Floridians have long cited the need to diversify our economy to keep us from being so heavily dependent on just a few industries — industries that are subject to deep cycles.
We saw once again how this works during the last recession when Florida went from having an unemployment rate that was below the U.S. average to one that was much higher than average at the bottom of the recession. It is now back to one of the lowest, but we remain too dependent on tourism, construction and real estate and that causes considerable pain to millions of Floridians in the down cycles.
Despite growing technology and health sectors, our economy heavily tilts to the big three in part because those three are just naturally strong in Florida. But part of the reason is that we are not as friendly to other industries, specifically manufacturing.
Having manufacturers such as Tropicana Products, Helios Technologies (formerly Sun Hydraulics) and Pierce Manufacturing in our community help create a bulwark against the wide swings of our heavily cyclical natural sectors. Additionally, manufacturing jobs pay on average more than other industries that do not require advanced education.
To keep, expand and attract more of these manufacturing companies, we need to make Florida more friendly to manufacturers, which means we need to make some changes at the state level.
Here are five things we could do:
1) Change the methodology for calculating the county tangible personal property tax on equipment. Counties ignore the Generally Approved Accounting Procedures (GAAP) that is used to capture the depreciating value of equipment for federal taxes. For instance, if a company bought a piece of equipment 30 years ago, it is still being taxed on it at that value — when it clearly no longer holds that value.
So companies are taxed when they buy a new piece of equipment, and then they are taxed again every year for using that already-purchased equipment. This is a revenue source for local counties, but it is a bad one because it puts manufacturers at a disadvantage to most of the rest of the country. Companies don’t even know how their equipment is valued. They just keep paying. If these companies were not paying that tax every year, they could buy more equipment and add more jobs.
2. Many years ago, Florida created a Research & Development tax credit and capped it at $9 million total statewide. So companies can get a tax exemption on their R&D — a critical element in being competitive in the global economy. But a cap of $9 million covering tens of thousands of companies statewide makes the exemption very difficult to qualify for. If they do, it is only a prorated amount. We know that more $100 million qualified last year. We should increase that cap to $50 million immediately, and sets aside $10 million of it for clean technology R&D.
3. Change our sales and use tax exemption so that it is competitive with other states. For instance, oil and rags at a manufacturing company are considered consumables, so they don’t fall under the sales and use tax exemption. This is just another way in which Florida manufacturing struggles to compete. We should expand those exemptions.
4. Continue to reduce the commercial lease tax, taking it from 5.5 percent down to 5 percent. We should be looking towards eliminating the tax. But because of the amount of revenue it generates, we should take it a step at a time.
5. Florida’s Qualified Target Industry (QTI) program is set to expire next year. We should extend it another five years, so companies in desirable industries would qualify for temporary tax relief. This is incredibly important in attracting manufacturers and diversifying the economy.
I’m talking to my fellow legislators to build support for these changes, so we can diversify our economy and have higher paying jobs in Florida. I’d also love to hear your ideas!
Florida State Rep. Tommy Gregory, R-Sarasota, represents House District 73 covering parts of Sarasota County and Manatee County.