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UCF economist: Gov. Scott's plan to cut taxes isn't the answer

A day after one prominent Florida economist applauded Florida Gov. Rick Scott's tax-cutting strategy, another economist attacked it.

University of Central Florida economist Sean Snaith warned that cutting corporate and property taxes is not the way to draw more business and jobs to the Sunshine State.

"Florida already has one of the lowest tax burdens in the nation and only lags behind South Dakota, Alaska, Wyoming and Nevada for the best business tax climate in the country," Snaith said in releasing his latest quarterly statewide forecast Thursday morning. "There is not much room for improvement as far as the tax climate in Florida is concerned, and trying to be the cheapest state in the country is not going to bolster the number of suitors Florida has.

"There is very little to win in our race to the tax bottom."

Instead of enacting Scott's proposed $1 billion in cuts to corporate income and property taxes, lawmakers should use tax breaks to encourage business behaviors like educating and training employees, Snaith recommended.

On Wednesday, Wells Fargo senior economist Mark Vitner, a longtime observer of Florida's economy, said Scott's initiatives to cut taxes and business regulations are "at least mildly supportive of job creation. They may do more than that."

The two economists agreed on one point: Though the state is still suffering from near-record high unemployment and a battered housing market, the long-term forecast is much better.

Snaith, director of UCF's Institute for Economic Competitiveness, gave his outlook for both Florida and its 12 metro regions.

He was more optimistic about Florida's trek to economic recovery than in previous reports because of recent gains in both personal income and economic output statewide. "Even the construction sector will begin to grow during the next few years," he said.

Overall, he anticipates the state's economic output will expand 2.4 percent this year, 3.3 percent in 2012, 3.6 percent in 2013 and 4 percent in 2014.

Florida's historic attraction as a destination point will continue a slow recovery, hitting a population growth rate of nearly 2 percent in 2014 "as the damage from the 'Great Recession' is repaired and the baby boomer retiree influx starts to swell," Snaith said.

By the end of 2014, he sees the pace of housing starts more than doubling from current levels. But that still will be 100,000 fewer starts than the peak of the housing boom.

Snaith also noted "the amount of wealth in the form of home equity that has been destroyed by the housing bust will not be recovered quickly.'' He estimated that loss at more than $1.1 trillion.

"This lost wealth,'' Snaith said, "will be an albatross around the necks of Florida's homeowners for years, if not a decade or more."

Among his other predictions:

• Florida's unemployment rate, now 11.5 percent, may trend slightly higher before beginning a slow descent to below 6 percent by 2018. Tampa Bay's unemployment will gradually drop to 10 percent in 2012 and 8.9 percent in 2013.

• Florida's strongest-growing industries over the next three years will be professional and business services; trade, transportation and utilities; manufacturing; and leisure and hospitality.

• Retail sales will grow this year and average nearly 5.4 percent annual growth between 2012 and 2014.

• Payrolls won't reach prerecession levels until the end of 2015.

• Average wages in Tampa Bay will rise 3.3 percent this year, better than any year since 2007 and slightly better than any year looking ahead as far as 2015.

UCF economist: Gov. Scott's plan to cut taxes isn't the answer 04/14/11 [Last modified: Thursday, April 14, 2011 11:00pm]
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