News

A break or a burden?

The governor's latest proposal to give businesses a tax break is one the state can't afford in this age of crowded classrooms and underfunded courts.

A Times Editorial
Published December 6, 2004

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Florida has poor children without health care, elderly people who are being squeezed out of nursing homes, courts without enough judges, schools with crowded classrooms and a new mandate to educate all 4-year-olds. But Gov. Jeb Bush already wants to hand out another business tax break next year.

The governor says businesses ought not pay sales tax on equipment purchased for research and development activities or to improve productivity, and that the $70-million tax break will "put us on a par with many other states that are doing far better." The "par" he is seeking is a curious one, given that Florida already taxes at a rate lower than 43 other states.

Bush now claims to have cut $8.2-billion in taxes over the past five years, at a time when the state was cutting university spending, forcing some teachers to go without pay raises, and telling seniors they might lose their spot in a nursing home if they are taken to the hospital. The prekindergarten program the governor apparently will endorse for next year offers little more than three hours of daily day care, mostly because lawmakers say the state can't afford to do any better.

The governor is fond of linking his various tax cuts to the state's job growth, but no serious economist has been willing to make such a connection. Population growth alone explains much of the gains. His new offer to forgive the 6 percent sales tax on some equipment purchases can hardly be described as a recruiting tool. Businesses aren't likely to locate in a state merely to take advantage of a narrow sales tax break, and existing businesses aren't likely to forgo the purchase of necessary equipment because the state adds a sales tax. In that sense, what the governor really offers is just a gift, not an incentive.

These gifts add up, as well, and they undermine the only major source of money on which Florida operates. Florida has no income tax, so sales taxes fuel three-fourths of the state budget. A variety of distinguished boards and commissions have called for broadening the reach of that sales tax by removing undeserving special-interest exemptions. Bush himself has acknowledged that the sales tax code offers some dubious exemptions, yet as governor he has only added more.

The money that Bush would so freely give away next year could provide 14,000 4-year-olds with quality prekindergarten education. But, in announcing his tax break more than a month ahead of the release of his proposed 2005-06 budget, he is also proclaiming his priorities. In a competition with business tax breaks, schoolchildren lose.

[Last modified December 6, 2004, 00:09:11]

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