The Associated Press April 25, 2011, 1:54PM ET

Scott's Fla. corporate tax repeal on life support

Gov. Rick Scott's plan to phase out Florida's corporate income tax went on life support in the Senate on Monday even with a new twist designed to make it more palatable to cash-starved lawmakers.

The Senate Commerce and Tourism Committee put the legislation on hold at the request of its sponsor, Sen. Garrett Richter, a Republican from Naples, Scott's hometown.

The meeting was the panel's last of the session, but Richter said he isn't giving up on one of Scott's top priorities. He could try to amend it to other legislation.

"I'm not ready to throw the towel in, but I'm a realist and we're running out of time," Richter said. "It's a work in process."

A similar House bill is doing no better there as it has yet to receive a committee hearing with just two weeks left in the regular legislative session.

Senate committee members questioned the bill's cost as well as Scott's premise that a corporate tax cut would create jobs.

Scott asked him to present the bill to the panel, but Richter said at the onset that he didn't want to put it to a vote chiefly because it would cost $333 million in the first year alone.

"We could have had the votes to pass it, but frankly I don't think we want to pass it unless we're clear about what it is we're passing," said Sen. Nancy Detert, a Venice Republican who chairs the committee. "I don't think you rush a bill that's hundreds of millions of dollars."

The committee didn't get the revised version until Friday, when senators were off for the Passover and Easter holidays.

Detert noted that lawmakers have cut taxes when Florida's economy was booming but suggested it's "just kind of odd" to do it "during the worst of times."

In its initial form, the bill would have cut the corporate tax from 5.5 percent to 3 percent the first year and by increments of 2.5 to 0.5 percentage point each successive year until fully repealed.

Scott's new proposal would cut the tax rate by a percentage point to 4.5 percent the first year. Future annual reductions would occur only if other state revenue increases enough to more than offset losses from the next year's tax cut increment.

The corporate tax currently brings in nearly $2.2 billion a year. Scott's new proposal is expected to fully repeal the tax in seven years.

Richter said the biggest problem is making up the first year's loss when lawmakers already have cut nearly $4 billion in spending for such things as schools and health care to balance a budget of about $70 billion.

The House and Senate have not yet settled spending differences but neither chamber's budget bill includes a corporate tax cut.

The governor's theory is that getting rid of the corporate tax would attract new businesses to Florida and encourage existing ones to expand, thus creating new jobs.

With more than 1 million jobless Floridians, Scott campaigned last year on a promise to create 700,000 new jobs in seven years. That's in addition to 1 million jobs Florida is expected to add as the state's economy recovers from recession in that span.

Sen. Paula Dockery, R-Lakeland, questioned the assumption tax cuts would create jobs. She noted the state spent more than $300 million on incentives to lure the Scripps Research Institute to Jupiter but so far it has created only about 330 jobs.

A February report by the Florida Center for Fiscal and Economic Policy, a liberal think tank, also cast doubt on the effectiveness of a corporate tax cut.

It pointed out most small businesses, often touted as Florida's biggest job creators, already are exempt from the tax. State data show that only 25,000 to 40,000 companies -- less than 1 percent of all for-profit businesses in Florida -- pay the tax.

Also, the state already has one of the nation's lowest corporate taxes and the Tax Foundation ranks Florida fifth in business climate.

Sen. Jeremy Ring, D-Margate, said he favors the tax cut but said it wouldn't help unless the state promotes itself better. Ring said Florida has failed to attract businesses despite having a low corporate tax rate and no personal income tax while dramatically improving its schools.

Richter said Scott is trying to remedy that by personally recruiting businesses.

Sen. Bill Montford, D-Tallahassee, suggested it would take too long for the tax cut to affect employment. He said Florida's unemployed are saying, "Tell me when."

Richter acknowledged the tax cut would not be a "short-term fix."


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