Quote:
Originally Posted by John887
In this case they are trying to lay the blame on unions, and it's BS!
This Governor had a surplus when he came into office...then he gave out tax breaks...and THEN claims they have a deficit!! What a load of crap...
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There is little doubt that taxes matter to businesses, but there is a sharp debate over how much, especially when states must cut services to offset their tax cuts. Spending decisions that disrupt local education, transportation and court systems also matter to companies.
In Florida, Scott has suggested that he can pay for his business and property tax cuts by finding efficiencies in state government. In a videotaped interview with The Wall Street Journal, Scott pointed to the consolidation of state agencies ? and his own decision to forgo the state plane that previous governors have used ? as key money savers. ?You add it up, it adds up to pretty big dollars,? Scott said.
But budget analysts say such moves will be nowhere near enough to patch Florida?s budget gap, let alone pay for a $2 billion tax cut for businesses and property owners. Democrats warn that spending cuts of the magnitude needed to compensate for Scott?s tax cut will decimate schools and other services, and even Republicans who control the state legislature have given the plan an unusually cool reception, raising doubts about whether it will ever become law.
Meanwhile, there is also broad skepticism among many economists over what businesses in Florida and elsewhere will do with the money they receive from any major state-level tax cuts.
Major firms with locations around the country could easily take the dividend from one state?s tax cut and invest it somewhere else. Meanwhile, corporate profits are surging and the stock market is booming, but national unemployment remains at 9 percent. That suggests that the money now sitting in companies? pockets is not going toward hiring new workers or ramping up production.
Padgitt, of the Tax Foundation, believes that firms are waiting for the economic recovery to begin in earnest and ?to be at a place where they can invest.? He says state tax cuts will help them get there. But others argue that national economic patterns play far more of a role than state-level tax rates.
?State tax policy is not what caused 10 years of economic collapse in the state of Michigan,? says Gary Olson, the recently retired director of the Michigan Senate Fiscal Office. ?When you go from domestic auto sales of 10 million units to 4.3 million units in the course of about a decade, that?s the problem in the state.?
The Ohio experiment
According to the Center on Budget Policy and Priorities, a Washington, D.C., think tank that is critical of broad tax-cut plans, only Ohio has done what Scott is proposing to do in Florida ? completely phase out its corporate income tax. That makes Ohio a prime test case for other states seeking to cut or abolish business taxes in the hopes of spurring growth.
Michael Mazerov, a CBPP economist, found in a September study that ?despite a more than $1 billion annual reduction in business taxes, Ohio?s shares of national income, employment and investment have all fallen slightly since 2005,? when the phaseout of the state?s corporate income tax began.
Ohio tax officials concede that the plan has not produced a windfall of new business activity. But they are quick to point out that they never expected one, predicting beforehand that eliminating the corporate income tax would amount to a net loss in revenue for the state, at least in the short term.
?In 2005, we were in the midst of an (economic) expansion, and part of the feeling was, ?We can afford to do this,? ? says Fred Church, deputy director of policy at the Ohio Department of Taxation and a veteran of the agency. Church also notes that the final year of the five-year phaseout was just two years ago, while most businesses were still struggling because of the recession. ?Maybe this is going to be a different story,? he says, ?if you look three or four years down the road from now.?
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