REPORT AND RECOMMENDATIONS OF THE FLORIDA TANGIBLE PERSONAL PROPERTY TAX TASK FORCE

REPORT AND RECOMMENDATIONS OF THE FLORIDA TANGIBLE PERSONAL PROPERTY TAX TASK FORCE November 2011

ReportandRecommendationsoftheFlorida TangiblePersonalPropertyTaxTaskForce Theadvaloremtaxationoftangiblepersonalproperty(TPP)inFloridaraisesapproximately$1.8 billionforcounties,cities,schoolsandspecialdistricts.itisarelativelysmallpartofflorida s $25billionpropertytaxsystem,butitplaysanimportantroleinmanylocalgovernments financialstructure,especiallysmallcountieswheretppcomprisesasignificantportionofthe taxroll. However,manybelievethatthetaxiscostlyforFloridabusinessestocomplywithandfor governmenttoadminister,thatthereisalackofuniformitytoitsapplicationtotaxpayersin differentareasofthestate,andthatthecurrentsystemallowsforsignificanttaxavoidance. Andperhapsmostimportantly,thereisaperceptionthatthetaxstandsasanimpedimentto capitalformationandjobcreationinourstate. AspartofhisfocusonjobcreationandenhancementofFlorida scompetitiveness,governor RickScottwantedtoexaminetangiblepersonalpropertytaxationinFlorida,focusingon whetherareductionoreliminationofthetaxcouldprovideaboosttoeconomicdevelopment. HeaskedformerstatesenatorandSarasotarealestatedeveloperPatNealtoleadtheeffort andaskedfloridataxwatchtocarryouttheresearch. Tothisend,FloridaTaxWatch,undertheguidanceofChairmanNeal,formedtheFlorida TangiblePersonalPropertyTaskForce.Thetaskforceiscomprisedofbusinessleaders, propertyappraisers,andtaxpractitioners.themissionofthetaskforcewastoexaminetpp taxationinflorida,issueareport,andmakerecommendationstothegovernorandtheflorida Legislature. ThisisthefinalreportoftheFloridaTangiblePersonalPropertyTaskForce.Itwaspresentedto thegovernoronseptember2,2011.(postscript:onoctober12,2011,thegovernorreleased his2012jobcreationandeconomicgrowthagendawhichrecommendsthatthelegislatureplace aconstitutionalamendmentontheballotthatwillcompletelyexemptanybusinesswithless than$50,000intangiblepersonalpropertyfrompayingtpptaxes.)

ExecutiveSummary Theadvaloremtaxationoftangiblepersonalproperty(TPP)inFloridaraisesapproximately$1.8 billionforcounties,cities,schoolsandspecialdistricts.itisarelativelysmallpartofflorida s $25billionpropertytaxsystem(7.5percent),butitplaysanimportantroleinmanylocal governments financialstructure. ManybelievethatthetaxiscostlyforFloridabusinessestocomplywithandforgovernmentto administer,thatthereisalackofuniformitytoitsapplicationtotaxpayersindifferentareasof thestate,andthatthecurrentsystemallowsforsignificanttaxavoidance.whiletheseare importantissues,thefocusofthisreportiswhetherthetaxstandsasanimpedimenttocapital formationandjobcreationinourstateoriftherepealorreductionofthetaxwouldspur economicdevelopment. ThereareamultitudeofvariationsonhowstatestaxTPP.Fourteenstatesatleastsubstantially exemptbusinesspropertyfromtaxation.nosoutheasternstateexemptstpp,indicatingan exemptioncouldbeanincentiveforbusinessestolocateinflorida. Propertytaxesarenowbyfarbusinesses numberonetaxexpensenationwide,comprising36 percentoftotalstateandlocaltaxes.thisiseventruerinflorida,whichhasthefourthhighest relianceonpropertytaxesforitstateandlocaltaxesinthenation.further,florida sproperty taxsystemshiftsbillionsofdollarsintaxburdenfromhomesteadpropertytononhomestead property. EliminationofTPPtaxeswouldaffectlocalgovernmentsinvariouscountiesverydifferently. WhilelargercountiestendtohaveasmallerportionoftheirtaxrollscomprisedofTPP(less than5.5percentinthethreelargestcounties),smallerruralcountiesrelyheavyonthetax. Threecountieshavemorethan40%oftheirtaxbasemadeupbyTPP.Whilesomeofthe larger,moreprosperouscountiescouldprobablyabsorblosttpptaxes,itwouldcreatesome realproblemsformanysmaller,fiscallyconstrainedcounties. Inaddition,localgovernments propertytaxbaseshavealreadydeclinedby21%since2007and thestatehasalsoseenitsrevenuesshrinkforseveralyears.thelegislaturewouldhavetofind anadditional$780millioninstatemoneytoreplacethelostfundingforschools orraise taxes toavoidareductionineducationfunding. Forallthesereasons,theTaskForceconcludedthat,whilethetotalrepealoftangiblepersonal property(tpp)taxesinfloridawouldlikelycreateasignificantaddedattractionforbusinesses

thatareconsideringlocatinghere,thecurrentenvironmentiscertainlynotfavorablefor reducingtherevenueofschoolsandlocalgovernmentsby$1.8billion. InsteadoftryingtototallyeliminateTPPtaxesnow,thestateshouldlookatprovidingtarget economicdevelopmentexemptionsfromtpptaxesthatcanpromotecapitalinvestmentin Floridaandcreatejobs.Exemptingallmanufacturingandthestate squalifiedtargeted Industrieswouldprobablyprovidethemost bangforthebuck. Onlytencountieshavea manufacturingsharethatexceedsthreepercentoftaxablevalueandonlyfourcountieshavea targetindustryshareabovetwopercent. FloridaTaxWatchperformedeconomicsimulationmodelingoffiveTPPtaxreductionoptions. FullrepealofTPPtaxescouldcreate,dependingonhowlocalgovernmentsdealtwiththe revenueloss,asmanyas100,000totaljobsovertenyears.thelossofgovernmentjobscould reducethattotal,dependingontheextenttowhichlocalgovernmentshadtoreducespending. Narrowerexemptionsformanufacturingandthetargetindustries(boththestate squalified TargetedIndustriesandhighimpactsectors)werealsomodeled.Allofthesescenariosshowed positivegrowthinprivatesectoremploymentandgrossdomesticproduct.assumingthelikely outcomethatmostcountieswillreplacethelostrevenueofthelesscostlyexemptions, exemptingbothmanufacturingandtargetindustriesshowsthemostprivatesectorjobs,the mosttotaljobsandlargestgdpincreaseoverthetenyearperiodofthesimulation.compared tototalrepeal,thisnarrowerexemptionproducesmorejobsrelativetothesizeofthetax reduction. TheexpectationthatreducingoreliminatingTPPtaxeswouldattractmorebusinessestolocate infloridawasalsoexamined.thisisalikelyscenariosincefloridawouldbecometheonlystate inthesoutheasttoexempttpp.ifthisexemptionledtoanincreaseinfloridamanufacturing jobsofonlyonetothreepercent(3,000to9,000jobs),between88,300and220,400additional jobswouldbecreatedovertenyears.thisisbetween35,000and60,000morejobsthanwould becreatedbytheinfluxofthesamenumberofnewjobsallocatedtoallindustries(insteadof justmanufacturing). 2

Insummary,theFloridaTangiblePersonalPropertyTaxTaskForcerecommendsthatthe Legislature: Passajointresolutionproposingaconstitutionalamendmenttogobeforethevotersin November2012thatgivestheLegislatureflexibilityintheareaoftaxationoftangible personalproperty. Intheshortterm,createTPPtaxexemptionsforallmanufacturersandotherstate targetedindustriesandhighimpactsectors.ataminimum,thestateshouldexempt newandexpandingbusinessesintheseareas,butstrivetoprovidefullexemptionsfor thesesectors. Thelegislaturecouldallowforlocalgovernments byreferendumto optout,or continuetotaxtpp.alternatively,thestatecouldconsiderreimbursinglocal governments particularlyfiscallyconstrainedcountiesforlostrevenue. TheLegislatureshouldsetagoaloftotaleliminationofadvaloremtaxationoftangible personalpropertyinthefuture,whenpropertyvaluesaregrowingatasignificantlevel again. 3

Wherethe$1.8BillioninTPPTaxesGo (million$) $144.1 8% $241.3 13% $647.6 36% $787.1 43% Counties SchoolDistricts SpecialDistricts Cities Source:FloridaTaxWatch,usingdatafromtheFloridaDepartmentofRevenue,August2011. 4

Introduction WhatisPersonalProperty? Ageneraldefinitionofpersonalpropertyispropertythatisnotattachedtothelandandcan thereforebemovedfromplacetoplace. TherearefourclassesofpersonalpropertyinFlorida 1 : Householdgoodswearingapparel,furniture,appliances,andotheritemsordinarilyfoundin thehomeandusedforthecomfortoftheownerandhisorherfamily,householdgoodsarenot heldforcommercialpurposesorresale. IntangiblePersonalProperty money,allevidencesofdebtowedtothetaxpayer,all evidencesofownershipinacorporationorotherbusinessorganizationhavingmultipleowners, andallotherformsofpropertywherevalueisbaseduponthatwhichthepropertyrepresents ratherthanitsownintrinsicvalue Inventory consistingofitemscommonlyreferredtoasgoods,wares,andmerchandisewhich areheldforsaleorleasetocustomersintheordinarycourseofbusiness TangiblePersonalProperty allgoods,chattels,andotherarticlesofvaluecapableofmanual possessionandwhosechiefvalueisintrinsictothearticleitself. Thefirstthreecategorieshouseholdgoods,inventory,andintangiblepersonalpropertyare exemptfromtaxationinflorida;onlytangiblepersonalpropertyissubjecttotaxation. WhatisTaxedasTangiblePersonalProperty? Generally,thetangiblepersonalproperty(TPP)taxispaidbybusinessesontheirmachinery, equipment,furniture,computers,signs,supplies,andothersuchproperty. Motorvehicles,boats,airplanes,trailers,trailercoaches,andmobilehomesaresubjecttoa licensetaxbutarenotsubjecttoadvaloremtaxes.mobilehomesfixedtothegroundare 1 http://dor.myflorida.com/dor/property/resources/definitions.html 5

treatedasrealproperty.however,mobilehomesnotfixedtothegroundandnothavinga licensecanbetaxedastpp. TPPComprises7.5%ofTotalStateTaxableValue 2011 $96.8billion 7.5% $1,287billion Source:FloridaTaxWatch,usingdatafromtheFloridaDepartmentofRevenue,August2011. TheFloridaConstitutionprovidesthattheremustbeanexemptionforhouseholdgoodsofat least$1,000 2.TheFloridaStatutesprovidethathouseholdgoodsarenotTPP 3. TheFloridaConstitutionalsoprovidesthatinventory( propertyheldforsaleasstockin trade ) 4 maybeexemptortaxedataspecifiedpercentageofitsvalue.floridastatutesprovide thatinventoryisnottpp 5. 2 ArticleVII,Section3(b),FloridaConstitution 3 Section192.001(11)(d),FloridaStatutes TangiblePersonalProperty AllProperty 6

