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Reports burnish state's biz climate

By ROBERT TRIGAUX
Published February 27, 2006


Florida is well known as the state of theme park fantasies and tourism myths. But its apparent elevation to economic miraclemaker may take awhile to gain a following.

Two new and notable reports giving high marks to Florida's ability to grow and attract business will contribute to the Sunshine State's growing economic legend. Last week, California's Milken Institute issued its annual report, Best Performing Cities, with so many highly ranked Florida cities - five of the top six, 12 of the top 30 nationwide - that the Milken researchers called the state's success "remarkable."

"In both 2004 and 2005, Florida experienced extraordinarily severe hurricane seasons," says the Milken report, which is subtitled Where America's Jobs Are Created and Sustained. "Yet despite the disruption they caused, the state's economy is creating jobs at a prodigious rate."

If that doesn't fire up the state cheerleaders, consider the analysis to be unveiled today of the nonpartisan Tax Foundation's annual look at which states boast the most "business-friendly" tax systems. The report, dubbed the decidedly unsexy State Business Tax Climate Index, names Florida as the nation's fourth on a top 10 list of business-friendly tax states. Florida is behind Wyoming, South Dakota and Alaska but ahead of Nevada, New Hampshire, Texas, Delaware, Montana and Oregon.

"Every one of the best tax systems raises sufficient revenue without imposing at least one of the three major state taxes: sales taxes, personal income taxes and corporate income taxes," said Tax Foundation economist Curtis S. Dubay, one of the report's authors.

Notably, the worst states for business taxes are concentrated in the Northeast and Midwest. The report identified New York as the worst, followed by New Jersey, Rhode Island, Ohio, Vermont, Maine, Kentucky, Nebraska, Iowa and Arkansas.

No surprise: None of these states are in the Sunbelt, the West nor in the Southeast, where population and job growth has been strong.

To the Tax Foundation's credit, its tax experts issued a strong caution to states infatuated with special tax incentives, subsidies and other concessions to lure business.

Florida, whose slogan is morphing from the Sunshine State to the Incentive State, might want to take note.

Gov. Jeb Bush's proposed budget, unveiled several weeks ago, is awash in business tax breaks. And Enterprise Florida, the state's public-private economic development arm, rarely has met a tax incentive it did not swear was crucial for future prosperity.

Such tax devices are short-term and ineffective lures and serve more to mask other problems in the state's tax system, tax experts warn.

The report specifically criticized a $3-million tax-break-bloated package used to lure a company to Tampa, only to see the business depart, laying off 1,110 people.

The deal involved Capital One, the credit card company. It was lured to Tampa with incentives known as the Qualified Target Industry Tax Refund Program.

"Lawmakers create these deals under the banner of job creation and economic development, but the truth is that if a state needs to offer such packages, it is most likely covering for a woeful business climate plagued by bad tax policy," the Tax Foundation report said.

"A far more effective approach is to systematically improve the business climate for the long term so as to improve the state's competitiveness as compared to other states."

The bottom line? Tax giveaways are the steroids of economic development. They deliver short-term performance but can cause long-term health risks to the economy.

In Milken's Best Performing Cities, Florida towns big and small rule. Among the nation's top 200 metro areas, Palm Bay-Melbourne-Titusville on the state's east coast ranked tops nationwide in creating jobs. The Tampa Bay metro area ranks No. 25 - impressive, but down from its No. 12 ranking in 2004.

Our metro area, which generated 32,400 jobs last year, was overtaken in the Milken rankings by the Orlando-Kissimmee area, which ranks No. 6. But the Miami-Miami Beach-Kendall area lands at 73.

Among smaller metro areas countrywide, Florida's Fort Walton Beach-Crestview-Destin is No. 1. Panama City-Lynn Haven, also on the Florida Panhandle, ranks No. 4.

All in all, quite a performance.

Who fared the worst in job creation cities?

The bulk of the bottom spots in the Milken report are from Ohio and Michigan. Worst of the worst - as if it has not been kicked enough over the years - is Flint, Mich.

Florida Gov. Jeb Bush will certainly exit his two terms in Tallahassee with a smile and strong economic credentials. But you have to think the new crop of gubernatorial candidates must be wondering how long the state's financial euphoria can last.

Robert Trigaux can be reached at 727 893-8405 or trigaux@sptimes.com

[Last modified February 25, 2006, 16:58:02]


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