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Budget shortfall has some lawmakers re-thinking business tax cuts

By James Call

Tallahassee, FL – State economists say Florida is facing a $2 billion budget shortfall next year and leading lawmakers indicate they plan to close it with spending cuts. At the same time, Governor Rick Scott says he will seek another round of business tax cuts as a way to revive the economy. James Call reports this is opening up a debate about whether spending and tax cuts lead to economic growth.

When state economists talk about Florida's economy they use the word anemic. They say tax collections hit a wall and started to miss projections during the summer. They expect next year's budget will be short by nearly $2 billion dollars. Senate President Mike Haridopolos says he thinks that estimate is overly optimistic and he's expecting the shortfall to grow by the time lawmakers start writing a state budget.

"And I actually think that the estimates are, at least the discussions I have had with JD Alexander and others that those estimates might be a little rosy. I still think that the number might get worse and we are planning for that accordingly."

Tax collections started to miss their mark and budget shortfalls began to appear six years ago when Jeb Bush was governor. Lawmakers have been responding with spending and tax cuts in an attempt to revive the economy. Last spring they cut spending and raised the exemption for Florida's corporate income tax, reducing general revenue by 12-million dollars. Governor Rick Scott's chief lobbyist, Jon Costello is telling lawmakers Scott will seek more tax reductions in January when lawmakers meet.

"If we are successful in doing this we will have in two years eliminated 65 percent of the businesses paying corporate taxes allowing them to keep that money and invest in their business and hire more people."

The idea is to make Florida more business friendly and lure companies to set up shop in the state by making Florida a low-cost state to do business; a plan that Haridopolos supports.

"We are trying to streamline the cost of government to the retailer and trying to attract people who want to do business here. I think the one good piece of news to report is that in comparison to other states we are looking more attractive every day because the cost of business, in my opinion, has gone down in Florida or at least reduced in comparison to other states."

Florida's unemployment rate dropped one tenth of one percent in September. Still, there are about a million Floridians who can't find work. And that has Democrats questioning whether tax cuts promote economic growth and job creation. Broward Representative Perry Thurston calculates in the past 13 years the state has eliminated more than 14 billion dollars in taxes. He says he wants to see the jobs those cuts produced.

"If we are going to be taking away from general revenue, which we have over those 13 years then clearly all I am asking is show us some data that shows it is working. And cuts, cuts, cuts, I don't believe is the answer. We have another deficit this year and I think we will have another deficit next year before things turn around and I think we ought to have an honest discussion about what works."

Orange County Representative Scott Randolph says the tax cuts over the past decade have reduced general revenue for this year by $4 billion. He says tax and spending cuts aren't producing the jobs promised. Randolph says that's because they are misdirected. The spending cuts removed money from the economy depressing demand for good. And he says the tax cuts didn't create jobs because they went to businesses not middle class consumers who would have spent the money and increase demand.

"But to create demand that is tax cuts to people who get up and go to work every day. Look a business is not going to create a job because you gave him an extra two to three hundred dollars. That is not going to create a job. I'm not going to go out and hire someone to diddle twiddle their thumbs when I don't have the demand for my product. So more corporate tax cuts are not going to create jobs, the studies show it what we see now show it."

Governor Scott though sees things differently. He says Florida is in a global competition for businesses and the jobs they provide. His plan is to reduce regulations and taxes to the point that Florida comes to mind first when anyone anywhere thinks of relocating or starting a businesses. The governor says his plan makes sense because it is the same logic used by a consumer shopping for goods and services.

"You know, you don't say I think I will pay more because that company has higher property taxes or business taxes or gosh their permitting takes longer so it costs more money so I'll pay a little bit more for that product or gosh they got a big pension so I will pay a little bit more or they deal in a state or country that has more regulations or more litigation risk. They don't we don't think that way. None of us think that way as shoppers and then we want businesses in our state or country do well."

The Governor will release his budget proposal, with details on the tax cuts he will seek, in December. State economists will project how deep of a budget hole lawmakers will have to close in January. That's also when lawmakers will begin writing next year's budget.