TangiblePersonalPropertyTaxationinFlorida TPPtaxesareadvalorem(property)taxesleviedannuallybylocalgovernmentsandschool districtsbaseditsvalueasofjanuary1ofeachyear.itistaxedlikerealproperty,withthe FloridaConstitutionprovidingtheframeworkandthedetailsspelledoutinstatute. TheFloridaConstitutionprohibitsthestategovernmentfromlevyinganadvaloremtaxexcept onintangiblepersonalproperty. 6 Intangiblepersonalpropertytaxeswerephasedout, beginningin1998andtheannualtaxwasfinallycompletelyrepealed 7 effectivejanuary1, 2007. ThetaxablevalueofTPPisthejustvalue(fairmarketvalue)ofthepropertyadjustedforany exclusions,differentials,orexemptionsallowedbytheconstitutionandthestatutes.the Constitutionstrictlylimitsthelegislature sauthoritytoprovideexemptionsoradjustmentsto fairmarketvalue. Thetaxrateisthesamemillagerateleviedbycounties,cities,schooldistricts,andspecial districtsonrealproperty. TPPtaxpayersarerequiredtofiletaxreturnsinthecountywherethepropertyislocated,a separatereturnforeachlocationinthecounty. AnnualtaxbillsaremailedinNovemberbasedonthepreviousJanuary1valuationand paymentisduebythefollowingmarch31.discountsaregrantedforearlypaymentandmost taxpayerspaybylatenovember. In1980,countiesandcitiesweregivenauthoritytoenactadvaloremexemptionsfornewand expandingbusinesses.theexemptionsmustbeapprovedbyreferendumofthelocalvoters. Theexemptionsexpirein10yearsunlessrenewedbyanotherreferendum. AllTPPtaxpayers(exceptmobilehomes)receivea$25,000exemptionwhichwascreatedas partofamendment1in2008. 8 Thereare1.24millionaccounts.Approximatelyonemillion(80 4 ArticleVII,Section4(c),FloridaConstitution 5 Section192.001(11)(d),FloridaStatutes 6 ArticleVII,Section1(a),FloridaConstitution 7 Thereisstilla2millonetimetaxisimposedonobligationsforthepaymentofmoneysecuredbyliensonFloridareal property.thisisstillcalledtheintangiblestax. 8 Amendment1wasapprovedbythevotersin2008andprovidedtheTPPexemption,alongwithanadditionalhomestead exemption,a10%assessmentcaponnonhomesteadpropertiesandallowedtheportabilityofbenefitsearnedundersaveour Homes. 7

percent)aretotallyexemptbythe$25,000exemption.butwhilethegreatmajorityof businesseshavenotaxliability,theexemptionreducestotalleviesbyonlysevenpercent. TPPtaxesraised$1.8billionin2011(seechartonpage2). 120 TaxableValueofTPP20012011 (billion$) 100 80 $96.3 $86.8 $88.3 $90.1 $91.9 $102.8 $106.6 $101.3$101.5 $101.1 $96.8 60 40 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source:FloridaTaxWatch,usingdatafromtheFloridaDepartmentofRevenue,August2011. TPPhasbeenafairlystable,slowgrowingrevenuesourceovertheyears.Thetaxablevalueof TPPhasonlyincreasedby11.5percentoverthelasttenyears(seechartabove).TheFlorida DepartmentofRevenuedoesnotkeepseparatetaxlevydataforTPP,butifyouapplythe averagestatewidemillageratein2001(whichwashigherthanitisnow)tothatyear staxable value,theresultisvirtuallythesameamountoflevies$1.82billionasin2011. Asthechartbelowshows,growthinTPPismuchflatterthanthatofrealproperty.WhileTPP increased11.5percentovertenyears,thetaxablevalueofrealpropertyhasincreased75 percent.tppvaluedidnotskyrocketduringthepropertyvalueboomandthereforehasnot fallenasmuchasrealpropertyafterthebubbleburst. 8

GrowthinTaxableValue TangiblePersonalPropertyvs.AllProperty 140% 120% 100% 80% 60% 40% 20% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 TPP AllProperty Source:FloridaTaxWatch,usingdatafromtheFloridaDepartmentofRevenue,August2011. TangiblePersonalPropertyTaxesinOtherStates Amongthefiftystates,thereareprobablyfiftyvariationsofhowtotaxtangiblepersonal property(tpp).statesdifferonhowtheytreatbusinessproperty,inventory,householdgoods, andmotorvehicles.therearewidelyvaryingexemptions,bothinthedollaramountof standardexemptions(suchasflorida s$25,000exemption)andindustryandpropertyspecific exemptions.somestatesgivelocaljurisdictionsmoreflexibilityinthetaxationoftpp. FloridaTaxWatchexamineddatafromthreeorganizations 9,someofitconflicting,totrytoget apictureofhowtppistreatedacrossthenation.thefocusisonbusinessproperty,whichis whatfloridataxes. 14StatesExemptTPP FourteenstatesatleastsubstantiallyexemptTPPfrompropertytaxation.Theseare: 9 InternationalAssociationofAssessingOfficers(IAAO),CCH,Inc.,andtheLincolnInstituteofLandPolicy 9

Delaware Maryland NorthDakota Hawaii Minnesota SouthDakota Illinois NewHampshire Ohio Iowa NewJersey Pennsylvania Maine NewYork ItshouldbenotedthatnosoutheasternstateexemptsTPP,meaninganexemptioninFlorida wouldgivethestateacompetitiveadvantageoveritsneighboringstates. 12StatesTaxInventory OneareathatFloridaexemptsalongwith38otherstatesisinventory,whichitexemptedin 1981.Twelvestatesstilltaxinventory.Theseare: Alaska Louisiana Pennsylvania Arkansas Massachusetts Texas Georgia Mississippi Wyoming Kentucky Oklahoma WestVirginia TPPTaxReliefinSelectedOtherStates ManystateshaveprovisionstoprovidenarrowerexemptionsorothermeansofTPPtaxrelief. Someexamples: Alaska allowsexemptionoftppbylocaloption Pennsylvania exemptsutilitiesandprovideseconomicdevelopmentexemptions Kansas citiesandcountiescanprovideeconomicdevelopmentexemptions RhodeIsland exemptsmanufacturers DistrictofColumbia$225,000standardexemption LikeKansas,Floridaalsoallowscitiesandcountiestoprovideeconomicdevelopment exemptionsforrealandtangiblepersonalproperty 10.However,atleastpartlybecausethereis areferendumrequirementtoapprovesuchexemptions,thiseconomicdevelopmenttoolisnot 10 ArticleVII,Section(3)(c),FloridaConstitution 10

widelyused.localgovernmentsinfifteencountiesprovideexemptionsworthapproximately onehalfofonepercentofthetotaltaxablevalueoftpp. SomeRecentDevelopments Inthelastdecade,severalstateshavetakensteptoeliminateorreduceTPPtaxes,including Ohio,whichisinthemiddleofaphaseoutofthetax. 2009 OhiobeganaphaseoutofTPPtaxation Coloradobeganphasinginanincreasedexemption,in2015itwillbeindexedto inflation 2008 MaineexemptedTPP Indianaexemptedinventory D.C.createda$225,000exemption Floridacreateda$25,000exemption 2003 IowaexemptedTPP 2000 Montanacreated$20,000exemption 11

DoFloridaPropertyTaxesImpactEconomicDevelopment? Taxesarejustoneofthefactorsthatcaninfluenceacompany sdecisionaboutwhichstateto locateitsoperations.education,workforcequality,infrastructure,qualityoflife,andother factorsareallimportant.buttaxescertainlydomatter.thiscanbeespeciallytruewithtaxes thatimpactcapitalintensiveindustries.thefloridalegislaturerecognizedthisduringthe2010 SessionwhenitpassedelectiveSingleSalesFactorapportionmentofcorporateincomefortax purposesforcompaniesthatinvestover$250millioninourstate.thisincentivewasalong timerecommendationoffloridataxwatch. 11 Underthisnewlaw,aqualifyingcorporationmay choosetoapportionitsmultistateincometofloridausinga100percentsalesfactor,meaning thepercentageofitsincomeapportionedtofloridawillequalthepercentageofitssalesin Florida.ThisisanalternativetoFlorida sthreefactorformulaofsales,propertyandpayroll.by goingto100%sales,ataxdisincentivetoplacingcapitalinfloridaisremoved. Propertytaxes,particularlytangiblepersonalproperty(TPP)taxesalsoimpactcapitalintensive businesses.propertytaxesarenowbyfarbusinesses numberonetaxexpensenationwide, comprising36percentoftotalstateandlocaltaxes. 12 ThisiseventruerinFlorida,whichhas thefourthhighestrelianceonpropertytaxesforitstateandlocaltaxesinthenation(seechart onnextpage).dueinparttoanabsenceofapersonalincometax,florida sstateandlocal governmentsrelymoreheavilyonsalestaxesandpropertytaxes,withpropertytaxesbeingthe largestrevenuesource 41percentofthetotal(seetableonnextpage). ThesizeofFlorida spropertytaxburdenisalsooneofthelargestinthenation(seetableon page14).in2008(latestavailabledataforallstates),floridaranked10 th amongthe50states inpercapitapropertytaxcollections.florida spercapitaburdenof$1,632is21percenthigher thanthenationalaverage. Florida spropertytaxburdenisalsodisproportionatelybornebybusinesses.floridaproperty taxlawsfavorhomesteadresidentialpropertyoverotherpropertytypes.homestead exemptionsandthesaveourhomes 13 caponhomesteadpropertyshiftbillionsinpropertytax burdentononhomesteadproperties,includingbusinesses.thisisdiscussedlaterinthisreport (seechartonpage16).fallingpropertyvaluesinrecentyearshavediminishedthistaxshift, 11 FloridaTaxWatch, TransformingFlorida'sCorporateIncomeTaxtoEncourageCapitalFormationandJobCreation,March 2009 12 Ersnt&YoungandtheCouncilonStateTaxation, TotalstateandLocalBusinessTaxes, March2010 13 Approvedbythevotersin1992,theconstitutionalamendmentallowstheassessmentofhomesteadpropertiestoincrease onlybythelesserof3percentorinflation. 12

butbothareexpectedtobeginincreasingagain 14.A10percentcapofnonhomestead propertyandthe$25,000exemptionfortppcontainedinamendment1helpbusinessasa whole,buttheadditionalhomesteadexemptionalsocontainedinthatamendmentismuch greaterthanthebusinessrelief.in2011,thehomesteadexemptionremovesmorethanfour timestheamountoftaxablevalue($84billion)fromtherollsastheothertwoprovisions combined 15. Floridahasthe4 th HighestRelianceonPropertyTaxesintheNation PercentofFlorida stotalstateandlocaltaxesbysource 3% 25% 41% 31% Property General Sales Corporate Income Other U.S.Average Property31%Sales23%PersonalIncome23%CorporateIncome4%Other19% 14 LatestresultsoftheFloridaAdValoremRevenueEstimatingConference,August3,2011 15 FloridaDepartmentofRevenue,2011AmendmentIImpactReport 13

Source:FloridaTaxWatch,usingdatafromtheFloridaDepartmentofRevenue,August2011 TheCouncilonStateTaxation s2011propertytaxadministrationscorecardgavefloridavery highmarksforitspropertytaxlaws B+,thethirdhighestgradeinthenation.Theonlyarea inwhichfloridawasdowngradedwasinequitybetweenresidentialandbusinessproperty. 16 Florida sbusinessclimate Thereareavarietyoforganizationspublishingbusinessclimaterankings,theresultsofwhich canberatherconfusing.afloridataxwatchreport 17 foundthatamongsevendifferent indices,floridaisrankedamongboththetoptenstatesandthebottomhalfofstatesforits competitivenessnationally.thevariabilityintheserankingsiscausedbythedifferentfactorsof thebusinessclimatebeingconsideredbyeachindexandthedifferentweightsassignedto thosemeasures. Thereportfoundthatitiswelldocumentedthattherelativetaxburdenleviedonbusiness directlyaffectsthedecisionsofentrepreneurs,firms,andinvestorsonwhethertostart, relocate,orexpandwithinastate.itfurtherfoundthatfloridarankednearthebottomforits overalltaxburden(37thand41stnationallybyforbesandcnbc,respectively.eachofflorida s neighboringstateswasrankedsignificantlybetter(lesscostlytobusiness).inallindices, Florida soveralltaxburdenwasfoundtobehigher(morecostlytobusiness)thantherestof thenationanditsneighboringstates. Florida spropertytaxrankingalsocomparesunfavorablytothestate scompetitors.florida wasranked37thnationallyduetoarelativelyhigherpropertytaxburdenbytheamerican LegislativeExchangeCouncil.EventheTaxFoundation,whichrankedFlorida5 th bestintotal businessclimate(duelargelytonopersonalincometax)rankedthestate28 th forproperty taxes,whichisdownfrom18 th placefouryearsago.inallthedifferentrankings,all neighboringstateshadalowerpercapitapropertytaxburdenthanfloridaandeveryneighbor excepttexas(onerankhigher)hadalowereffectivepropertytaxrate. Onelastrankingofnote,arecentstudybyErnst&YoungshowedthatFloridahasthe27 th lowesteffectivetaxrate(alltaxes)onnewcapitalinvestmentandthe29 th lowesteffectivetax 16 CouncilonStateTaxation, TheBestandWorstofPropertyTaxAdministration, May2011 17 FloridaTaxWatch,KatieFurtickandKatieHayden,StateCompetitivenessIndices&Rankings:WhatNationalRankingsTellUs aboutflorida scompetitiveness,march2011. 14

rateoncommercialequipment.areductionintangiblepersonalpropertytaxescouldhelp lowerthoserates. 18 Relativebusinessclimaterankingsaredifficulttomeasureeffectively,asevidencedbythe disparitiesinthevariousrankings.however,onethingisclearafterreviewingthedata, Florida spropertytaxburdenonbusinessesishigherthanmoststates.thissuggeststhat exemptingtangiblepersonalpropertyfromtaxationwouldhelpremoveacompetitive disadvantagenowfacingflorida. 18 Ernst&YoungandtheCouncilonStateTaxation, Competitivenessofstateandlocalbusinesstaxesonnewinvestment, April2011 15

