By Andrea Castillo, JMI Intern & Florida State University Senior in Political Science & Economics
Governor Rick Scott’s highly publicized state budget proposal has garnered throngs of both praise and derision from commentators on the state and national level. The proposal, which calls for $4 billion in tax cuts over two years and a $5 billion reduction in state spending, is an ambitious step for the new governor whose state unemployment rate has been hovering around 12% for almost 2 years. Unsurprisingly, supporters of limited government have been pleased by Gov. Scott’s adherence to his campaign principles and need little convincing of the feasibility of the governor’s plans.Critics of the proposal, however, call the governor’s plan for controlling state taxes and expenditures counterintuitive and possibly destructive. Many point to the elimination of 9,000 state bureaucratic positions and the dramatic slashing of corporate income taxes and property taxes as examples of wrongheaded “right-wing” economic dogmatism.However, it is worthwhile to note that many of the most vociferous critics of Gov. Scott’s plan represent the various interest groups that stand to lose the most, such as union representatives and political opponents. Although Gov. Scott’s plan will undoubtedly be ravaged by politicking opportunists in the media, there is a vast body of economic research that suggests that Gov. Scott’s budget proposal will cultivate a jobs-boosting business climate while increasing state tax revenues at the same time.Deficit hawks like Gov. Scott are commonly chided for being inconsistent in their approach to budget reform. The argument goes that one cannot simultaneously call for tax cuts and deficit reduction without being hypocritical. Critics assert that the only true path to budgetary austerity is the one that calls for tax increases and spending cuts. Although this argument is frequently repeated in the media, the empirical research on tax analysis suggests otherwise.Economists and policy analysts have long known that lower rates of taxation actually generate higher revenue yields than comparatively high rates of taxation do. As a matter of fact, President John F. Kennedy, hardly regarded as an anti-tax activist, explicitly gave this justification for lowering the top marginal tax rate from 91% to 70% in 1963. During his annual budget message to Congress in 1963, he said:“Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government.”President Kennedy’s address was anything but empty rhetoric; tax revenues increased by 62% from the years 1961 to 1968 after his reform of the tax schedule. There are numerous other examples of this economic principle at work both here in the U.S. (tax cuts of the 1920’s and 1980’s) and around the world (famous “Irish Miracle” and the Chilean reforms of the late 1970’s).Given the historical support for Gov. Scott’s budget proposal, Florida seems well-positioned to shake off its recession blues and finally “get to work” as a state if the governor’s plan be adopted. The spending cuts will undoubtedly cause some short-term discomfort for the bureaucrats whose services will no longer be needed by the state, and supporters of the governor’s proposal should be aware of this immediate friction. However, there is strong evidence that suggests the small loss in unproductive state jobs will be more than made up for in new private sector opportunities for employment.Floridians have suffered under the weight of an uncooperative economy and bad public policy for far too long. Gov. Scott’s budget proposal is promising to be a much-needed ray of hope for the hardworking citizens of the Sunshine State and should be the catalyst that brings our beautiful state into one of our most prosperous decades yet.