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Tax boon in works for state business

Gov. Jeb Bush is proposing almost $70-million in breaks for companies buying equipment for manufacturing and research and development.

By JONI JAMES
Published December 2, 2004


TALLAHASSEE - Florida manufacturers and private research companies would see nearly $70-million in tax breaks a year from now under a proposal Gov. Jeb Bush plans to unveil today in Orlando.

The two-part plan was shared for the first time Wednesday with top legislative staff.

Part one would eliminate the state's 6 percent sales tax on any machinery and equipment purchased for research and development activities, saving Florida businesses $33.7-million annually.

The second part would greatly expand an existing sales tax break for new equipment manufacturers buy that enhances productivity by at least 10 percent.

Currently, manufacturers must pay the first $50,000 in taxes on the first $830,000 worth of equipment before they qualify for the tax exemption. Under Bush's proposal, the $50,000 threshold would be eliminated, saving manufacturers an estimated $34.8-million annually.

The proposed tax breaks are part of Bush's 2005-06 budget proposal, which will be released in full next month.

"Florida's business climate is good and competitive, but our climate for manufacturing and R&D needs some work," Bush said Wednesday night. "This will put us on par with many other states that are doing far better."

Bush plans to unveil his plan today during an inaugural "manufacturing summit" at the Hyatt Hotel at Orlando International Airport. But it won't be known until next spring, when the state Legislature meets to craft the 2005-06 state budget, whether the tax breaks will come to fruition.

Bush's contention: With nearly $2.9-billion more in state revenue available next year than the state will spend on programs in 2004-05, it makes sense to invest some of the money in the state's manufacturing and fledgling research industries by giving them the tax breaks their industries enjoy in other states.

The state's Republican-led Legislature has largely embraced tax breaks in the past, approving more than $10-billion worth in the past six years. But new Senate President Tom Lee and House Speaker Allan Bense have been reticent to make any promises for the 60-day session that begins March 8 as they consider spending extra money on hurricane issues, Medicaid and other state needs.

Lee and Bense could not be reached late Wednesday.

Manufacturing accounts for more than 5 percent of Florida's nonagricultural jobs. But 95 percent of the state's manufacturers have fewer than 100 employees, and 72 percent have fewer than 10 employees.

That makes it hard for small companies to tap into the state's current tax break on equipment, said Pam Dana, director of Bush's Office of Tourism, Trade and Economic Development.

Bush's office said 40 other states do not tax manufacturing equipment, or tax at a much lower rate than Florida. He said the state also lags in giving breaks on research and development equipment. Bush's office said 24 states either do not tax the equipment or do so at a lesser rate.

In 2002, private industry in Florida spent just $3.7-billion total on research and development, less than 2 percent of the national total. Florida is the fourth-largest state, but 13 other states posted higher research and development expenditures.

[Last modified December 2, 2004, 00:06:22]


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