PerCapitaPropertyTaxCollections FY2008 1 NewJersey $2,625 26 Washington $1,199 2 Wyoming $2,385 27 Ohio $1,178 3 Connecticut $2,381 28 Maryland $1,171 4 NewHampshire $2,317 29 NorthDakota $1,157 5 NewYork $2,009 30 Oregon $1,133 6 RhodeIsland $1,957 31 Indiana $1,089 7 Vermont $1,896 32 SouthDakota $1,072 8 Massachusetts $1,789 33 Georgia $1,063 9 Illinois $1,662 34 Arizona $1,043 10 Florida $1,649 35 Hawaii $977 11 Maine $1,636 36 SouthCarolina $963 12 Wisconsin $1,573 37 Missouri $924 13 Alaska $1,559 38 NorthCarolina $860 14 California $1,449 39 Utah $823 15 Michigan $1,409 40 Mississippi $785 16 Nebraska $1,399 41 Idaho $780 17 Texas $1,393 42 Tennessee $752 18 Virginia $1,362 43 Delaware $695 USAverage $1,352 44 WestVirginia $683 19 Kansas $1,323 45 Kentucky $651 20 Minnesota $1,273 46 Louisiana $643 21 Colorado $1,254 47 Oklahoma $582 22 Iowa $1,245 48 NewMexico $568 23 Nevada $1,241 49 Arkansas $512 24 Pennsylvania $1,239 50 Alabama $495 25 Montana $1,221 Source:FloridaTaxWatch,usingdatafromtheU.S.CensusBureau,August2011. 16

WhatistheRealFiscalImpactofTPPRepealorNewExemptions? WhenthestateRevenueEstimatingImpactConferencedevelopsafiscalimpact(changein revenues)onproposedpropertytaxchanges,theycalculatethechange simpactontaxable valueandthenapplycurrentmillagerates.theyhavetodoitthiswaybecausetheyare requiredtoassumecurrentlawandcannotpredictwhatlocalgovernmentswilldowithmillage rates.themostimportantfactordictatingtheimpacttolocalgovernmentistheannualvoteby localgovernmentsonmillagerates. Buttherealworldimpactoftaxreliefonstatewidelocalgovernmentrevenueandespecially expenditures maybefarless.taxesontangiblepersonalproperty(tpp)willraisean estimated$1.8billionin2011;however,thisdoesnotnecessarilymeanthatrepealoftpptaxes willreducelocalgovernmentspendingby$1.8billionoreventhattpptaxpayerswillsave$1.8 billion. Millageratescanbeadjusted,sopropertytaxexemptionsorassessmentcapsusuallyshifttax burdenfromoneclassoftaxpayerstootherclasses.increasedmillagerateswillevendecrease thetaxsavingsofthoseenjoyingnewexemptions.inmustberememberedthatlocal governmentsadoptnewmillagerateseachyear,andofficialscanadopttherolledbackrate withoutevenadvertisingataxincrease.therolledbackrateistheratethatwillproducethe sameamountofrevenueasthepreviousyearwhenappliedtothenewtaxroll,allowingfor growthrevenuesfromnewconstruction.forexample,sayajurisdictionhadnogrowthin propertyvaluesandanewexemptiondecreasedtotaltaxablevalue.therolledbackrate whichinthiscasewouldbehigherthanthepreviousrate couldbeadoptedtobringinthe samerevenueasthepreviousyear,plusanyrevenuesfromnewconstruction.anyupward pressureonmillageratesbroughtaboutbydecreasesintaxablevaluearealsonotaffectedby themillageratecapsenactedbythelegislaturein2007. 19 Itshouldbenotedthatwhilethisiseasywhenpropertyvaluesarerising,itismuchharder politicallywhenvaluesarefalling.ifthereisenoughgrowthtocovertheimpactofthe exemption,themillageratedoesnotevenhavetobeincreased.however,whenvaluesare falling astheyhaveforthepastfouryears localofficialswillgetsomeheatfromtaxpayers foranincreasedrate,evenifitistechnicallynotataxincrease. Still,intimesofrisingpropertyvaluesmanylocalgovernmentsaretypicallyabletoabsorb most,ifnotalloftheimpactsofchangesthatreducetaxablevalues.thisisnottrueformany 19 17

ofthestate ssmallerruralcountieswithsmalltaxrollsandalreadyhighmillagerates.thiswill bediscussedfurtherinthenextsectionofthisreport. TheSaveOurHomes(SOH)amendmentisillustrativeofhowstatewidepropertytaxrelief doesnotalwaysresultinrevenuelosstolocalgovernments.thesohdifferential the differencebetweenjust(market)valueandtheassessedvalueofhomesundersoh grew steadilyfromtheinceptionofthecapin1994andskyrocketedafter2000throughthehousing bubble(seechartbelow).thedifferentialhasbeendroppingsincethen,asthesoh recapture provision 20 hasincreasedhomesteadassessmentsdespitefallingmarketvalues.the differentialisexpectedtobegingrowingagainin2013.thedifferentialpeakedintaxyear2007 at$427.5billionintaxablevalue.thiswasworthover$7billionintaxes(basedontheaverage statewidemillageratethatyear). Save Our Homes Differential B I L L I O N $ O F J V $450 $400 $350 $300 $250 $200 $150 $100 $50 117.9 165.1 246.5 404.5 427.5 313.7 168.3 82.6 67.0 61.6 62.3 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2006 38% of Just Value 2011 11% of JV 20 UnderSaveOurHomes,assessmentsonhomesteadpropertyincreasebythelesserofthreepercentorinflation,evenifthe marketvalueofthepropertydeclines,providedtheassessedvaluedoesnotexceedmarket(just)value.aproposed constitutionalamendmentcurrentlyonthenovember2012ballotcouldstopthisfromhappening. 18

ComparetheescalatingSOHdifferentialtopropertytaxleviesduringthattime(seechart below).fromfy2001tofy2008(taxyears2000to2007) 21,SaveOurHomesremovedmore than$1.5trillioninvaluefromthepropertytaxrolls,worthmorethan$28billionintaxes. However,duringthattimepropertytaxleviesbyalljurisdictionsinFloridaalmostdoubled, increasing$15.1billion.thelargestsingleyearincreaseinthedifferentialoccurredin2006, whenanadditional$158billioninvalue worth$2.9billionintaxes wasremovedfromthe rolls.stilllocalgovernments enjoyedtheirlargestpropertytaxrevenuesincreaseinhistory $4.7billion(18.3%). Florida Property Tax Levies 2001-11 B I L L I O N $ 35 30 25 20 15 15.3 16.7 18.2 20.2 22.4 25.7 30.4 31.0 29.4 27.3 25.1 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Theeffectofallthisisthatpropertytaxcutsthatreducetaxablevaluetendtoshifttaxesto othertaxpayerpopulations.moreover,totheextentthatmillageratesarehigherthanthey wouldhaveotherwisebeen,thetaxpayerstowhichtheexemptionorcapweretargeteddonot receiveallofthetaxrelieftheymightexpect.thiscertainlyhappenedundersaveourhomes 21 TaxyearsarebasedonthevalueofpropertyonJanuary1ofthatyear.Thepropertytaxesfromataxyearfundlocal governmentoperationsinthenextfiscalyear.forexample,currenttaxyear2011willfundfy201112(beginningoctober1, 2011.) 19

andtheincreasedhomesteadexemptionpassedin2008,asbusinessesandothernon homesteadpropertyhavehadbillionsofdollarsoftaxburdenshiftedtothem. Ofcourse,localgovernmentscanalsoincreaseotherrevenuesources,suchasimpactfees, specialassessments,licensesandpermits,andchargesforservices.localgovernmentshave beenincreasingtheirutilizationoftheserevenuesforsometime.a2006floridataxwatch reportfoundthateachoftheserevenuesourcesincreasedevenfasterthanpropertytaxesover thetenyearperiodendingin2004,withallsourcesatleastdoublingandchargesforservices tripling. 22 22 FloridaTaxWatch,KurtWenner, ControllingEscalatingPropertyTaxationandLocalGovernmentSpendingandRevenue:, December2006 20

HowWouldRepealofTPPTaxesImpactLocalGovernments? Thepropertytaxenvironmentdifferssignificantlyacrossthestate.Becausepropertyvalues andtheimpactexemptionshaveontaxrollsvarysignificantlyfromcountytocounty,the propertytaxburdenonfloridiansalsovariesgreatly.someexamples(2010): PerCapitaPropertyTaxLevies High$2,842(Monroe) Low$347(Holmes) Average$1,360 AverageTotalMillageRates High24.55(Alachua) Low10.58(Monroe) Average19.01 PerCapitaJustValue High$375,934(Monroe) Low$61,239(Jackson) Average$103,105 PerCapitaTaxableValue High$268,678(Monroe) Low$20,475(Holmes) Average$71,543 PercentofJustValuethatisTaxable High 83.6%(Walton) Low 23.2%(Union) Average 69.4% Theimpactonlocalgovernmentsofrepealingorreducingtangiblepersonalpropertywould alsovarysignificantlyfromcountytocounty. Asdiscussedintheprevioussectionofthisreport,reductionsintaxablevaluecanoftenbe absorbedbylocalgovernments,especiallyintimesofhealthypropertyvaluegrowth.however, whilestateestimatorsexpectvaluestobegintoriseagainthisyear,theforecastcallsforonly modestgrowththroughatleast2015(seechartonnextpage).theearliestrepealorreduction oftppcouldtakeeffectisintaxyear2013. 23 Currently,thetaxablevalueofTPPis$98.6billion ofthe$1.3trillionintotalcountytaxablevalue.growthintotalcountytaxablevaluein2013is estimatedat$60billion.by2015,annualgrowthisonlyexpectedtobe$91billion.so,growth intotalcountypropertytaxrevenueswillnotmakeiteasyforlocalgovernmentstoabsorbfull repeal. 23 TheFloridaConstitutioncurrentlydoesnotauthorizesuchexemptions.Ifthe2012Legislatureweretopassajointresolution tobringaproposedconstitutionalamendmenttotheballot,itcouldbevotedoninnovember2012,effectivejanuary1,2013. Thiswouldaffectrevenuesforthe201314localgovernmentfiscalyear,beginningOctober1,2013. 21

Growth in County Taxable Value Statewide, Total Amount and Annual Growth B I L L I O N $ O F T V 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 1,599 1,468 1,390 1,307 1,330 23 60 78 91 2011 2012 2013 2014 2015 2011 TV of TPP - $96.8 billon Yellow numbers show growth revenues Forsomecounties,reducedtaxablevalueistoughtodealwithnomatterwhatthestateofthe economy.localgovernmentsinsomecountiesrelymuchmoreheavilyontaxesfromtppthan others.thetableonpage22showsthepercentageofcountytaxablevaluethatiscomprised oftangiblepersonalproperty.itrangesfromahighof51.76percentinhardeecountytoalow of2.78percentinmonroecounty.statewide,theportionis7.52percent.notsurprisingly, mostofthecountieswiththehighestpercentageofttptaxablevaluearesmallercounties. Withrelativelysmallpropertytaxbasesandgenerallylowerrealpropertyvalues,alargeTPP taxpayercanbeveryimportanttothesecounties. Thecountiesthatarelistedinredtypeinthetablesarethoseforwhichthecountygovernment hasalreadyreachedtheconstitutional10millcap(2010rates).theoneslistedinboldtype haveataxrateofatleast8.5mills.thetopthreecountiesareallinthesetwogroupsandtpp comprisesmorethan40percentofeachoftheirpropertytaxbases.allfiveofthe10mill countiesareamongthetenleastpopulouscounties. 22

