George Gibbs Center for Economic Prosperity

Orlando Sen⁠t⁠⁠i⁠nel — Flor⁠i⁠da should f⁠i⁠gh⁠t⁠ federal pol⁠i⁠c⁠i⁠es ⁠t⁠ha⁠t⁠ d⁠i⁠scourage ⁠t⁠rade

By: The James Madison Institute / 2014

Orlando Sentinel
“Florida should fight federal policies that discourage trade”
September 12, 2014
By J. Robert McClure, Guest columnist
The entrepreneurial spirit is alive and well in Florida, despite federal tax and trade polices that discourage it. It is especially strong among recent immigrants who — like the Cuban refugees before them — fled countries such as Venezuela, where an authoritarian government seems bent on destroying the private-sector economy.
Unfortunately, despite Florida having its business climate ranked among the nation’s best, starting a business in the Sunshine State — or anywhere else in the U.S. — is no longer as simple as setting up shop and hanging out a sign. Instead, for the prudent entrepreneur, the first steps nowadays often entail hiring a lawyer and an accountant.
Why a lawyer? Legal advice can help a startup business through a regulatory minefield replete with hazards ranging from zoning restrictions to licensure provisions, including some blatantly designed to discourage competitors from entering a field of business.
Then there’s the matter of compliance with the complex federal, state and local rules and regulations governing so many facets of their business. With Florida widely portrayed as “a judicial hellhole,” where businesses are constantly harassed by the threat of costly litigation, the Sunshine State is not a good place to be sued; so, hiring a lawyer can help.
Why an accountant? Because the federal tax code is thousands of pages long. Even the savviest CPAs have trouble understanding all of it, but ignorance of the law nonetheless runs the risk of wrath of the Internal Revenue Service and triggering an audit. Even if you emerge from the audit relatively unscathed by fees and fines, you lose time and money.
Few steps in Washington would do more than tax reform to encourage the formation of new businesses nationwide and the prosperity of existing ones. However, that’s not the direction Congress is headed.
Indeed, as author Peter Schweizer pointed out in his well-documented 2013 exposé of crony capitalism — “Extortion: How Politicians Extract Your Money, Buy Votes, and Line Their Own Pockets” — keeping the tax code big and complex lends itself to granting political favors, regardless of which party is in charge.
The same goes for trade barriers. Although most economists tout the advantages of freer trade, numerous obstacles remain in place in the form of tariffs and import quotas. The result around the U.S. in general is that consumers pay more for imported goods — and that other countries buy fewer products and services from the U.S. than they otherwise might buy.
For Florida, the impact of trade barriers on job creation is arguably even worse. This state is a natural trading partner with Latin America and the Caribbean. The state’s seaports — and airports — are important job creators.
Freer trade with the rest of the Western Hemisphere not only would create jobs in Florida, but it could also improve the economies of Florida’s trading partners, thereby contributing to the political stability and economic prosperity of those nations.
Alas, problems with the mind-boggling federal tax code and with counterproductive trade barriers such as the import quotas on sugar can’t be solved in Tallahassee. The best any state can do is to avoid emulating Washington’s bad policies with regard to taxes and regulations.
Meanwhile, states are essentially bystanders when it comes to the key issues affecting foreign trade. States may improve the conduits — the seaports and airports — through which trade flows, and Florida is aggressively doing so with a new sense of urgency heightened by the widening of the Panama Canal.
In the end, though, Washington needs to act — and that’s where Florida’s large congressional delegation has a role to play. Simplifying the tax code and relaxing trade barriers are issues on which elected officials of both political parties ought to be able to find common ground.
The challenge is in the phrase “Washington needs to act.” Our nation’s capital has become so dysfunctional that it underscores the wisdom of turning over more responsibilities to the states. Unfortunately, only Washington can fix the federal tax code and lower the trade barriers. Until Washington acts, Florida should continue to do the best it can with the hand it has been dealt.
J. Robert McClure is president/CEO of The James Madison Institute, a nonpartisan think tank based in Tallahassee.