Governor Rick Scott and Enterprise Florida recently unveiled a new public relations logo proclaiming Florida as the “Perfect Climate for Business”. Intended as a fresh campaign to attract business and jobs to the state, the upbeat message was drowned out by the ill-advised and insensitive use of a necktie to represent the letter ‘I’ in Florida.
Predictably -- how could the creators of the logo not anticipate
this? – it prompted an outcry from women’s organizations claiming the new logo
communicates a sexist male-oriented message – more along the lines of “Florida:
a perfect business climate for men”.
While the state flubbed its public relations campaign, there
are more substantive reasons for critiquing the state’s business climate
efforts. Namely, they are based on a set of principles and policies that are
generally hostile to average working Floridians.
The long-standing “war between the states” over jobs and
industry is waged with three primary forms of ammunition -- tax rates, labor
costs, and “public private partnerships”.
How well has this three-pronged strategy served the state of
Florida?
Rick Scott has made low taxes -- and its corollary less
government – a cornerstone of his business-friendly approach. Scott claims that
“Cutting taxes is essential to economic prosperity” and
advances a budget “focused on the goal of shrinking government, reducing your
taxes, creating private sector jobs”.
This supply-side economic mantra – that low
taxes and less government equals more jobs -- has become an article of religious
faith among Republicans and Democrats alike. Unfortunately, there is no
evidence that shrinking government and reducing taxes will create more jobs or
economic prosperity.
An enormous amount of
empirical research has examined the relationship between state tax rates and
job growth. The general conclusion is that the effects are either non-existent
or negligible; and most agree that there will be no positive effect if government
spending is also slashed. This is because, contrary to the prevailing ideology,
public spending is an important source of job growth (public and private) and
it can also enhance the productivity of the private sector.
There are several reasons for
the weak effect of taxes on job growth. First, for most businesses taxes are a
small part of the cost of doing business. When businesses are surveyed about
decisions to expand or locate in a state, taxes are rarely a major factor. Second, the more critical factors are the
quality of the education system, the condition of the infrastructure, and the
general quality of life. Starving the public sector will not address any of
these factors and, in fact, may only make them worse.
Further, Florida is already
regarded as a “low tax state”. The Tax
Foundation ranks Florida 5th on the State Business Tax Climate Index
for 2013. The absence of a state income tax goes a long way in vaulting Florida
to top-ten status. If there are only four states with a better tax climate than
Florida, why is the state economy so anemic? There are obviously other
explanations that have nothing to do with tax rates.
Governor Scott has also proposed
to reduce and eventually phase out the state corporate tax. But it is already
the 13th lowest among the 50 states.
Again, what do we have to show for our current low corporate tax rate in
the way of attracting innovative high tech industry or high paying jobs?
One thing Florida has
accomplished from these tax policies is membership in the “Terrible Ten” states
with the most regressive state tax systems. According to the Institute on
Taxation and Economic Policy, Florida – which relies heavily on sales and
excise taxes for revenue – is ranked #2 among the states that “ask their poorest residents — those in the bottom 20 percent of
the income scale — to pay up to six times as much of their income in taxes as
they ask the wealthy to pay. Middle-income families in these states pay up to
three times as high a share of their income as the wealthiest families.”
As it pertains to labor costs, Florida proudly brandished
its status as a so-called “right-to-work” state. This law prohibits compulsory
union membership and dues collection from employees even when they are represented
under its collective bargaining agreement. This law is designed to effectively
limit the strength and breadth of union organizing and collective bargaining.
The result has been a state that lags behind in worker compensation and quality
of work life, but not in poverty.
Studies of the impact of RTW laws confirm this pattern. Florida also has the 7th highest
level of income inequality among the states.
In spite of the promise, the right-to-work law has never
attracted manufacturing or high tech industries to the state. Florida is 44th in employment in
the manufacturing sector. The Information Technology and Innovation Foundation
has ranked states on a “New Economy Index” based on five areas: knowledge jobs, globalization, economic
dynamism, the digital economy, and innovation capacity. Among the ten bottom-dwellers
on this index, eight are right-to-work states. Florida places 21st
on the New Economy Index.
Instead, the low wage
pattern prevalent in the state of Florida has contributed to high levels of
economic insecurity among the working population. According to a Rockefeller
Foundation study of economic insecurity in the states, Florida ranks 4th
on the “Economic Insecurity Index” (behind the perennial leaders of dubious
distinction – Mississippi, Alabama, and Arkansas) that measures the proportion
of individuals who lose at least 25 percent of their available household
income, due to either changes in income or changes in out-of-pocket medical
spending, and who lack sufficient liquid financial wealth to fully cushion the
loss.
The
third piece of the state business climate strategy -- public-private
partnerships (PPPs) -- involves, invariably, taxpayer incentives and subsidies
to lure, retain, and encourage business expansion. These PPPs have been hyped as the best
possible way to solve all economic challenges. Adding “private” to public also makes
the policies more legitimate in a political climate that devalues and
discredits any role for the public sector.
While these PPPs may occasionally generate some innovative
and collaborative solutions and projects, more common is simply the public
sector financing, subsidizing, and catering to the needs of the private sector
independent of any gain for the general public; in other words, corporate
welfare. This form of “rent-seeking” has been aggravated as corporate interests
have captured the political system through direct and unlimited financial
contributions to public officials, and as businesses use the threat of capital
flight to receive public benefits.
One indication of the severity of this
problem is a study conducted by two organizations that make very strange
political bedfellows -- Integrity Florida and Americans for Prosperity. The
study, not the first of its kind, takes aim at Enterprise Florida, the state
agency responsible for distributing public monies to corporations, and
concludes that the system can be characterized as “pay-to-play” cronyism and
“corporate welfare”. Further, it finds
that Enterprise Florida has failed to meet its jobs targets, does not hold the
welfare recipients responsible for the promised jobs, and has a habit of doling
out incentives to well connected corporations for expansions that had been
planned anyway.
At the same time that states and cities
are slashing public services that meet the needs of the larger working and
economically deprived population, large gifts are handed out to the private
sector under the increasingly unassailable banner of public-private
partnerships.
In the end, one
should question all business climate policies based on the fraudulent claims of
neo-liberal supply-side economics -- if you give private corporations everything
they want – low taxes, weak unions, cheap labor, deregulation, and taxpayer incentives
– this will bring jobs and prosperity to all. We have a long record of contrary
evidence at the national level starting from the 1980s to the present. As with most policies, some win and some lose
and we now know that the presumed benefits will not “trickle down” and that a rising
tide does not “lift all boats”. Record income inequality and the lingering Great
Recession are the daily reminders.
If we want to improve
the quality of life of Floridians it will require more than gifts to the
corporate class; it will also require government policies that directly improve
the employment and living conditions of the working classes.
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