Tax cut for business gets initial okay
By STEVE BOUSQUET, Times Staff Writer
TALLAHASSEE -- A special session of the Legislature opened Monday with a Senate committee approving a tax policy change opposed by one of the state's leading economists.
Despite the warnings from economist Ed Montanaro, the Senate Finance & Tax Committee voted 5-4 to give large corporations a tax break this year worth $262-million.
Republicans, including Gov. Jeb Bush, support the tax break. Democrats oppose it.
At issue is a bill that conforms Florida's tax code to federal tax changes designed to stimulate jobs.
President Bush signed a law in March allowing corporations to take an immediate depreciation allowance of 30 percent on equipment bought after the September terrorist attacks.
That would reduce state revenue by $262-million for the fiscal year that begins July 1, and an estimated reduction of $428-million over three years.
It was the first significant vote in a two-week session called to handle the unfinished business of the regular session, including a state budget, school code rewrite and Cabinet reorganization.
On Monday night, Bush significantly expanded the legislative agenda by adding bills relating to health care reform, defense contracts, and a proposed public records exemption that would eliminate access to military discharge papers filed in Florida.
Sen. Ginny Brown-Waite, R-Brooksville, wants the papers exempt from the state's public records law because of the possibility that terrorists might target former military officials.
Bush also added another issue to the legislative plate: a bill that would require groups pushing initiative petitions to establish a way to pay for measures.
The move comes after a 2000 amendment directing state legislators to create a high-speed rail system, and a new proposal that would dramatically reduce the number of students in public school classrooms.
The tax fight demonstrated that both parties are in a campaign mode, playing to different constituencies in an election year.
Business groups praised the Republican senators who voted for the tax cut, while lobbyists for a teachers union and advocacy groups for women and working people said lawmakers made the wrong choice.
"It sends a loud and clear message that we're a business-friendly state and businesses create jobs, bottom line," added Brown-Waite, a supporter who's running for Congress.
Said Senate Democratic leader Tom Rossin, Royal Palm Beach: "Until somebody tells me where we're going to get the money and not hurt our medically needy and schools and a lot more, I'm not voting for it."
The close vote reflects the volatile nature of the consensus Bush hopes to achieve this week in the fourth special session since last fall.
Democrats questioned the timing of the corporate tax break, noting that the Legislature has agreed to drop a popular back-to-school sales tax holiday on school purchases, worth about $28-million in savings to taxpayers. Lawmakers said they couldn't afford it.
Democrats said the money lost from the corporate tax break would be better spent on raises for teachers or to avoid a planned change in the Medically Needy program that forces clients to pay more.
The program acts as a safety net for people who have suffered a catastrophic illness and have used up their own insurance but earn too much money to qualify for Medicaid.
Lawmakers cut the Medically Needy program during last year's session, but delayed the cuts until July 1. House and Senate leaders now are debating delaying those cuts until at least Jan. 1, 2003, and thereafter requiring participants to spend more more of their own money on medical care to qualify for the program.
The most surprising testimony of the day came from Montanaro, who heads the Legislature's Office of Economic and Demographic Research.
Over the next year to 18 months, Montanaro said, a better economic shot-in-the-arm would be to spend the $262-million on "public expenditures" -- in other words, government services -- than diverting it to private companies.
"You'd get more in the short-term from government spending. It is a small difference. It's not huge either way," said Montanaro, citing a computer model by his agency.
The governor's office was dumbfounded.
"State revenues depend on a vibrant private sector," Bush spokeswoman Katie Muniz said. "To maintain that government is a better provider of jobs is puzzling and frightening at the same time."
The bill's sponsor, Sen. Charlie Clary, R-Destin, said the tax break would keep Florida in line with the IRS tax code, and "send the right message" to companies and investors seeking to expand or relocate to Florida.
Democratic senators Skip Campbell, Steve Geller and Rossin, who voted no, demanded proof that the tax break will create jobs, but Clary and his fellow Republicans could not promise any. All three Democrats voted no, as did Sen. Rod Smith, D-Alachua.
Rossin chided Clary for "mumbling" through an explanation of the proposal.
Only at the very end of the hearing, following an assist from Gov. Jeb Bush's office, did Clary cite a projection by the conservative Heritage Foundation that the tax break would add 10,500 jobs over a five-year period.
Two Tampa Bay-area Republicans, Brown-Waite and Tom Lee of Brandon, voted for the legislation. The bill (SB 18-E) now awaits a vote by the full Senate. Rossin predicted Republicans would have more than enough votes to pass it.
-- Times staff writer Alisa Ulferts contributed to this report.
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