Scott’s billion-dollar bet wrong one for Florida

In Boca Raton, one narrative supports Gov. Rick Scott’s economic policy. The other narrative undercuts it.

The governor prefers the narrative that giving companies public money will entice them to move here or expand. In December, Scott appeared in Boca to announce that KRS Global Biotechnology plans to add 160 jobs and get into manufacturing. If that happens, and the jobs come with the promised median salary of $58,000, the company will receive financial incentives from the city, Palm Beach County and Enterprise Florida, the state’s economic development agency.

Expect Scott to mention KRS in 10 days, during his address to open the legislative session. Scott wants $250 million next year for Enterprise Florida — roughly six times what the Legislature allocated for 2015-16. He wants to eliminate the corporate income tax for manufacturers. According to Scott, Florida’s economic future depends on low taxes and public handouts.

Scott won’t mention Office Depot, which employs 2,000 people at its Boca headquarters two miles from KRS. In 2008, the company got an incentive package to keep its headquarters in the area, moving from Delray Beach. In 2013, the package was updated to keep the company in Boca after it merged with Office Max, which had headquarters near Chicago.

Almost a year ago, however, Staples and Office Depot announced a merger of the largest and second-largest office supply retailers. The headquarters would be in Staples’ hometown of Framingham, Mass. Boca Raton, the county and the state hardly got the chance to make an offer.

In making that decision, Staples chose a state where the corporate income tax is higher — 8 percent to 5.5 percent. Massachusetts also has a state income tax of 5.15 percent. Florida has no income tax. Employees moving from Boca thus would face a salary cut.

None of this mattered to Staples. And while those 160 additional jobs at KBS would be nice, the city, county and state face the loss of 2,000 jobs. Federal regulators have sought to block the merger as being anti-competitive, but Staples is trying to work out a deal.

Other state politicians sing in the lowtax, good-jobs choir. Scott, though, sings lead and sings loudest. He travels to other states, choosing those with Democratic governors, and pitches Florida as a better home — low taxes, low regulation and those potential handouts.

Narratives far from Boca Raton, however, also are undercutting Scott’s economic theory. Until a bad November, California had the most job growth since the recession ended. The state’s corporate tax rate is 8.84 percent. The income tax rate is 13.3 percent.

Florida’s unemployment rate in November was 5 percent, the same as the national rate. In Minnesota, however, the unemployment rate is 3.5 percent. The corporate tax rate is nearly 10 percent. Hawaii’s unemployment rate is even lower — 3.2 percent, with a corporate tax rate of 6.4 percent. The rate in Colorado is 3.6 percent. In Vermont, it’s 3.7 percent.

All those states have something in common other than corporate tax rates that are higher than Florida’s and state income taxes. They have Democratic governors.

Neither party has cornered the market on economic policy. Conditions in any state can depend on unique, perhaps temporary circumstances. South Dakota and Nebraska have the lowest unemployment rates because of energy exploration that fracking has made possible. Continued low oil prices could change that.

For all the money Florida has spent on biotechnology, the state remains dependent on tourism, agriculture and construction. Scott wants to persuade the Legislature that his tax cut/handout proposal would change that.

By basing so much of his proposal around manufacturing, though, Scott is relying on a small part of the state’s economy. The percentage of jobs tied to manufacturing is only about 4.2 percent, among the lowest rates in the nation.

Ending the tax for manufacturers would cost the state nearly $800 million that Florida might spend on, say, higher education to create a better workforce — usually the top priority for business owners and executives. Enterprise Florida also is too secretive. Promised jobs often don’t become real jobs.

Scott likes to say that his business experience taught him to value results above everything. Here and elsewhere, the results don’t support Scott’s theory about how Florida should invest in its economy.

Randy Schultz is the former editorial page editor of The Palm Beach Post. He also blogs for Boca Raton Magazine.