Gov. Rick Scott’s ill-fated former economic development chief found himself defending corporate tax incentives during a panel discussion on Florida’s competitiveness hosted by the Charles Koch Institute on Tuesday night.
Jesse Panuccio, who, facing possible rejection from the state Senate, resigned as executive director of the state Department of Economic Opportunity in December, joined two public policy experts for nonprofit think tanks and a Florida State University economics professor during the event at the downtown Grand Bohemian Hotel.
Panuccio was alone among the panelists in his support of using tax dollars to attract out-of-state companies to Florida, although he stressed incentives are a small part of a larger economic development strategy that should also include lower taxes, less regulation and smart investments in infrastructure and education.
Panuccio’s resignation came right before the 2016 legislative session, during which Scott’s top priority was spending $250 million on incentives. Lawmakers balked at his plan and ultimately directed resources toward cutting corporate taxes as well as local property taxes that are used to support education.
“Whether you like incentives or not, realize that … from an economic perspective, once you impose taxes on anyone, as soon as you create an exemption from that tax policy or anything else, you are favoring one group and disfavoring another,” Panuccio said during the panel. “And we do that all the time. We have higher taxes on cigarettes, because we don’t want people to smoke.
“I think I’m the only one on the stage who doesn’t work for a 501(c)(3),” he said, addressing the other panelists. “Your groups all put out an education product, which we like, and so we say, we’ll give you a tax incentive.”
Panuccio then read from his prepared notes how much money the nonprofits represented on the stage — FSU, the James Madison Institute and the Texas Public Policy Foundation — “owe” in taxes.
Sal Nuzzo, vice president of policy and director of JMI’s Center for Economic Prosperity, noted that tax-exempt status for nonprofits is a federal policy. Panuccio responded that they are free from paying state sales taxes.
Later, Panuccio reiterated his point.
“If you say incentives are the worst thing ever, and they’re cronyism, and they’re corporate welfare, fine, but how do you define incentive?” he said. “It’s anything that is differential tax treatment.”
The $250 million in incentives Scott was seeking, he said, is “miniscule” compared to “the the billions that are given away to 501(c)(3)s every year.”
The other panelists were critical of incentives.
Bill Peacock, vice president of research and director of the Center for Economic Freedom at the Texas foundation, said he recently testified before a Senate panel in his home state. Afterward, a senator asked him if he thinks there are any good government economic development programs.
“I said, essentially, no,” Peacock said. “By definition, by design, they are inefficient. They’re taking money from somebody who is really good at making money, because they pay taxes, and they’re giving it to somebody who is not as good at making money, and the government takes its cut in the process. … It’s a net loss.”
Shawn Kantor, the FSU economics professor, called incentives “an overall drag on the economy” that undermine free markets. He also argued they are ineffective.
“They truly are giveaways,” Kantor said. “When executives are thinking about where to locate, the things high on the list: low taxes, reasonable regulations, very importantly an educated workforce — those are about one to seven. And then down at about 16 or something is … incentives.”
Nuzzo celebrated the Legislature’s decision to reject Scott’s proposed incentives during this year’s session, which he called a “sea change” and “paradigm shift.”
“Florida is, at least for the foreseeable future, not going to utilize a pool of taxpayer dollars to attract businesses from outside the state to come in and set up operations,” he said.
Panuccio scoffed at that assertion, taking a jab at lawmakers.
“While the Legislature decided not to fund [Scott’s priorities], I think it is a myth to argue they are not spending on corporations,” he said. “They just moved it from an agency picking those corporations to the Legislature picking them and putting them in line items.
“They gave $1 million to bring Jet Blue to fly to Tallahassee. Who has to fly to Tallahassee every year?” he said. “Let’s not be too holier than thou about what exactly was done this legislative session.”
The panelists agreed the state should focus on K-12 and higher education in order to remain competitive.
Kantor argued Florida is behind many other states in building an educated work force.
Panuccio said former Gov. Jeb Bush’s focus on education, continued by Scott, has fueled Florida’s economic growth. But, he said, the state should spend more money on schools.
“There are lots of things we are spending on that we ought to reallocate to infrastructure and education and other areas, and we don’t for a whole lot of political reasons,” he said.
Panuccio was frustrated that the panelists focused so much of the conversation on incentives, which he argued is a small part of Florida’s economic development strategy.
“The fetishizing of incentives is sort of taking our eye off the ball,” he said.