By
Dhanraj Singh
|
February 14, 2017

More Business Tax Cuts Will Not Spur Economic Growth in Florida

More Business Tax Cuts Will Not Spur Economic Growth in Florida

Governor Rick Scott’s proposed business tax cuts of $618 million will have negligible impact on the state economy and job creation. Instead, instituting these cuts would make it harder for the state to invest in education, health care, roads and ports, safe communities and other crucial services that make Florida a desirable state for business.

Governor Rick Scott’s proposed business tax cuts of $618 million will have negligible impact on the state economy and job creation. Instead, instituting these cuts would make it harder for the state to invest in education, health care, roads and ports, safe communities and other crucial services that make Florida a desirable state for business.

Since 2010, Florida has cut taxes for businesses by almost $4 billion. Of this total, $1.8 billion of the cuts constituted a permanent loss in state revenues.[1] In addition, the state appropriated a total of $1.1 billion in subsidies and incentives for businesses through various economic development programs over the same period.

Empirical evidence shows tax cuts for businesses do not drive job creation or economic growth.[2] State and local taxes represent a very small share – 1.8 percent – of average business expenses.[3]

The legislative Office of Economic and Demographic Research identifies investment in key services among state investments with the highest return in state revenues.[4]  Public investment in Florida’s beaches and seaport program areas, for example, returned $5.40 and $2.70, respectively, per state dollar invested.

In comparison, seven out of eight programs that provide tax relief or subsidies to businesses failed to break even; that is, they returned less than $1 in state revenues for every state dollar invested.[5]  For example, almost $79 million was spent on the Quick Action Closing Fund (QAC); however, it returned $47 million in tax revenues, leaving QAC $32 million short of breaking even.

Florida,  despite having the nation’s fourth largest economy, ranked 49th in support for public services in 2013 (the latest year for which data are available). Per person spending was almost 40 percent less than the national average.[6]Since 2008, Florida’s support for public services has declined consistently, reaching $6,881 per person in 2013, almost 10 percent less than 2008.[7]

Florida’s support for a public education system–vital for building a well-prepared labor force–ranks 39th out of 50 states. Likewise, support for the state roads, rails, bridges and ports necessary for transporting business products ranks 23rd.

Florida cannot afford more business tax cuts at the expense of core services. Lawmakers should reject the governor’s proposed tax cuts and business subsidies and instead invest tax revenues in priorities such as education, affordable healthcare, safe and clean communities, roads, bridges, seaports and affordable workforce housing, all of which are critical for economic growth and creating an attractive business environment.

Notes

[1] Office of Economic and Demographic Research, Florida Fiscal Analysis in Brief, 2010 – 2016

[2] Wiliam Gale, Aaron Krupkin, and Kim Rueben. “The Growth Mirage: State tax Cuts Do Not Automatically Lead to Economic Growth”. Tax Policy Center, September 8, 2015.

[3] Grading the States: Business Climate Ranking and the Real Path to Prosperity.

[4] Office of Economic and Demographic Research, Florida’s Financially-Based Economic Development Tools and Return on Investment Presentation to the Florida Legislature, House Careers and Competition Subcommittee meeting held on January 11, 2017. p. 12.

[5] Office of Economic and Demographic Research, Economic Evaluation for Selected State Economic Development Incentive Programs, Revised Version, January 2017.

[6] Florida Policy Institute, Florida Ranks 49th in the Nation in Support for Public Services, 2017

[7] Singh, Dhanraj (2017): Florida’s Support for Public Services Lowest Since the Recession and Trending Downwards,Florida Policy Institute, 2017.

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