Conversely,thethreemostpopulouscounties(MiamiDade,Broward,PalmBeach)havethe 56 th,57 th and58 th smallestrelianceontppfortheirtotalpropertytaxrevenue.eachcounty s percentageoftpptaxablevalueisbetween5percentand5.5percent.fiveoftenlargest countiesrankat50 th oflowerandhavetppmakinguplessthan7percentoftheirtaxrolls.all buttwo(hillsboroughandpolk)ofthetoptenmostpopulouscountieshavepercentagesless than10percent.polkcountyistheanomaly,wheretppcomprises19.73percentofthetax roll,rankingit12 th. Thenexttable(onpage23)showstheamountofeachcounty slevies(fromalljurisdictions withinthecounty)ontangiblepersonalproperty,whichproduces$1.8billionstatewide.while MiamiDadeCountycollectsapproximately$223millioninadvaloremtaxesfromtangible personalproperty,fourcountiescollectlessthan$1million. Forthehighmillagecounties,whileTPPcomprisesalargepercentageoftheirtaxbase,the dollaramountoftaxleviesisrelativelysmallwhencomparedtothe$1.8billioninproperty taxescollectedontpp.thefivecountiesatthetenmillcapcollectlessthan1percent(0.6 percent)$10.9million.thefifteencountieswithatleast8.5millscollect3.2percentofthe stateslevies$57.7million. Sowhilethetaxamountisrelativelysmall,thecountieswithalargepercentageofTPPand alreadyhighmillagerateswouldbesignificantlyadverselyaffectedbyatotaleliminationof tangiblepersonalpropertytaxes..whilesomeofthelarger,moreprosperouscountiescould probablyabsorblosttpptaxes,itwouldcreatesomerealproblemsformanysmaller,fiscally constrainedcounties. Inaddition,localgovernments propertytaxbaseshavealreadydeclinedby21%since2007 andlowgrowthisforecastfornextseveralyears.thestatehasalsoseenitsrevenuesshrink forseveralyearsandgrowthisnotexpectedtoexceedthegrowthinlarge,costlyprogramslike MedicaidandEducation.Billionsofdollarsinbudgetcutshavealreadybeenimplemented. TheLegislaturewouldhavetofindanadditional$780millioninstatemoneytoreplacethelost fundingforschools orraisetaxes toavoidareductionineducationfunding. Forallthesereasons,theTaskForceconcludedthat,whilethetotalrepealoftangiblepersonal property(tpp)taxesinfloridawouldlikelycreateasignificantaddedattractionforbusinesses thatareconsideringlocatinghere,thecurrentenvironmentiscertainlynotfavorablefor reducingtherevenueofschoolsandlocalgovernmentsby$1.8billion. 23

TangiblePersonalPropertyasaPercentofTotalTaxableValue 2011 County TPP/All TV % of state TPP TV Pop Rank County TPP/All TV % of state TPP TV Pop Rank 1 Hardee 51.76% 0.34% 51 35 Volusia 9.45% 2.35% 11 2 Hamilton 47.05% 0.09% 61 36 Wakulla 9.40% 0.11% 49 3 Liberty 41.56% 0.21% 67 37 Alachua 9.17% 1.11% 23 4 Taylor 34.62% 0.42% 54 38 Highlands 9.14% 1.12% 34 5 Citrus 25.60% 2.47% 32 39 Duval 9.02% 0.05% 7 6 Putnam 24.24% 0.87% 37 40 Sumter 9.01% 0.62% 36 7 Hendry 24.13% 0.79% 47 41 Osceola 8.54% 1.47% 22 8 DeSoto 23.54% 10.54% 48 42 Pasco 8.46% 1.78% 12 9 Suwannee 22.83% 0.35% 44 43 Marion 7.93% 2.45% 15 10 Madison 20.61% 0.09% 56 44 Lake 7.77% 0.04% 19 11 Gilchrist 20.54% 0.27% 57 45 Clay 7.73% 0.65% 24 12 Polk 19.73% 4.98% 9 46 Pinellas 7.57% 4.35% 6 13 Gadsden 18.84% 0.06% 43 Statewide 7.52% 14 Calhoun 18.72% 0.07% 63 47 SantaRosa 7.24% 0.55% 13 15 Washington 18.25% 0.16% 53 48 Seminole 7.12% 1.77% 20 16 Jackson 17.18% 0.54% 42 49 Leon 7.05% 3.66% 21 17 Lafayette 17.11% 0.09% 66 50 Brevard 6.85% 1.76% 10 18 Jefferson 16.70% 0.25% 62 51 Lee 6.61% 1.25% 8 19 Bradford 16.69% 0.14% 50 52 Bay 6.57% 0.97% 28 20 Okeechobee 15.97% 0.24% 46 53 Nassau 6.46% 0.44% 38 21 Union 15.69% 0.04% 60 54 Gulf 5.83% 0.08% 59 22 Holmes 14.83% 7.08% 55 55 Charlotte 5.52% 0.72% 29 23 Hernando 14.34% 0.43% 27 56 PalmBeach 5.48% 7.04% 3 24 Baker 14.28% 0.11% 52 57 MiamiDade 5.46% 2.20% 1 25 Glades 13.20% 0.13% 64 58 Broward 5.12% 6.69% 2 26 Escambia 12.45% 4.74% 18 59 Okaloosa 5.06% 0.72% 26 27 Martin 12.40% 1.23% 31 60 Flagler 4.53% 1.71% 35 28 SaintLucie 12.28% 1.83% 14 61 SaintJohns 4.09% 0.74% 30 29 Levy 11.50% 1.02% 45 62 IndianRiver 3.95% 0.06% 33 30 Columbia 11.28% 0.26% 40 63 Sarasota 3.76% 1.54% 25 31 Hillsborough 11.03% 0.44% 4 64 Walton 3.39% 0.38% 41 32 Dixie 10.19% 0.34% 58 65 Collier 2.89% 1.75% 17 33 Manatee 9.97% 0.13% 16 66 Franklin 2.83% 0.31% 65 34 Orange 9.83% 8.28% 5 67 Monroe 2.78% 0.54% 39 Source:FloridaTaxWatch,usingdatafromtheFloridaDepartmentofRevenue,August2011. CountyGovernmentsincountiesinREDareatthe10millcap(2010).ThoseinBOLDhavearateabove8.5mills.

EstimatedTangiblePersonalPropertyTaxLeviesbyCounty County TPP Levies % of state TPP Levies 2011 Pop Rank County TPP Levies % of state TPP Levies Pop Rank 1 MiamiDade 223,022,137 12.25% 1 35 IndianRiver 8,509,658 0.47% 33 2 PalmBeach 144,140,144 7.92% 3 36 Hendry 7,905,906 0.43% 47 3 Hillsborough 140,998,298 7.75% 4 37 SantaRosa 7,743,851 0.43% 13 4 Orange 140,809,628 7.74% 5 38 Nassau 7,022,283 0.39% 38 5 Broward 138,925,551 7.63% 2 39 Highlands 6,970,094 0.38% 34 6 Polk 85,862,952 4.72% 9 40 Taylor 6,929,056 0.38% 54 7 Pinellas 85,128,907 4.68% 6 41 Hamilton 6,280,125 0.35% 61 8 Duval 84,304,175 4.63% 7 42 Suwannee 5,822,214 0.32% 44 9 Lee 63,282,705 3.48% 8 43 DeSoto 5,518,444 0.30% 48 10 Volusia 52,442,943 2.88% 11 44 Monroe 5,432,053 0.30% 39 11 SaintLucie 41,104,955 2.26% 14 45 Flagler 5,126,369 0.28% 35 12 Manatee 39,105,540 2.15% 16 46 Columbia 4,749,415 0.26% 40 13 Citrus 38,026,637 2.09% 32 47 Gadsden 4,675,705 0.26% 43 14 Martin 35,582,086 1.96% 31 48 Okeechobee 4,304,707 0.24% 46 15 Brevard 31,238,518 1.72% 10 49 Walton 3,601,585 0.20% 41 16 Seminole 29,249,605 1.61% 20 50 Jackson 3,547,802 0.19% 42 17 Pasco 28,932,882 1.59% 12 51 Levy 3,403,710 0.19% 45 18 Escambia 27,173,944 1.49% 18 52 Washington 2,731,822 0.15% 53 19 Marion 26,296,092 1.44% 15 53 Bradford 2,526,056 0.14% 50 20 Alachua 25,392,104 1.40% 23 54 Madison 2,405,176 0.13% 56 21 Osceola 24,802,535 1.36% 22 55 Gilchrist 2,247,998 0.12% 57 22 Sarasota 21,741,231 1.19% 25 56 Baker 1,921,159 0.11% 52 23 Lake 20,552,410 1.13% 19 57 Wakulla 1,779,617 0.10% 49 24 Collier 20,297,811 1.12% 17 58 Liberty 1,615,963 0.09% 67 25 Leon 18,775,965 1.03% 21 59 Jefferson 1,554,539 0.09% 62 26 Hernando 17,365,159 0.95% 27 60 Glades 1,485,087 0.08% 64 27 Putnam 15,889,131 0.87% 37 61 Gulf 1,320,970 0.07% 59 28 Hardee 13,772,698 0.76% 51 62 Calhoun 1,219,588 0.07% 63 29 Charlotte 12,018,298 0.66% 29 63 Dixie 1,078,818 0.06% 58 30 Bay 11,764,694 0.65% 28 64 Holmes 960,347 0.05% 55 31 SaintJohns 11,438,294 0.63% 30 65 Union 666,929 0.04% 60 32 Clay 10,011,705 0.55% 24 66 Lafayette 659,941 0.04% 66 33 Okaloosa 9,394,288 0.52% 26 67 Franklin 604,019 0.03% 65 34 Sumter 8,820,215 0.48% 36 Source:FloridaTaxWatch,usingdatafromtheFloridaDepartmentofRevenue,August2011.Leviesestimatedby using2010averagemillageforeachcounty(alljurisdictions). CountyGovernmentsincountiesinREDareatthe10millcap(2010).ThoseinBOLDhavearateabove8.5mills. 25

TargetedTPPExemptionsarePreferabletoRepealatThisTime Afterageneralconsensusthatatotaleliminationofadvaloremtaxesontangiblepersonal propertyinfloridaatthetimewouldbeproblematic,thetaskforcebegantofocusonmore targetedexemptionsthatcouldhelpspureconomicdevelopmentinthestate.thetaskforce feltthatsuchexemptionscouldbeusedtohelpattracthighwage,capitalintensiveindustries toflorida. Itwasdecidedtofocusonthestate squalifiedtargetedindustries(qti)andhighimpact sectors.thesearetheindustriesdefinedinlaw 24 thatareeligibletoreceiveqtitaxrefunds andhighimpactgrants.forpurposesofthisreport,theterm targetindustries meanboth QTIsandhighimpactsectors.ThelistofQTIscanberevisedbyEnterpriseFloridaeachyear basedonthefollowingcriteria: Futuregrowth Industryforecastsshouldindicatestrongexpectationforfuturegrowthinboth employmentandoutput,accordingtothemostrecentavailabledata.specialconsideration shouldbegiventobusinessesthatexportgoodsto,orprovideservicesin,internationalmarkets andbusinessesthatreplacedomesticandinternationalimportsofgoodsorservices. Stability Theindustryshouldnotbesubjecttoperiodiclayoffs,whetherduetoseasonalityor sensitivitytovolatileeconomicvariablessuchasweather.theindustryshouldalsoberelatively resistanttorecession,sothatthedemandforproductsofthisindustryisnottypicallysubjectto declineduringaneconomicdownturn. Highwage Theindustryshouldpayrelativelyhighwagescomparedtostatewideorarea averages. Marketandresourceindependent Thelocationofindustrybusinessesshouldnotbe dependentonfloridamarketsorresourcesasindicatedbyindustryanalysis,exceptfor businessesintherenewableenergyindustry. Industrialbasediversificationandstrengthening Theindustryshouldcontributetoward expandingordiversifyingthestate sorarea seconomicbase,asindicatedbyanalysisof employmentandoutputsharescomparedtonationalandregionaltrends.special considerationshouldbegiventoindustriesthatstrengthenregionaleconomiesbyaddingvalue tobasicproductsorbuildingregionalindustrialclustersasindicatedbyindustryanalysis. Specialconsiderationshouldalsobegiventothedevelopmentofstrongindustrialclustersthat includedefenseandhomelandsecuritybusinesses. 24 QTISection288.106,FloridaStatutes.HighimpactsectorsSection288.108,FloridaStatutes.

