Lawmakers Hope Sales Tax Cut Brings Manufacturing Boom

Jul 29, 2013

Florida ranks among the bottom states for the number of manufacturing jobs. Lawmakers eliminated the sales tax on manufacturing equipment, hoping to lure more companies.

Manufacturing isn't a booming industry in Florida, but many hope that will change thanks to a vote by the state Legislature.

Starting next spring, manufacturing companies will be able to buy equipment in Florida without paying sales tax on it.

That means less revenue initially for the state, but supporters say the move will help boost the industry and create jobs in Florida.

Gov. Rick Scott says 70 percent of businesses in Florida are exempt from paying the corporate income tax, and now, the state is cutting taxes for manufacturers as a way to keep the economy growing.

The governor wants to lure more companies like Danfoss Turbocor Compressors, an international manufacturing business that has its home base in Tallahassee.

“Not only do we think that it's important for the manufacturers in Florida,” said Nancy Stephens with the Manufacturers Association of Florida, “but it's important to send the message to the world that Florida is open for manufacturing business.”

Stephens says her industry is the base for everything.

“You would not be moving any goods on trucks or rail or ships if you did not have manufactured goods,” Stephens said. “So you have to make something to sell to keep all the other sectors strong.”

The governor's office says this is where Florida lags behind other states. We're in the bottom ten for manufacturing jobs.

House Minority Leader Perry Thurston, D-Ft. Lauderdale, says the revenue that's lost by cutting the sales tax could be used for transportation and education issues.

“To eliminate potential revenue to cover those needs without any type of justification or accountability is just wrong.” Thurston says incentive programs like this one don't require increased productivity or job creation.

Tallahassee Rep. Michelle Rehwinkel Vasilinda thinks the state offers too many corporate exemptions.

“I think we need to go towards a level playing field for all businesses,” Rehwinkel Vasilinda said. “We keep picking winners and losers, and I just get a little concerned about that.”

Like Thurston and all of the other Democrats in the House, she voted against the tax cut.

“I think people were looking at the fact that, you know, do we really need another tax exemption for corporations, especially when the state needs the revenue?”

The Department of Economic Opportunity estimates the tax cut will cost the state up to $115 million in revenue, while local governments could lose up to $26 million a year.

Florida State University Economics Professor Randall Holcombe says this issue epitomizes a common political debate in Tallahassee.

“I think there sometimes is – maybe I would call it an anti-business sentiment or just the idea that businesses can afford to pay those taxes,” Holcombe said. “Individuals are struggling, so let's put the taxes on the business.”

Holcombe agrees with the decision to temporarily drop the tax, but not for the reason most might think.

“It eliminates the double tax on manufacturing equipment. When the equipment's bought, you pay the sales tax, then when whatever is produced is sold, the sales tax is paid again. It's a tax on top of a tax,” Holcombe said. “Also, I don't think it's a bad idea to try to cut business taxes to attract business to Florida.”

The Florida Legislature approved the tax cut, and Gov. Scott signed the bill into law last May. It goes into effect next spring and will sunset after three years unless lawmakers extend it.