State Budgets Rife With Potential Pitfalls
MIAMI (CBS4) – Florida Governor Rick Scott’s budget and economic policy has been based on a pro-business, anti-tax platform to revive the state economy. But, going too far in that direction carries as much risk as having too much government intervention.
Governor Scott and other legislative leaders are championing repealing the business tax in the Sunshine State, despite a multi-billion dollar budget gap. The justification is that if businesses don’t face taxes, they will move to Florida and bring jobs with them.
While that is possible, currently the Florida corporate income tax brings in roughly $2 billion a year to the state. If that amount is eliminated, it will bring about more budget problems for state legislatures to face.
Plus, businesses look at the housing market, the schools, and other programs that require government spending in areas before locating a business there. Florida’s housing market remains depressed and with schools facing a multi-billion dollar budget hit, the times will be tough for school districts across the state.
States like California and New Jersey have run into budget problems the likes of which have almost never been seen in American history. Both states have high corporate income taxes which could have led to the problems facing the states.
On the other hand, states like Texas, which prides itself on low taxes, faces the same multi-billion dollar budget holes other states are also seeing. Texas now faces a two-year budget gap of more than $10 billion without much left to cut when it comes to social programs and discretionary spending.
But just as tax cuts may not help attract businesses, tax hikes won’t either.
Take the case of Illinois.
Governor Pat Quinn signed a 66 percent temporary increase in income taxes and a corporate rate increase to help close his state’s $15 billion budget gap. When Illinois makes a pitch to businesses to come to the state, it faces the hurdle of trying to sell the state with taxes that high.
With Florida facing a multi-billion dollar budget hole, and now draconian cuts proposed to the state’s education system; the state must prove to businesses that beyond low corporate taxes, the state can produce an educated workforce and solid infrastructure while doing it with fewer and fewer state dollars.