EconomicbenefitsTheindustryisexpectedtohavestrongpositiveimpactsonorbenefitsto thestateorregionaleconomies. TheTaskForceconcludedthatinsteadoffullrepealatthistime,focusingonsmaller exemptionsforthesetypesofindustriescouldbestleverageexemptadvaloremtaxdollarsto producethehighesteconomicdevelopmentreturns.inotherwords, getthemostbangfor thebuck. ThisechoesthelanguageintheQTIstatute 25 (emphasisadded): TheLegislaturefindsthatretainingandexpandingexistingbusinessesinthestate, encouragingthecreationofnewbusinessesinthestate,attractingnewbusinessesfrom outsidethestate,andgenerallyprovidingconditionsfavorableforthegrowthoftarget industriescreateshighquality,highwageemploymentopportunitiesforresidentsofthe stateandstrengthensthestate seconomicfoundation.thelegislaturealsofindsthat incentivesnarrowlyfocusedinapplicationandscopetendtobemoreeffectivein achievingthestate seconomicdevelopmentgoals.thelegislaturefurtherfindsthat higherwagejobsreducethestate sshareofhiddencosts,suchaspublicassistanceand subsidizedhealthcareassociatedwithlowwagejobs.therefore,thelegislature declaresthatitisthepolicyofthestatetoencouragethegrowthofhigherwagejobs andadiverseeconomicbasebyprovidingstatetaxrefundstoqualifiedtargetindustry businessesthatoriginateorexpandinthestateorthatrelocatetothestate. TheTaskForcedecidedonexaminingtheimpactofexemptingallmanufacturersandeachof thetargetindustrysectors. HowMuchDoTargetIndustriesPayinTPPTaxes? InordertoascertaintheamountofTPPtaxespaidbytheseindustries,wecompiledalistof NAICScodesforbothQTIsandhighimpactsectors.UsinginformationprovidedbyEnterprise Florida 26,wehadthecodesforthehighimpactsectorsandwereabletofindcodesformost companiesthatfitintheqtis. TheFloridaDepartmentofRevenue(DOR)wasabletopullTPPtaxdatabasedontheNAICS codes.thedordatawasalsobrokendownbycounty.mostofthehighimpactsectors overlappedtheqtis.theonehighimpactsectornotsubstantiallycontainedinaqticategory wastransportation. 25 Section288.106(1),FloridaStatutes. 26 SeeappendicesBandC 27

Wecompileddataforthefollowingsectors: Manufacturing CleanTech\Energy InformationTechnology LifeSciences AviationandAerospace HomelandSecurityandDefense FinancialServices Transportation ResearchandDevelopment CorporateHeadquarters ThisisnotintendedtobeacompletelistofindustriesthatwouldfallundertheproposedTPP exemptions.otherindustriesandemergingtechnologiessuchasprofessionalservices,global logistics,marinesciences,materialsciencesandnanotechnologyfallundertheqtiumbrella.it isultimatelyuptothelegislaturewithinputfromenterprisefloridatodecideonthe industriestoincludeinanynewexemption. Thetableonthenextpageshowsthenumberoftangiblepersonalpropertyaccounts,just value,taxablevalue,andtheestimatedleviesfortheseindustriesduring2011.thereissome duplicationamongthegroups,forexamplemanyofthetargetedindustriesaremanufacturers, andsemiconductormanufacturersareinmultiplegroups. Thetotal(unduplicated)amountsare: Manufacturing $191.7million QualifiedTargetedIndustriesOnly $208.3million AllManufacturingandOtherTargetedIndustries $365.1million 28

Florida Tangible Personal Property - Selected Sectors - 2011 DESCRIPTION # OF TAX 27 PAYERS JUST VALUE TAXABLE VALUE Manufacturing 11,231 11,663,269,900 10,268,975,636 CleanTech 598 496,276,525 463,133,854 LifeSciences 713 789,521,301 771,462,701 AviationandAerospace 337 321,152,941 312,670,959 InformationTechnology 16,744 9,059,232,607 8,556,110,457 FinancialServices 3,797 750,731,039 679,202,885 Transportation 297 351,066,628 343,118,265 LEVIES 28 191,670,458 8,461,930 15,408,328 5,929,272 163,106,695 13,150,865 6,718,955 CorporateHeadquarters 94 49,741,761 47,544,936 875,917 HomelandSecurity/Defense 1,323 565,969,499 544,776,800 ResearchandDevelopment 148 86,393,885 83,350,617 10,283,214 1,736,775 Source: 2011 Preliminary N.A.P Tax Rolls, Property Tax Oversight, Florida Department of Revenue, August 2011. Levies estimated by Florida TaxWatch. SeeAppendixAforinformationontheindustriesineachsector. 27 Numberofaccounts.Asinglebusinesscanhavemultipleofaccounts.Eachlocationrequiresitsownreturnand account. 28 Estimatedbyapplying2010averagemillagerates(alljurisdictionsincounty)totaxablevalue.Computedatthe countylevelthensummedforstatewidetotal. 29

ManufacturingandTargetIndustriesasa%ofTotalTaxableValue 2011 All Target* Pop All Target* Pop County Manuf. Industries Rank Manuf. Industries Rank 1 Taylor 19.80% 1.10% 54 34 Bradford 0.80% 0.10% 50 2 Liberty 18.10% 17.80% 67 35 Okeechobee 0.80% 0.60% 46 3 Hendry 11.90% 0.10% 47 36 Orange 0.80% 1.20% 5 4 Putnam 7.80% 1.40% 37 37 Clay 0.70% 0.50% 24 5 Madison 7.40% 0.90% 56 38 Hillsborough 0.70% 0.40% 4 6 Baker 5.50% 2.00% 52 39 Pasco 0.70% 1.20% 12 7 Escambia 4.60% 1.80% 18 40 Seminole 0.60% 1.20% 20 8 Suwannee 4.30% 0.00% 44 41 Hamilton 0.50% 0.00% 61 9 Polk 4.00% 2.00% 9 42 SantaRosa 0.50% 0.10% 13 10 Gadsden 3.10% 0.00% 43 43 Osceola 0.50% 1.10% 22 11 Nassau 3.00% 0.00% 38 44 SaintJohns 0.40% 0.60% 30 12 Gilchrist 2.90% 1.60% 57 45 Holmes 0.40% 0.00% 55 13 Hernando 2.60% 2.20% 27 46 Hardee 0.40% 1.00% 51 14 Union 2.30% 2.10% 60 47 MiamiDade 0.40% 0.70% 1 15 Sumter 2.20% 0.10% 36 48 PalmBeach 0.40% 0.80% 3 16 Duval 2.20% 1.60% 7 49 Broward 0.30% 1.00% 2 17 Alachua 2.20% 1.50% 23 50 Levy 0.30% 1.80% 45 18 Glades 1.90% 1.00% 64 51 Gulf 0.30% 0.90% 59 19 Manatee 1.60% 1.00% 16 52 Sarasota 0.30% 0.80% 25 20 SaintLucie 1.50% 1.10% 14 53 Martin 0.30% 0.10% 31 21 DeSoto 1.40% 0.00% 48 54 Lafayette 0.20% 2.10% 66 22 Columbia 1.20% 2.50% 40 55 Leon 0.20% 0.10% 21 23 Bay 1.10% 0.20% 28 56 Okaloosa 0.20% 0.10% 26 24 Jackson 1.10% 0.10% 42 57 IndianRiver 0.20% 0.20% 33 25 Dixie 1.00% 0.20% 58 58 Flagler 0.20% 0.10% 35 26 Wakulla 1.00% 0.40% 49 59 Lee 0.20% 0.70% 8 27 Volusia 1.00% 1.30% 11 60 Charlotte 0.10% 0.70% 29 28 Washington 1.00% 0.10% 53 61 Walton 0.10% 0.00% 41 29 Marion 1.00% 1.10% 15 62 Calhoun 0.10% 0.00% 63 30 Pinellas 1.00% 1.30% 6 63 Collier 0.10% 0.60% 17 Statewide 0.80% 0.90% 64 Citrus 0.10% 0.00% 32 31 Lake 0.80% 0.80% 19 65 Franklin 0.10% 0.00% 65 32 Highlands 0.80% 0.00% 34 66 Jefferson 0.00% 0.10% 62 33 Brevard 0.80% 0.10% 10 67 Monroe 0.00% 0.40% 39 Source:FloridaTaxWatch,usingdatafromtheFloridaDepartmentofRevenue,August2011. CountyGovernmentsincountiesinREDareatthe10millcap(2010).ThoseinBOLDhavearateabove8.5mills. * TargetIndustries includequalifiedtargetedindustries(qti)andhighimpactsectors.

TPPLeviesonManufacturingandTargetIndustries 2011 TargetIndustries Manufacturing TargetIndustries Manufacturing Levies* Levies Levies* Levies 1 Dade 30,464,223 15,207,973 35 Baker 267,960 741,675 2 Broward 28,426,599 8,890,188 36 Hardee 259,637 107,981 3 PalmBeach 20,049,075 9,707,592 37 Okaloosa 229,940 407,994 4 Orange 16,849,912 10,822,710 38 Leon 218,167 606,832 5 Duval 14,806,814 20,844,584 39 Taylor 211,405 3,959,351 6 Pinellas 14,460,024 10,689,962 40 Gulf 208,457 72,233 7 Polk 8,839,354 17,361,742 41 Gilchrist 174,122 313,037 8 Lee 7,100,170 1,949,491 42 Okeechobee 152,052 208,808 9 Volusia 6,988,709 5,492,350 43 Flagler 144,710 238,221 10 Hillsborough 5,146,137 8,941,346 44 Glades 109,785 209,978 11 Seminole 5,024,020 2,457,041 45 Madison 101,544 862,884 12 Sarasota 4,707,963 1,640,316 46 Union 90,630 96,038 13 Alachua 4,146,988 5,988,128 47 Lafayette 80,408 9,290 14 Pasco 4,133,406 2,275,227 48 SantaRosa 75,466 494,306 15 Collier 4,114,687 650,606 49 Wakulla 72,846 192,014 16 Escambia 3,988,557 9,943,421 50 Sumter 62,221 2,199,503 17 Manatee 3,819,006 6,425,838 51 Hendry 45,017 3,882,756 18 SaintLucie 3,612,599 5,133,341 52 Walton 43,924 142,515 19 Marion 3,558,739 3,210,015 53 Bradford 20,970 117,424 20 Osceola 3,173,968 1,313,531 54 Jackson 19,918 220,244 21 Hernando 2,658,580 3,158,792 55 Highlands 19,697 615,642 22 Lake 1,984,909 2,236,286 56 Dixie 15,879 109,934 23 Charlotte 1,615,202 309,888 57 Washington 14,124 146,092 24 SaintJohns 1,543,207 1,168,490 58 Citrus 12,093 122,934 25 Columbia 1,041,585 514,062 59 Jefferson 12,086 2,605 26 Putnam 935,956 5,116,320 60 Suwannee 12,003 1,101,206 27 Monroe 830,907 17,442 61 DeSoto 7,143 336,207 28 Clay 703,667 909,479 62 Gadsden 6,027 761,675 29 Liberty 692,365 703,705 63 Nassau 1,739 3,255,561 30 Brevard 675,902 3,649,735 64 Franklin 312 16,948 31 Levy 526,136 94,319 65 Calhoun 7,580 32 IndianRiver 336,793 460,154 66 Hamilton 68,002 33 Martin 291,942 756,572 67 Holmes 26,567 34 Bay 278,063 1,975,776 Source:FloridaTaxWatch,usingdatafromtheFloridaDepartmentofRevenue,August2011.Leviesestimatedbyusing2010 averagemillageforeachcounty(alljurisdictions).* TargetIndustries includesqtiandhighimpactsectors. CountyGovernmentsincountiesinREDareatthe10millcap(2010).ThoseinBOLDhavearateabove8.5mills.

