Gov tours the state to promote jobs package, business tax cuts

Apr 6, 2012

Florida Governor Rick Scott is traveling the state to promote a number of bills he’s signed that are part of his jobs and economic growth package, but Regan McCarthy reports some experts question whether the governor’s policies will help Floridians get back to work.

Florida Governor Rick Scott has held a total of six bill signings, so far, for a group of bills that will give tax breaks to the state’s businesses and re-brand the unemployment program to be a reemployment program. In a weekly radio address Scott said the move will make Florida an even more attractive state for businesses

“To help create jobs in our state we’ve enacted measure to eliminate burdensome state rules and regulations.”

But will the proposals help create jobs? The measures Scott signed would make changes like bumping up the state’s corporate income tax exemption from $25,000 to $50,000, and gives sales tax exemptions to certain industries, like giving packing plants an exemption on the electricity they use. They’re changes Florida’s National Federation of Independent Businesses Executive Director, Bill Herrle, says that will unquestionably help businesses.

“When we do anything to reduce their cost that government imposes on them that increases their willingness to go out and expand.”

Herrle says his members are also excited about a measure that, if approved by 60-percent of the voters in a referendum vote, would amend the state’s constitution to double the tangible personal property tax exemption for businesses. Jim Cherry owns Cherry communications in Tallahassee. He has a small office with a handful of permanent employees and big pool of 50 to more than 100 temporary workers, depending on his current project. Cherry’s business is conducting over-the-phone surveys, generally about political issues. He says, for him, an increase in the state’s tangible property tax exemption would definitely be a help.

“One of the unfair things I’ve always thought, is that if a business person has cash, they can take a trip to Hawaii, they can buy art for their home, and it’s not taxable, but if you do something positive to create jobs, you know, buy more equipment so you can hire another person or two or increase your productivity you get taxed for that.”

Cherry says he looks forward to using any savings for upgrading and buying more phone equipment, but he can’t say for sure whether he plans to create new jobs. And Herrle says it’s hard to show an example of a business gets has lower taxes and as a result adds a job. But he says it’s happening. For example, a survey put out by the Florida Chamber of Commerce shows 37-percent of the small businesses it surveyed plan to hire new employees during the next six months. That’s up from 30-percent in July of 2011.

But, on the other hand, Robert Lynch, who chairs the department of economics at Washington college and authored the book “Rethinking Growth Strategies: How state and local taxes affect economic development,” says cutting business taxes doesn’t generally lead to growth. He says most studies are “fairly unanimous” in finding that reducing taxes on businesses has a very small impact on economic growth. Sometimes that impact is positive, but Lynch says more often it’s actually negative.

“People don’t’ realize what a small part of total business cost state and local taxes are. For a typical firm in Florida, of their total cost of doing business, the taxes, the state and local taxes they pay typically amount to a little over one-percent of their total cost. If you cut business taxes by 20-percent or 25-percent you’re reducing the cost of business by 0.2 or 0.25 percent leaving intact the other 99.75 or 99.8-percent of cost.

Lynch says that’s not really a big enough percentage for a business to consider when making an investment decision.

“The Federal Reserve bank of Cleveland did a big analysis of all manufacturing relocations in the United States between 1972 and 1992 and they found that the states with the most generous business tax incentives had no more relocations than the states with the fewest business tax incentives. So, the idea that businesses move to a state in response to various incentives is grossly exaggerated. There really isn’t any evidence to support that.

Lynch says there is strong evidence to show that often businesses move because of the needs of executives who are looking for things like good school systems, low crime rates, recreation facilities, museums and other “quality of life considerations.” And he says cutting businesses taxes means the government has less money to provide those kinds of services. But, reducing businesses taxes in an effort to grow jobs is not just a trend in Florida but a trend that can be seen nation-wide.