‘Persistent inflation conditions will ultimately suppress collections as consumers begin to spend more money on non-taxable necessities.’
Florida’s sunny economic recovery from the COVID-19 pandemic appears to have continued in March, as a report from state economists released Thursday shows revenues collected that month were $626 million above the estimate.
Total collections for March were $3.53 billion, or 21.5% above the state’s official projection of $2.91 billion. Sales taxes accounted for 78% of the gain, coming in $488.5 million above the estimate.
As with other monthly reports this year showing revenues beating projections, the report sounds a note of caution about the numbers. Inflation is at levels not seen in 40 years, pushing the cost of goods, and therefore sales tax amounts, higher. If high inflation persists, many residents will likely cut back on their purchases.
“The immediate response to inflation is an increase in sales tax collections that reflects the higher prices,” the report states. “Persistent inflation conditions will ultimately suppress collections as consumers begin to spend more money on non-taxable necessities like food and health care.”
If a reduction in consumption is widespread throughout the country, Florida’s tourism-heavy economy is likely to suffer as families cut back on vacations.
Gov. Ron DeSantis has touted Florida’s economic rebound from COVID-19, citing his policies of reopening much faster than the rest of the country as the main reason. But in recent weeks he’s also warned that high inflation — it was 8.5% in the last 12 months, the highest rate since August 1982 — could eventually lead to a recession, so Florida might need robust reserves to hedge against leaner times.
The report also notes the Seminole Tribe of Florida has stopped making its $37.5 million monthly payment to the state under the new gaming compact, which was thrown out by a federal judge in November. The Tribe had been making the monthly payments since then, but stopped in March, POLITICO reported earlier this week.
“It is currently unknown when or if they will resume into state accounts,” the report states.
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