Thetablesontheprevioustwopagesshowtheimpactonindividualcountiesofexempting manufacturingand/ortargetedindustries.thefirsttableshowsthepercentageoftotaltaxable valuethatwouldbelostfromexemptingtheseindustries.earlierinthisreport,weexamined thelosttaxablevalueoffullrepealandfoundthatsomesmallercountieshadverysignificant portionsoftheirtaxrollsmadeupoftpp.threecountieshadmorethan40percentoftaxable valuemadeupoftpp.thetableonpage28showsmuchmoremanageableamounts. Generally,thetableshowsthatmanufacturingTPPmakesupmoreofthetaxrollsinsmaller countiesthantargetedindustrytpp,whilethetargetedindustryshareislargerinlarger counties. Threesmallcountieshavemorethan10percentoftheirtaxrollsdevotedtomanufacturing TPP.Onlyonecountyhasmorethan10percentcomingfromtargetedindustries.Thatis LibertyCounty,whichhasalargesawmill(whichisahighimpactsectorbusiness).Thesawmill showsupinbothcategories. Onlytencountieshaveamanufacturingsharethatexceedsthreepercentoftaxablevalueand onlyfourcountieshaveatargetindustryshareabovetwopercent. WhoPaysFloridaTangiblePersonalPropertyTaxes? 3.3% 11.0% 12.0% 31.6% 7.0% Utilities 9.8% Information Manufacturing 10.6% WholesaleandRetail Entertainment,Recreation,Accommodation,FoodService Finance,Insurance,RealEstate,ProfessionalServices MiningandConstruction Other 14.7% Source:FloridaTaxWatch,fromFloridaDepartmentofRevenuedata,August2011.

ResultsofEconometricModelingforTPPTaxReduction Options UsingthedynamicmodelfromRegionalEconomicModels,Inc.(REMI),fivesimulationswere runwiththefollowingtaxreductions: Simulations TPPAmount TotalRepealofTPP $1,893,311,094 5YearPhaseoutofTPP $378,662,219peryear ExemptallManufacturing $199,337,276 ExemptallTargetIndustries $216,627,019 ExemptallManufacturingandTargetIndustries $379,755,761 Sincetheearliestachangecouldtakeeffectwouldbetaxyear2013(FY201314)estimatesof taxvaluesfortheseexemptionsmadebyfloridataxwatchthatarediscussedearlierinthis reportwereincreasedbytheofficialstateforecastedgrowthoftpptaxablevalueforthenext twoyears(4percent). ShownabovearefivesimulationsthatweremodeledusingtheRegionalEconomicModelsInc. software,remipi+.simulation1,totalrepealoftpptax,completelyrepealsalltpptaxesin 2014.Simulation2,5yearphaseoutofTPPtax,reducestotalTPPtaxesby20percenteach yearuntilitiscompletelyphasedout,beginningin2014.insimulation3,4,and5,business taxesareloweredandcreditedtoareductionincapitalcostforthetargetedtypesof businesses(manufacturing,targetindustries,andboth).oneshouldnotethatthereissome overlapbetweentargetindustriesandmanufacturing.somemanufacturingisintarget Industries,butnottheentiremanufacturingsector.Duplicationswereeliminatedforthe simulationofexemptingbothgroupstogether. Thesimulationsaremodeledwithareductionofgovernmentspendingforeachdollarof reductionintpptaxes.onefeatureoftheremimodelisthatthisresultsinsignificantlossesin publicsectorjobs(asopposedtoprogramcutsorcostsavingsinitiatives),especiallyintheearly simulationperiodresults.however,asdiscussedearlierinthisreport,propertytaxreliefdoes nottranslateintoadollarfordollarreductioningovernmentspending.therefore,foreachof thesesimulations,threeseparatescenarioswererun.firstwasaneliminationoftpptaxes withnoincreaseofothertaxestomakeupthetpptaxrevenueloss.secondwasanincreasein thetaxonrealpropertytomakeup50percentofthetpptaxrevenueloss.thirdwasan increaseinthetaxonrealpropertytomakeup100percentofthetpptaxrevenueloss.this 33

providesarangeofpossibleoutcomes,dependinguponhowlocalgovernmentswouldchoose todealwithreducedtaxreceiptsintheirjurisdictions. ToshowthebenefitofreductionorrepealoftheTPPtax,ineachscenariotheamountofthe TPPtaxthatisreducedisthenallocatedtoareductionincapitalcostforeachofthetargeted groupsinthefiveaforementionedsimulations.insimulation1and2,thereductionincapital costisallocatedtoallfloridabusinesses,anditisproratedonapercentageoftheirvalue addedinflorida.inotherwords,ifoneindustrycreatesfivepercentofthevalueaddedin Florida,itisallocatedfivepercentofthereductionincapitalcost.Similarly,thisisalso calculatedforsimulation3,4and5,butisdirectedatallmanufacturingindustries,only targetedindustrygroupsandbothmanufacturingandtargetedindustrygroups,respectively. TomodelthesescenariosinREMI,localgovernmentspendingisreducedbytheamountofTPP taxrevenuereduction.inthefirstscenario,localgovernmentspendingisreducedbythe amountthatatotalrepealoftpptaxwouldequateto.forthesecondscenario,local governmentspendingisreducedbyhalfofthetpptax.forthethirdscenariolocalgovernment spendingisassumedtostaythesame. ForScenarios2and3foreachsimulation,therecoupmentoflostTPPtaxesismodeledby simulatingtheincreaseofrealpropertytaxesbythatamount.theresultofthisisincreased productioncostsforallindustriesinfloridaandincreasedlivingcostsforhomeownersand renters.tobeclear,nomatterwhichindustriesreceivelowercapitalcostsbytheelimination oftpptax,whenthosetaxesarereplacedbyrealpropertyitwillcauseproductioncostsforall industriestogoup.industriesthathaveintensiverealpropertyinputswillpaymorethan thosethatarelessintensiveinrealpropertyinputs. ResultsofEconometricSimulationsofTPPFullandPartialRepeal ComparisonofallScenarios Thechartbelowshowstheresultsofallfiveofthesimulationswitheachofthescenarios tested.the 0%TaxRecoup barsinblue,showthescenariowherelocalgovernmentspending isreducedbytheamountofthetpptax,andnoneofthelosttpptaxrevenueisrecoveredby increasingthetaxrateonrealproperty.underthe 50%TaxRecoup scenario,local governmentspendingisreducedbyhalfofthelosttpptaxrevenue,andhalfofthetpptax receiptlossismadeupbyincreasingthetaxrateonrealproperty.finally,the 100%Tax Recoup scenarioshowswherelocalgovernmentspendingisnotchanged,andthelosttpptax revenueisrecoveredbyincreasingthetaxrateonrealproperty. 34

35 Althoughsomeoftheresultsintheabovechartmightbecounterintuitive,thechartbelow demonstratessomeofthedynamicsintheremimodelthatleadtotheresults.ineachcase whenlocalgovernmentspendingisreduced,oneofthefeaturesoftheremimodelisthatit decreaseslocalgovernmentemployment,ratherthancuttingprograms,whichperhapswould bethemostlikelyactionatthelocalgovernmentlevel.ineachcaseof 0%TaxRecoup,local governmentemploymentisimmediatelyaffected.inthesecases,thelossingovernment employmentoverwhelmsgainsintheprivatenonfarmemploymentsectorandthecumulative totaljobsoverthe10yearhorizonisnegativeforallthescenariosasshowninthechartbelow. 0 20,000 40,000 60,000 80,000 100,000 120,000 FullRepeal 20%Repeal PerYear MfgExempt TgtIndustries Exempt Mfg&Tgt Industries Exempt NumberofJobs CumulativePrivateNonFarmJobsCreatedfromTPPTaxChanges (2014 2023) 0%Tax Recoup 50%Tax Recoup 100%Tax Recoup 80,000 60,000 40,000 20,000 0 20,000 40,000 60,000 80,000 100,000 120,000 FullRepeal 20%Repeal PerYear MfgExempt TgtIndustries Exempt Mfg&Tgt Industries Exempt NumberofJobs CumulativeTotalChangeinJobsfromTPPTaxChanges (2014 2023) 0%Tax Recoup 50%Tax Recoup 100%Tax Recoup

36 WherelocalgovernmentspendingisonlyreducedbyhalfoftheTPPtaxloss,asshowninthe 50%TaxRecoup scenariosinredinthechartonthepreviouspage,localgovernment employmentdropsonlybyhalfthelevelofinthe 0%TaxRecoup scenario.bytheendofthe 10yearhorizonofthissimulation,privatenonfarmemploymenthasbeenabletoincreaseby morethantheamountoflocalgovernmentemploymentinfourofthefivescenarios,producing anetjobgain. Inthescenario 100%TaxRecoup,themodeldoesnotdroplocalgovernmentemployment becausethereisassumedtobenochangeintaxreceipts.thereforetheprivatenonfarm employmentgainsbegintoaffectnetjobcreationimmediatelybecausetheydonothaveto overcomesignificantlocalgovernmentemploymentlosses.thegraphbelowshowsthe cumulativechangeingrossdomesticproductafter10yearsofamendmentorappealofthetpp taxacrossallscenariosandsimulations. ThechangeinGDPacrossallscenariosispositiveandhasatrendthatissimilartothechangein totalprivatenonfarmemploymentmentionedabove.oneshouldnotethatinthe manufacturingexemptsimulationwiththezeropercenttaxrevenuerecovery,gdpisactually higherthanthosescenariosinwhich50percentor100percentoftaxrevenuesisrecovered. Thissuggeststhatgivingthemanufacturingsectorincentivetoinvestintangiblepersonal propertyhasagreaterpositiveeffectongdpthatripplesthroughflorida seconomythandoes thenegativeeffectfromreductioningovernmenttaxrevenues.inthezeropercenttaxrevenue recoveryscenario,acrossallothersimulationsgdpislowerthanifapartialortotalrecoveryof governmenttaxrevenuesreplaceswhatislostintpptaxrevenues. Inthefollowingsections,wewilllookatmoredetailofeachofthesimulations. $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 FullRepeal 20%Repeal PerYear MfgExempt Tgt Industries Exempt Mfg&Tgt Industries Exempt Millionsof(2005)Dollars CumulativeChangeinGDPAccrossallScenarios 0%TaxRecoup 50%TaxRecoup 100%TaxRecoup

1. FullRepeal 100,000 FullRepealwith0%TaxRevenueRecovery (100%GovernmentSpendingReduction) CumulativeNumberofJobs 60,000 20,000 20,000 60,000 100,000 140,000 PublicSector PrivateNonFarm Employment NetJobs 180,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 AfullrepealofTPPtaxwith100percentreductioningovernmentspendingcausesasignificant amountofpublicsectorjoblossinthemodelsimulation,andhasanetnegativejobcreation. Thenumberofpublicsectorjobslostoverwhelmsthenumberofprivatenonfarmjobsgained. Acumulativenetlossof76,850jobsisestimatediflocalgovernmentspendinginthemodelis reducedbythefullamountofthetpptaxlosswithnoreplacementofthoselostrevenuesby localgovernments. FullRepealwith50%TaxRevenueRecovery (50%GovernmentSpendingReduction) 100,000 CumulativeNumberofJobs 80,000 60,000 40,000 20,000 0 20,000 40,000 60,000 80,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PublicSector PrivateNonFarm Employment NetJobs 37

Thecumulativenumberofprivatenonfarmjobsisslightlyhigherthanthenumberofpublic sectorjobslost.approximatelyacumulative17,100jobswillbegainedintotalby2023witha fullrepealofppttaxand50percentreductioningovernmentspending. 120,000 FullRepealwith100%TaxRevenueRecovery (0%GovernmentSpendingReduction) CumulativeNumberofJobs 100,000 80,000 60,000 40,000 20,000 PublicSector PrivateNon Farm Employment NetJobs 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 ThereisnojoblossandonlyapositiveincreaseinjobcreationwithafullrepealoftheTPPtax andazeropercentreductioningovernmentspending.approximately111,371jobswillbe createdcumulativelyby2023,thevastmajorityofwhicharemadeupofprivatenonfarm employmentasshowninthechartabove. A baselinescenario willbeusedfortheremainderofthescenariosofrepealingorreducing tangiblepersonalpropertytaxes.thebaselinescenariowillbea50percentrecoveryintax revenues.graphsshowingallthreescenarios,withzeropercent,50percentand100percent recoveryoftaxrevenuescanbefoundintheappendixforthefollowingsimulations. 2. 20%PhaseoutofTangiblePersonalPropertyTax ThechartbelowshowsthescenariowhereTPPisrepealed,butisphasedinat20percentofthe totaleachyear.comparedtothesimulationwhereallofitisrepealedthefirstyear,thelocal governmentjoblossesaresignificantlylessintheearlyyears.therearealsonotasmany privatenonfarmjobscreatedinthisscenariowhencomparedtothefullrepealinthefirstyear. 38

