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Friday, July 8, 2011

Lower taxes do not woo companies to Florida

From the St. Petersburg Times, editorial board

It's a modicum of good news that Florida's unemployment rate has declined to 10.6 percent, the lowest since August 2009. But it would be a mistake for Gov. Rick Scott and state lawmakers to seize upon these numbers to justify further reducing Florida's already low corporate income tax rate to woo new companies here. Contrary to the common mantra of the state's Republican leaders, tax cuts don't produce jobs. Good schools, strong infrastructure and a good quality of life seem to be far better inducements for corporate relocation.

Florida has the fifth lowest corporate income tax rate in the country at 5.5 percent, trailing only South Dakota, Alaska, Wyoming and Nevada — states hardly in Florida's league. Yet Florida's unemployment rate remains far higher than the 9.1 percent national average. Recently, both a Tax Foundation study and University of Central Florida economist Sean Snaith have argued that reducing taxes has no discernible impact on job growth.

It's not hard to find evidence to support such a view. Other states with much higher corporate tax rates — Connecticut, New York, Illinois, Massachusetts, New York and New Jersey — all enjoy significantly lower jobless numbers, as well as hosting the corporate headquarters of many more Fortune 500 companies per capita.

And Snaith offers a refreshing view as a registered Republican who clearly hasn't bought into his party's pandering politics. Snaith argues that Florida cannot right its economic house on the cheap. Companies will invest their financial and human capital in states willing to make a commitment to education, employee training, a quality public transportation system and family-oriented recreational outlets — all far more important than a shaving off a few marginal points off the corporate income tax rate.

If a low corporate tax rate were the economic panacea Scott believes it to be, Florida long ago would have become a veritable and enviable Disney World of economic wonder. It's worth noting that Florida's longtime lack of an income tax — while wooing rich retirees — has also had little impact on persuading major U.S. corporations to move operations to the Sunshine State. Giving corporations a tax break isn't the answer to Florida's unemployment woes. Giving executives and their employees a reason to want to invest their lives in Florida is.

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