News Column

Business-Friendly Tax Climate Is Sweet

Oct. 17, 2012

Elvina Nawaguna

Small-business

Florida's tax climate wasn't the top attraction when SteriPack chose Lakeland for its first U.S. operations, but it was an added incentive.

"Taxes was one of the reasons," said Tony Paolini, the Ireland-based company's president.

"It was a good enough package combined with every other reason."

A report from Tax Foundation ranked the Sunshine State's tax climate No.5 of all 50 states. Above Florida, other states with a favorable tax climate were Wyoming, South Dakota, Nevada and Alaska in the 2013 State Business Tax Climate Index. New York, New Jersey and California, the report said, have a far less pleasant tax climate.

Tax Foundation is a Washington, D.C.-based nonpartisan research organization that monitors fiscal policy at the federal, state and local levels.

While a combination of several factors such as location, demographics and the labor pool influence a company's decision to relocate or expand into a particular state, the tax environment plays a role.

The Central Florida Development Council, based in Bartow, trumpets the state's favorable tax climate to lure businesses.

"Taxes are a huge issue for companies. I can tell you that businesses look heavily at taxes and the implication it has on a location decision," said Rodney Carson, director of economic development at CFDC. "That is definitely something that we tout."

Taxes, he said, are additional expenses a company incurs for operating its business. His organization has this year been helpful in drawing a number of new companies into Polk County, including SteriPack and Mission Foods.

Tax Foundation's index collects and synthesizes data on more than a hundred tax provisions for each state and assigns them a single score that is used to compare the different states. Florida has been fifth in the index for three years in a row. The survey took into consideration the entire tax systems of the states, including rates and the bases. Florida's sales tax rate is 6 percent, according to the state Department of Revenue, and the state has no state income tax.

One of the common things about the states at the top is that they do without the major taxes, said Scott Drenkard, an economist with Tax Foundation. Aside from the absence of personal income taxes, he said, Florida also has reasonable taxes in other categories, and all these matter for businesses. Florida also charges corporate income tax and property taxes.

"Without an individual income tax, you're capable of attracting people that are on fixed income and don't want to pay (more taxes)," he said. "I know Florida is a retirement spot, and not having an individual income tax is one of the things that makes it attractive."

Peter Bias, a professor of economics at Florida Southern College's Barney Barnett School of Business and Free Enterprise, said several factors, including tax rates, ease of transportation, skilled workforce availability, close proximity to their consumers, state and local government regulations and non-economic reasons such as weather could influence an individual or company's decision to move.

All these factors matter, he said, but it's hard to say whether Florida has low taxes because it has low spending or whether it's the other way around. Or does the state have low tax rates because it also has relatively low incomes? High tax rate areas, he said, generally have higher incomes.

"If taxes were raised would companies leave? Yes -- but hard to know how many. If taxes were lowered, would companies come to Florida? Yes, but, again, hard to know how many," Bias said.

Carson of the CFDC said it's a matter of policy.Having less tax burden is also a huge benefit because it means small businesses have more money to spend on expanding their facilities and operations, investing in their employees, and in marketing and therefore increasing their sales.

"The governor has taken a very strong point on trying to be business-friendly and part of trying to be business- friendly is lowering the tax burden on businesses," he said.



Distributed by MCT Information Services



Source: (c) 2012 The Ledger (Lakeland, Fla.)


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