CumulativeNumberofJobs 20%RepealofTPPTaxAnnuallywith50%RecoveryinTaxRevenues (50%inGovernmentSpendingReduction) 80,000 60,000 40,000 20,000 0 20,000 40,000 60,000 80,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PublicSector PrivateNonFarm Employment NetJobs OneofthekeyresultsisthatnetjobcreationispositiveinthescenarioinwhichtheTPPtaxis phasedoutoverfiveyearsbeginningin2014. 3. ManufacturingSectorExemptfromTPPTax InthesimulationofexemptingthemanufacturingsectorfromTPPtaxes,aclearpositivenetjob creationoccurs.thisisaresultofthelowercostofcapitalallocatedtomanufacturers,who havethehighestmultiplierofallindustries.asseeninthechartbelow,althoughlower governmentspendinginthesimulationdecreaseslocalgovernmentjobs,thegainsfromprivate nonfarmjobsoverwhelmsthelossesoflocalgovernmentjobs. CumulativeNumberofJobs 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2,000 4,000 6,000 8,000 ManufacturingSectorExemptfromTPPTaxwith50%Recoveryin TaxRevenues(50%GovernmentSpendingReduction) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PrivateNonFarm Employment PublicSector NetJobs 39

4. TargetIndustrySectorsExemptfromTPPTax InthesimulationofTargetedIndustriesbeingexemptfromTPPtax,netjobsincreasesimilarly tothoseinthemanufacturingsimulation. CumulativeNumberofJobs 20,000 15,000 10,000 5,000 0 5,000 10,000 TargetedIndustriesExemptfromTPPTaxwith50%RecoveryofTax Revenues(50%GovernmentSpendingReduction) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PublicSector PrivateNonFarm Employment NetJobs 5. BothManufacturing&TargetIndustrySectorsExemptfromTPPTax ThechartbelowindicatesthesimulationwhenboththeTargetedIndustriesandall manufacturersareexemptfromtpptax.onecanseethatthelossoflocalgovernment employmentishigherthaninthepreviousscenarios.duetoahigherlossoflocalgovernment employment(andthewagesassociatedwiththosejobs),theincreaseinprivatenonfarm employmentislessthaninsomeoftheearlierscenarios.however,assumingthelikely outcomethatmostcountieswillreplacethelostrevenueofthelesscostlyexemptions, exemptingbothmanufacturingandtargetindustriesshowsthemostprivatesectorjobs,the mosttotaljobsandlargestgdpincreaseoverthetenyearperiodofthesimulation.compared tototalrepeal,thisnarrowerexemptionproducesmorejobsrelativetothesizeofthetax reduction. 40

TargetedIndustries&ManufacturingExemptwith50%Recoveryof TaxRevenues(50%GovernmentSpendingReduction) NumberofJobs 20,000 15,000 10,000 5,000 0 5,000 10,000 15,000 20,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PublicSector PrivateNonFarm Employment NetJobs CumulativeNumberofJobs 50,000 40,000 30,000 20,000 10,000 0 TargetedIndustries&ManufacturingExemptfromTPPTaxwith 100%RecoveryofTaxRevenue(0%GovernmentSpending Reduction) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PrivateNonFarm Employment PublicSector NetJobs TheImpactofAttractingMoreBusinessestotheState OnelikelyscenarioifTPPtaxesarereducedoreliminatedisthatFloridacouldattractmore businessestorelocatetothestate,sincefloridawouldbetheonlysoutheasternstateto exempttpp.tosimulateincreasedrelocationstoflorida,twoscenariosweredevelopedfor simulationmodeling.fortheseproposedjobscenarios,estimatesof1percentand3percent additionalmanufacturingjobcreationweremodeled.giventhatthereareapproximately 300,000manufacturingjobsinthestateofFlorida,theestimatesusedwere3,000and9,000 newjobsperyear.alternativescenarioswerealsorunshowingtheimpactofaddingthesame 41

numbersofnonmanufacturingjobs.thisshowsthedifferencebetween9,000manufacturing jobsand9,000jobsallocatedincurrentproportionstootherexistingindustriesinthestate. Thesejobs(bothscenariosof3,000jobs/yearand9,000jobs/year)werecreatedexogenously. Inotherwords,themodeldemandwasnotmanipulatedtoincreasejobs.Althoughitcanbe done,thattechniqueincreasesthedifficultyofseparatingtheeffectsandinterpretingthe results. Animportantpointtonoteisthatthesejobincreasesdonotaccountforanyconstructionof newbuildingsorretrofittingoldbuildingstostartproduction.implictintheassumptionisthat thenewemployeeswouldbefitinexistingfirms.itisreasonabletoassumethatsome unknownnewconstructionandretrofitting(likelyasignificantamount)wouldoccurwiththe introductionofnewfirmstoflorida.theincreasedconstructionandretrofittingwouldcreatea significantamountofextraeconomicactivity.thereforetheseestimatesshouldbeviewedas highlyconservative. Simulation1 IncreaseManufacturingJobsbyOnePercentperYear Inthisscenario,jobswerecreatedtwoways.First,the3,000jobswereallocatedonlyto manufacturing.thesewereallocatedinproportiontotheexistingmanufacturinginflorida. Eachtypeofjobcreatedhasamultiplierinthatonenewjobhelpscreatejobsintheinputand outputsectorsoftheeconomy.inmanufacturing scase,ithasthelargestmultiplierofany industry.secondly,the3,000jobswereallocatedacrossallsectorsofthefloridaeconomyin theexistingproportionsofindustry.therefore,someofthejobswenttomanufacturingmany wenttotourism,agriculture,miningandalltheothersectors.onecanseeonthechartbelow thatallocatingallthejobstomanufacturingproducedsignificantlymorejobseachyear.over the10yeartimeframeofthissimulation,whenjobswereallocatedacrossallsectors,there wereapproximately53,000jobscreated.whenthenewjobswerestrictlymanufacturingjobs, therewereatotalof88,300created.thismeansthatmorethananadditional35,000jobswere createdinfloridawhenallthe3,000yearlyjobswereallocatedtomanufacturing. ThissupportstheTaskForce sconclusionthattargetedtppexemptionsformanufacturingand targetindustrieswouldproducealargerpositiveimpactperdollaroftaxreductionthanthe averagesector. 42

NmuberofJobs CumulativeJobCreation from3,000jobincreaseperyear (000) 90 80 70 60 50 40 30 20 10 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 3000Jobs 3000Mfg.Jobs Simulation2:IncreaseManufacturingJobsbyThreePercentperYear Tosimulateanincreaseof3percentofmanufacturingjobs,thesametechniqueasabovewas used.thesametechniqueofaddingjobsexogenouslywasused;thereforethesesimulation resultsaredirectlycomparabletotheabovesmallerincrease. 250 CumulativeJobCreation from9,000jobsperyear (000) NumberofJobs 200 150 100 50 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 9000Jobs 9000Mfg.Jobs Fromthechartabove,eachyearthereisanextraincreaseinjobcreationformanufacturingjobsrelative totheallocationtoallindustriesonaproportionalbasis.inthecaseofallindustries,anincreaseof 9,000jobsperyearanditsassociatedmultipliereffectcreatesatotalof159,200Floridajobsoverthe 10yearperiodofthesimulation.Ifthose9,000jobswereallmanufacturingjobs,thetotalbecomes approximately220,400jobs.thisisanincreaseofmorethan60,000jobscreatedoverthe10year periodwhenthenewjobsareallocatedonlytomanufacturing. 43

ConclusionandRecommendations Whilethetotalrepealoftangiblepersonalproperty(TPP)taxesinFloridawouldlikelycreatea significantaddedattractionforbusinessesthatareconsideringlocatinghere,thecurrent environmentiscertainlynotfavorableforreducingtherevenueofschoolsandlocal governmentsby$1.8billion.localgovernments propertytaxbaseshavealreadydeclinedby 21percentsince2007andlowgrowthisforecastfornextseveralyears.Whilesomeofthe larger,moreprosperouscountiescouldprobablyabsorblosttpptaxes,itwouldcreatesome realproblemsformanysmaller,fiscallyconstrainedcounties.thestatehasalsoseenits revenuesshrinkforseveralyearsandgrowthisnotexpectedtoexceedthegrowthinlarge, costlyprogramslikemedicaidandeducation.billionsofdollarsinbudgetcutshavealready beenimplemented.thelegislaturewouldhavetofindanadditional$780millioninstate moneytoreplacethelostfundingforschools orraisetaxes toavoidareductionin educationfunding. TheLegislatureshouldstriveforthefuturetotaleliminationofadvaloremtaxationoftangible personalpropertyinthefuture,whenpropertyvaluesaregrowingatasignificantlevelagain. Thiscouldhelpavoidrepeatingtheexperienceduringthehousingbubble,whenlocal governmentsdidnotrollbackmillageratesenough,insteadspendinghugeincreasesin propertytaxrevenues.spendingthiswindfallallowedmanylocalgovernmentstobudgetat unsustainablelevels,makingdealingwiththesubsequentdropinpropertytaxvalueevenmore difficult. InsteadoftryingtototallyeliminateTPPtaxesnow,thestateshouldlookatprovidingtarget economicdevelopmentexemptionsfromtpptaxesthatcanpromotecapitalinvestmentin Floridaandcreatejobs.Exemptingallmanufacturingandthestate squalifiedtargeted Industrieswouldprobablyprovidethemost bangforthebuck. Thesetypesofindustriesare notcaptiveandoftentaxesplayalargeroleinlocationdecisions.inaddition,economic simulationmodelingshowsthatexemptingmanufacturingandtargetedindustrybusinesses thatarealreadyherewouldprovideasignificantincreaseinprivatesectorjobsandgross domesticproduct. Ataminimum,thestateshouldexemptnewandexpandingbusinessesintheseareas,but strivetoprovidefullexemptionsforthesesectors.exemptingnewandexpandingbusinesses willnoterodethecurrenttaxbaseandafullexemptionwouldremoveonlyasmallpartofthe currentpropertytaxbase,worthabout$379millionintaxes.thisisonly21percentofcurrent TPPtaxesandonly1.5percentofallpropertytaxes. 44

