RALEIGH, N.C. (WNCN) — Lawmakers should be aware that some bills they propose could lead to a big hit in the tax revenue their states collect, a tax expert says.
A study by Nathan Goldman, a professor of accounting at North Carolina State University’s Poole College of Management, and colleague Christina Lewellen examined the massive tax implications for Florida because of the state’s with Disney over the law that its critics call “Don’t Say Gay.”
It’s timely now in North Carolina with Republican lawmakers this week announcing a similar bill that if signed into law would put limits on sexual orientation and gender identity topics in certain classrooms.
GOP leaders in Raleigh pointed out differences between their bill and the law in Florida that was opposed by Disney, leading Republican Gov. Ron DeSantis to sign a bill that dissolved the private government the company controls on its property in the state.
“Governments need to be very careful about the general business environment that they’re putting out for their companies that are coming there,” Goldman said.
Even if those companies don’t pay high corporate income taxes, Goldman said, they are “also employing a lot of people. They’re also contributing a lot to the general environment of the community, to the point that they need to be careful about upsetting these corporations. Because it needs to be a two-way street where they provide benefits and they receive benefits back from the local organizations.”
Disney has said it employs more than 60,000 workers in Florida.
The law signed by DeSantis eliminates the Reedy Creek Improvement District, which allows Disney to function as its own county government over 27,000 acres — running its own fire department, and managing building codes, utilities and roads.
DeSantis said the company would end up paying more taxes than it does now and the law wouldn’t lead to tax hikes for residents.
But the N.C. State professors say the opposite of both scenarios is more likely.
“If you think about all the taxes that are needed to operate Disney and really operate everything in that area, it really does become a zero-sum game of every dollar needs to be accounted for,” Goldman said. “And what ends up happening is that those tax dollars are not going to be repurposed.”
Goldman says Reedy Creek could figure out how much tax revenue was needed to keep Disney functional and then bill the corporation that amount. But Florida has a limit on how big that bill can be, he said.
“So if Reedy Creek previously was giving a much bigger tax bill to Disney, to cover all those different services that it provides, and Reedy Creek doesn’t exist anymore, the counties are still going to give Disney a tax bill but it can’t be as big,” he said.
But because every dollar must be accounted for, Goldman said, some of the tax burden would be passed along to people in Orange and Osceola counties, “which means the residents of those counties are likely going to have a bigger tax bill.”
The professors wrote that they expect Disney to pay less in taxes “since they will now pay tax at the maximum rate in the neighboring counties like other entities in the area” and will have what they call “an effective decrease in indirect taxes” because the burden of maintaining the company’s infrastructure would shift to counties “that cannot levy the same amount of taxes against (Disney) as the special district can.”
The counties also will be responsible for the district’s bonds, with rating agency Fitch saying a downgrade on them is possible because of the uncertainty of whether they will be repaid once Reedy Creek is dissolved.