By: Adam Millsap
One of America’s most-watched governor’s races is taking place in Florida. Democrat Andrew Gillum is up against Republican Ron DeSantis, and each candidate has different views on which policies will help Florida going forward. A new report from the James Madison Institute discusses some of each candidate’s preferred policies and their economic impacts. While DeSantis’s policies are more favorable to economic growth than Gillum’s, Gillum does have some good ideas when it comes to criminal justice reform.
DeSantis’s proposal to continue the phase out the business rent tax is a good one. According to the JMI report, Florida is the only state that taxes businesses on their rent payments and this can discourage businesses from locating in Florida. The business rent tax is also double taxation if some of the property tax burden is passed on to businesses from the landowner, which is likely.
As for corporate income taxes, DeSantis wants to reduce Florida’s rate from 5.5% to 5%. Lower corporate income taxes can increase investment and thus wages and employment. It’s also important to remember that only people pay taxes, so any corporate income tax is paid for by some combination of shareholders, workers (in the form of lower wages), and customers (in the form of higher prices).
Research shows that workers in particular bear anywhere from 35 to 60%of the corporate income tax in the form of lower wages, so lowering it would increase wages by relieving workers of their share of the burden. Corporate income taxes are often viewed as a way to reduce income inequality, but depending on how the burden is distributed, that may not always be the case.
In contrast to DeSantis, Gillum wants to raise Florida’s top corporate income tax rate to 7.5%. All else equal, such an increase would decrease investment in Florida and reduce wages and employment opportunities. That said, even with the increase, Florida would still likely have a favorable tax climate relative to most other states so the related decrease in economic activity may not be very large.
While raising taxes is generally not conducive to economic growth , an even worse policy from the standpoint of Florida’s lowest-skilled workers is Gillum’s proposal to increase Florida’s minimum wage to $15 per hour. Increasing the minimum wage has been a hot topic for several years—but it shouldn’t be. Substantial evidence shows that higher minimum wages reduce employment opportunities for lower-skilled workers, including a couple of recent studies that I wrote about here and here.
But even if you think a higher minimum wage is the best way to improve the lives of low-income workers (it isn’t), it’s still not the case that every part of Florida should have the same minimum wage. For a variety of reasons—including types of employers, attractiveness of the area, natural resources, and skills of the workforce—different areas have different local economies. Each local economy has its own average wage. Minimum wages that are large relative to an area’s average wage will have especially large negative effects on employment there, since they will have large effects on employer costs.
The figure below shows the average weekly pre-tax wage for counties in Florida (lighter colored counties have lower wages). A full-time worker earning $15 per hour would earn $600 per week before taxes.
In low-wage counties such as Calhoun, Franklin, and Levy, weekly wages from a $15 minimum wage would be 100% or more than what the average worker currently makes. But in Palm Beach, Hillsborough, and Brevard County, $15 per hour would generate weekly wages that are only two-thirds or less of what the average worker currently makes. Lower-wage counties tend to be more rural and already lack employment options and are precisely the counties that would be hurt most by the unintended consequences of a statewide $15 minimum wage.
While some of Gillum’s economic policies leave a lot to be desired, he does have some good ideas. His proposal to legalize marijuana would prevent numerous arrests and free up police, court, and other justice system resources for use on more important things. His proposal to reduce prison sentences for non-violent offenders is also a step in the right direction.
Both proposals would save taxpayer money (and raise some since marijuana would be taxed) and, more importantly, reduce the number of lives that are ruined as a result of getting caught up in the criminal justice system. DeSantis would be wise to copy and build on both proposals.
Florida is a heavily watched swing state in the presidential elections and this year’s governor’s race could be an early indication of which way the state will go in 2020 . For those interested in politics, November 6th will be an exciting day in Florida.
Adam A. Millsap is the Assistant Director of the L. Charles Hilton Jr. Center at Florida State University and a Senior Affiliated Scholar at the Mercatus Center at George Mason University.
