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Second in the series, Pro-Taxpayer, Pro-Responsible Growth, without Incentives

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First in the series, Pro-Taxpayer, Pro-Responsible Growth, without Incentives: Do business tax incentives work on the state level?

April 18, 2018

It’s simple to research incentive programs to see if others are seeing massive success that we can mimic here in Volusia County.

 

As a pro-taxpayer and pro-smart growth candidate, I want what works! And if there is evidence that incentives are massively effective, I want to know!  Unfortunately, there is zero evidence that business tax incentives work.

 

Let’s look at the Florida state level. They have a lot more experience, more money, and a lot more diverse group of businesses to fund. Did incentives work for them?

 

You might remember all the hoop-la associated with the ‘Enterprise Zone Program’. These were areas that received state money for businesses to develop. The goal was to generate more tax revenue than the incentives cost.  We even had one in Daytona Beach.

 

The program quietly went away in 2015. Why?

 

Because Florida’s two oversite groups, the Office of Economic and Demographic Research (EDR) and the Office of Program Policy Analysis and Government Accountability (OPPAGA) (whew!) determined these incentives cost more than they ever produced. (While their office names may be convoluted, these are the groups tasked with determining if business tax incentives actually work.) In a neighboring county, for example, the Lake Apopka enterprise zone received $406,661 in state funds (in 2015) but created zero jobs.

 

This effect, losing more than you put into a program, is called a ‘negative Return On Investment’. Think of it like putting money in a savings account and finding less money every time you went back to the bank!

 

 Smartly, Florida state officials ended the Enterprise Zone Program in 2015. But the important lessons were these, taken from 2017 EDR official report:

 

“To the extent the state funds supporting the incentive (money) could have been more productively spent elsewhere and the business activity would have occurred anyway, the state actually foregoes revenues beyond the direct cost of the incentives.”  (my emphasis)

 

“Many of the benefiting businesses are market or resource dependent and these business activities would have been undertaken somewhere in the state or local area absent the incentive. (my emphasis)

 

 Simply put, the incentives not only didn’t work, but were not necessary. A look at all the different economic incentives (there were 8 different state programs) shows the majority return less than a simple savings account! And we all know how little that pays!

 

Of the 8 programs, 7 lost money, and for 6 of these 7, state reports show “…the program does not break even; however, the state generates enough revenues to recover a portion of its cost of the investment.” (emphasis mine)

 

Kind of like putting money in the bank to earn enough to pay for your kid’s education or retirement and barely getting back what you put in. Or worse…

 

My Position: It’s pretty simple to see: If the State of Florida, with all their expertise, cannot get incentives for business to pay off, who are we in Volusia County to think we can? And the reports tell one other point: The business would have developed without the incentives.

 

I'm pro-taxpayer and pro-responsible growth. If incentives don’t work at the state level, we don’t need to reinvent the wheel here in Volusia.

 

The best way to attract business is with a consistently low tax rate, not special incentives for one or two businesses.