Tag: revenue

Cutting Corporate Income Tax Unwise, Economist Says
April 20, 2011

Governor Rick Scott has renewed his call for the legislature to adopt big tax cuts even as billions of dollars are being cut from state programs like education and Medicaid. 

“I remain certain that any budget I sign into law will do the following things: reduce the size and scope of government, reduce the cost of government, and pass those savings on to taxpayers in the form of tax cuts,” Scott said in his weekly radio address.

“The budget proposal I sent to the legislature does those three things. I will not compromise on these principles.”

The “no compromise” talk raises the issue of a possible veto of the state budget, the St. Petersburg Times said.

The tax cuts he wants:  "Business and property tax cuts are critical to make Florida No. 1 in job creation. Lowering taxes will attract businesses and jobs to our state. I am confident that, with your help, the Legislature will make the right decision.”

Scott continues to advocate for a cut in the state corporate income tax, even though Florida’s tax is relatively low and so riddled with loopholes that few companies pay it.  

"Slashing the corporate income tax would do little, if anything, to improve an already business-friendly tax structure or to create jobs," FCFEP said in a February report.  "But it would do much to decrease the level of services necessary to support a decent quality of life, which is the foundation of economic development.  (See "Keeping and Modernizing the Corporate Income Tax Will Best Serve Florida; Corporate Tax Cut Would Force More Service Cuts While Doing Little to Create Jobs.") 

So far, legislative leaders have resisted any pressure to adopt sweeping tax cuts.  A prominent Florida economist suggests that they should continue to do so.

“There is not much room for improvement as far as the tax climate in Florida is concerned and trying to be the cheapest date in the country is not going to bolster the number of suitors Florida has,” writes Dr. Sean Snaith, director of the Institute for Economic Effectiveness at the University of Central Florida.                   

“There is very little to win in our race to the tax bottom,” Snaith said in his quarterly Florida and Metro Forecast.  “Those tax revenues could be used more effectively to grow the economy through investment in infrastructure or education.  These things would be far more attractive to business than a marginal improvement in the business tax climate.”

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"Slackers?" In Truth, Few Jobs Exist for the Jobless
January 13, 2011

Governor Rick Scott’s economic development transition team and some legislators have complained recently that Florida’s unemployed workers don’t look hard enough to find a job.  The transition team cited a study that was misused, its author said.  Now two new reports indicate just how difficult it is for the unemployed to find a new job.

Nationally, the U.S. Department of Labor reported, there were 4.6 jobless workers for every job available in November.  That’s three times more competitors for each job opening than there were in early 2007, when Florida employment began a long slide that resulted in more than one million jobless.

Nevertheless, legislators worried this week about jobless Floridians milking the unemployment insurance (UI) system.  (See “Florida senators target couch potatoes inflating state unemployment rate,” January 11, St. Petersburg Times.)

One state senator asked the state agency overseeing unemployment compensation to "distinguish between those who can't get off the couch ... and those who won't get off the couch" to hunt for jobs.  Another senator wanted to make sure the state eliminated “slackers and malingerers” who enjoy a “lifestyle” of receiving unemployment benefits without trying to work.

But the difficulty of job-seeking was illustrated in a report by Forbes.com that lists three Florida cities – Orlando, Jacksonville, and Miami – as among the 10 worst job markets in the nation.  The list was created using unemployment rates, JuJu.com’s monthly Job Search Difficulty Index for Major Cities, and analysis by Moody's Economy.com.

It’s not as if Florida’s unemployed are living it up.  The maximum weekly benefit for an unemployed worker is $275 a week, lower than all but three states.  Less than half of the unemployed even qualify for benefits because of Florida’s antiquated UI system. 

Furthermore, Florida’s UI system is among the cheapest in the nation for employers.  Only the first $7,000 of a worker’s salary is taxable to the employer – lowest in the nation.  Even after unemployment tax increases this year to strengthen the unemployment insurance trust fund, the maximum tax on Florida employers per worker ($378 annually) will be among the lowest of the 51 states and District of Columbia.

Even so, the new administration and some legislators want to “reform” the system as part of efforts to make Florida the most business-friendly state in the nation.

The American UI system was created in 1935 as a response to the Great Depression, when millions of jobless workers and their families suffered.  Without wages, they couldn’t buy goods and services, leading to more layoffs and a collapse in economic activity.

The system remains vital today not only to the more than one million Floridians and their families who receive payments, but also to thousands of businesses where the unemployed spend their benefits on products and services. 

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Lower Budget Gap Due in Part to Previous Program Cuts
September 15, 2010

Floridians can rightly cheer the news that the anticipated budget gap facing the new governor and legislature next year will be only $2.5 billion, instead of the $5.5 billion state economists had predicted earlier.  It means, in part, that the state’s economy is recovering enough that revenues from the sales tax and other taxes are growing more than expected.

But the good news masks the fact that the improved outlook also depends partly on $1.5 billion in cuts made by the 2010 legislature – and that more budget cuts will be on the agenda for 2011.

This means that the next budget will be built on an already-reduced base.  Those 2010 reductions will become permanent unless the legislature adds back the cut money in future years.  

Sometimes budget cuts might conceivably be characterized as “efficiencies.”  But after several years of cuts during the economic downturn, even the projected new speaker of the House of Representatives warns that there’s not a “waste, fraud, and abuse” line item that can be wiped out to balance the budget.

State economists provide a list of 26 Critical Needs that the next budget should fund and 29 Other High Priority Needs that the state normally pays for.  “Critical Needs can be thought of as the absolute minimum the state must do absent significant law or structural changes, and Other High Priority Needs in combination with the Critical Needs form a highly conservative continuation budget,” state economists wrote.

The list (see it here on Page 67) includes replacing federal stimulus funds for public schools, keeping up with Medicaid growth, paying for health insurance for uninsured children, providing services to Floridians with disabilities and those served in programs of the Department of Children and Families, and paying for new students enrolled in state colleges and universities.

These needs are among those that bear watching in the 2011 legislative session.  The options for closing a budget gap of $2.5 billion are limited:  modernizing Florida's tax structure by asking everyone to pay their fair share (which many political leaders say will not be considered); imposing fee increases on those already paying; or more cuts to services, perhaps to some on the list.

 

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