FloridaTaxWatchperformedeconomicsimulationmodelingoffiveTPPtaxreductionoptions. FullrepealofTPPtaxescouldcreate,dependingonhowlocalgovernmentsdealtwiththe revenueloss,asmanyas100,000totaljobsovertenyears.thelossofgovernmentjobscould reducethattotal,dependingontheextenttowhichlocalgovernmentshadtoreducespending. Narrowerexemptionsformanufacturingandthetargetindustries(boththestate squalified TargetedIndustriesandhighimpactsectors)werealsomodeled.Allofthesescenariosshowed positivegrowthinprivatesectoremploymentandgrossdomesticproduct.assumingthelikely outcomethatmostcountieswillreplacethelostrevenueofthelesscostlyexemptions, exemptingbothmanufacturingandtargetindustriesshowsthemostprivatesectorjobs,the mosttotaljobsandlargestgdpincreaseoverthetenyearperiodofthesimulation.compared tototalrepeal,thisnarrowerexemptionproducesmorejobsrelativetothesizeofthetax reduction. TheexpectationthatreducingoreliminatingTPPtaxeswouldattractmorebusinessestolocate infloridawasalsoexamined.thisisalikelyscenariosincefloridawouldbecometheonlystate inthesoutheasttoexempttpp.ifthisexemptionledtoanincreaseinfloridamanufacturing jobsofonlyonetothreepercent(3,000to9,000jobs),between88,300and220,400additional jobswouldbecreatedovertenyears.thisisbetween35,000and60,000morejobsthanwould becreatedbytheinfluxofthesamenumberofnewjobsallocatedtoallindustries(insteadof justmanufacturing). ConstitutionalAmendmentNeeded ToallowtheLegislatureneededflexibilitytobeginreducingtangiblepersonalpropertytaxes,a proposedconstitutionalamendmentwouldbeneeded. Thefollowingproposedconstitutionalamendmentwhilenotmandatinganyreductionsin taxeswouldallowforavarietyofoptionstobedebatedbythelegislature(underlinedtextis addedlanguagetothecurrentfloridaconstitution.seefootnotebelow). 29 ArticleVII,section3: (e) Bygenerallawandsubjecttoconditionsspecifiedtherein,notlessthantwentyfive thousanddollarsoftheassessedvalueofpropertysubjecttotangiblepersonalproperty taxshallbeexemptfromadvaloremtaxation.pursuanttogenerallawalltangible personalproperty,orthetangiblepersonalpropertyofspecifiedindustriesorofnewor 29 Thislanguageshouldnotbereviewedasfullyvettedconstitutionallanguage.Thislanguageismeantonlyasastartingpoint forlegislativedeliberationsonaproposedjointresolution. 45

expandingbusinesses,orofanycombinationofspecifiedindustriesandnewor expandingbusinesses,maybevaluedfortaxationataspecifiedpercentageofitsvalue ormaybeexemptedfromtaxationandthelegislaturemayauthorizelocalgovernments, inamannerprescribedbygenerallaw,toelectnottoparticipateinsuchvaluationata specifiedpercentageofvalueorexemption,inwhicheventtaxationoftangiblepersonal propertybyalocalgovernmentexercisingsuchelectionshallbeasotherwiseprescribed inthisconstitution. Thislanguagewouldpreservethecurrent$25,000exemption,whilekeepingthedooropenfor possiblefuturerepeal.allowingfortaxationataspecifiedpercentageofvaluewouldallowfor aphaseoutthatwouldapplytoalltaxpayersequally.forexampleunderafiveyearphaseout, TPPcouldbetaxedonthefollowingschedule: 1 st Year 80% 2 nd Year 60% 3 rd Year 40% 4 th Year 20% 5 th Year 0% Theamendmentwouldalsoallowfortheeconomicdevelopmenttargetedexemptionsfor manufacturingandthestate stargetindustriesandhighimpactsectors. Acknowledgingthefiscalstrainthatrepeal orevenexemption oftpptaxesmayplaceon somelocalgovernments,thelegislaturecouldallowforlocalgovernmentsto optout or continuetotaxtpp.thisshouldrequireareferendum approvalbylocalvoters.alternatively, thestatecouldconsiderreimbursinglocalgovernments particularlyfiscallyconstrained countiesforlostrevenue.ifmanufacturingandtargetedindustriesareexempteditwould costthestate$379milliontoreimbursealllocalgovernments(includingschools)andrelatively littletoreimbursethesmallcountiesmosteffectivebytheexemption.toillustrate,thetop25 counties(intermsoflevies)comprise96percentofthetotalstateleviesofthetppoftarget industriesand90percentoftppleviesonmanufacturing. 46

Insummary,theFloridaTangiblePersonalPropertyTaxTaskForcerecommends thatthelegislature: Passajointresolutionproposingaconstitutionalamendment(seelanguageabove)to gobeforethevotersinnovember2012thatgivesthelegislatureflexibilityinthearea oftaxationoftangiblepersonalproperty. Intheshortterm,createTPPtaxexemptionsforallmanufacturersandotherstate targetedindustriesandhighimpactsectors.ataminimum,thestateshouldexempt newandexpandingbusinessesintheseareas,butstrivetoprovidefullexemptionsfor thesesectors. TheLegislaturecouldallowforlocalgovernments byreferendum to optout,or continuetotaxtpp.alternatively,thestatecouldconsiderreimbursinglocal governments particularlyfiscallyconstrainedcountiesforlostrevenue. TheLegislatureshouldsetagoaloffuturetotaleliminationofadvaloremtaxationof tangiblepersonalpropertyinthefuture,whenpropertyvaluesaregrowingata significantlevelagain. ThisTaskForcereportwaswrittenbyKurtWenner,FloridaTaxWatchVicePresidentforTax Research,withassistancefromTaskForcemembers.Economicsimulationmodelingperformedby JerryD.Parrish,Ph.D.,ChiefEconomist,withtheassistanceofandKatieFurtick,ResearchAnalyst. TheTaskForcethanksFloridaDepartmentofRevenueExecutiveDirectorLisaVickersandherstaff fortheirconsiderableassistanceincompilingthedatausedinthisreport. MarshallCriser,III,Chairman;DominicM.Calabro,President,Publisher,andEditor. FloridaTaxWatchResearchInstitute,Inc. www.floridataxwatch.org CopyrightFloridaTaxWatch,November2011 47

Florida(Tangible(Personal(Property(Tax(Task(Force(Membership( Chairman: The Honorable Pat Neal President Neal Communities Carlos Beruff President Medallion Homes Gulf Coast Barney Bishop, III President & CEO Associated Industries of Florida Dominic Calabro President & CEO Florida TaxWatch Colleen Castille Principle The Fiorentino Group Marshall Criser, III President & CEO AT&T Florida Florida TaxWatch Chairman Steve Evans Vice President (Ret.) IBM David Mann Chairman & CEO North Florida Suntrust Bank Chris Flack Executive Director, External Relations Progress Energy Florida The Honorable Bill Furst Property Appraiser Sarasota County Danny Gaekwad President NDS Jim Grainger Owner Grainger Farms Charles Gray Chairman & CEO GrayRobinson, P.A. Todd Jones Executive Managing Director Collier International Tampa Steve Lezman Director Government Affairs Pepsico/Tropicana CJ Evans, Jr. Director Ryan, LLC Ron Nation Owner, President & CEO JVI Solutions, LLC The Honorable Jim Overton Property Appraiser City of Jacksonville John Andrew Smith Smith & Smith Consulting Michael Sole Vice President State Government Affairs Florida Power & Light Stam Stathis President Florida Institute of CPAs Kelly Underhill Director Tax & Treasury Publix Supermarkets, Inc. Kurt Wenner Vice President of Tax Research Florida TaxWatch 48

Florida Tangible Personal Property Data Targeted Industries and High Impact Sectors 2011 DESCRIPTION NAICS # of Accounts JUST VALUE TAXABLE VALUE CleanTech/Energy 598 496,276,525 463,133,854 Semiconductor and Other Electronic Components 33441 112 154,045,237 150,112,435 All Other Basic Organic Chemical Manufacturing 325199 5 92,254,706 92,129,706 Solar energy heating equipment manufacturing 333414 4 262,448 212,448 Turbine and Turbine Generator Set Units 333611 19 67,168,429 66,743,429 Industrial Gas Manufacturing 32512 46 22,490,025 21,606,262 Storage Battery Manufacturing 335911 5 760,366 635,366 Environmental Consulting Services 54162 103 13,325,065 11,320,573 Other Scientific and Technical Consulting Services 54169 227 42,224,622 38,188,264 R&D in the Physical, Engineering, and Life Sciences 541712 32 4,956,833 4,395,527 Sawmills 321113 39 93,388,010 72,539,060 Starch and Vegetable Fats and Oils Manufacturing 31122 6 5,400,784 5,250,784 Ethyl Alcohol Manufacturing 325193 0 0 0 DESCRIPTION NAICS # of Accounts JUST VALUE TAXABLE VALUE InformationTechnology 16,744 9,059,232,607 8,556,110,457 Office Machinery Manufacturing 333313 28 2,363,143 2,086,243 Computer and Peripheral Equipment Manufacturing 33411 60 92,022,314 90,789,095 Telephone Apparatus Manufacturing 33421 23 60,472,196 60,072,196 Radio, TV and Wireless Communications Equipment Manufacturing 33422 270 62,617,439 60,996,998 Semiconductor and Other Electronic Components 33441 112 154,045,237 150,112,435 Software Publishers 51121 77 20,725,917 19,200,079 Telecommunications 517 14,530 8,357,218,870 7,880,582,577 Data Processing, Hosting, and Related Services 518 636 114,230,973 110,897,114 Computer Systems Design and Related Services 5415 1,008 195,536,518 181,373,720

Florida Tangible Personal Property Data Targeted Industries and High Impact Sectors 2011 DESCRIPTION NAICS # of Accounts JUST VALUE TAXABLE VALUE LifeSciences 713 789,521,301 771,462,701 Pharmaceutical and Medicine Manufacturing 32541 96 193,460,706 189,375,198 Semiconductor and Other Electronic Components 33441 112 154,045,237 150,112,435 Analytical Laboratory Instrument Manufacturing 334516 6 1,916,484 1,791,484 Irradiation Apparatus Manufacturing 334517 2 392,047 342,047 Medical Equipment and Supplies Manufacturing 3391 389 361,983,844 354,328,429 R&D in the Physical, Engineering, and Life Sciences 54171 108 77,722,983 75,513,108 AviationandAerospace 337 321,152,941 312,670,959 Aerospace Product and Parts Manufacturing 3364 136 220,697,138 216,085,844 Fluid Power Valve and Hose Fitting 332912 9 1,428,155 1,228,155 Fluid Power Cylinder and Actuator Manufacturing 333995 1 13,189,219 13,164,219 Fluid Power Pump and Motor Manufacturing 333996 2 16,138,237 16,088,237 Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instruments 334511 20 25,165,541 24,765,541 Other Support Activities for Air Transportation 48819 169 44,534,651 41,338,963 50

Florida Tangible Personal Property Data Targeted Industries and High Impact Sectors 2011 DESCRIPTION NAICS # of Accounts JUST VALUE TAXABLE VALUE FinancialServices 3,797 750,731,039 679,202,885 Monetary Authorities-Central Bank 521 493 110,976,886 98,768,461 Nondepository Credit Intermediation 5222 750 114,948,624 100,976,655 Activities Related to Credit Intermediation 5223 789 174,875,415 161,100,378 Securities, Commodity Contracts, and Related Activities 523 1,298 225,677,052 202,833,052 Insurance Carriers 5241 324 109,250,653 102,432,645 Funds, Trusts, and Other Financial Vehicles 525 143 15,002,409 13,091,694 CorporateHeadquarters 94 49,741,761 47,544,936 Corporate, Subsidiary, and Regional Managing Offices 551114 94 49,741,761 47,544,936 ResearchandDevelopment 5417 148 86,393,885 83,350,617 Scientific Research and Development Services 5417 148 86,393,885 83,350,617 51

Florida Tangible Personal Property Data Targeted Industries and High Impact Sectors 2011 DESCRIPTION NAICS # of Accounts JUST VALUE TAXABLE VALUE Transportation 297 351,066,628 343,118,265 Aerospace Product and Parts Manufacturing 3364 136 220,697,138 216,085,844 Fluid Power Valve and Hose Fitting Manufacturing 332912 9 1,428,155 1,228,155 Fluid Power Cylinder and Actuator Manufacturing 333995 1 13,189,219 13,164,219 Fluid Power Pump and Motor Manufacturing 333996 2 16,138,237 16,088,237 Motor Vehicle Manufacturing 3361 37 21,127,131 20,349,937 Motor Vehicle Body Manufacturing 336211 3 306,317 256,317 Military Armored Vehicle, Tank, and Tank Components 336992 1 457,448 432,448 R&D in the Physical, Engineering, and Life Sciences 54171 108 77,722,983 75,513,108 HomelandSecurity/Defense 1,323 565,969,499 544,776,800 Optical Instrument and Lens Manufacturing 333314 64 202,741,866 201,266,866 Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instruments 334511 20 25,165,541 24,765,541 Small Arms Ammunition Manufacturing 332992 3 6,567,345 6,492,345 Ammunition (except Small Arms) Manufacturing 332993 2 1,068,161 1,018,161 Other Ordnance and Accessories Manufacturing 332995 8 1,009,766 984,760 Military Armored Vehicle, Tank, and Tank Component 336992 1 457,448 432,448 Ship and Boat Building 3366 217 133,422,854 128,442,959 Computer Systems Design and Related Services 5415 1,008 195,536,518 181,373,720 52

HighImpactSectors 54

TotalRepealofTPPTax FullRepealwith0%TaxRevenueRecovery (100%GovernmentSpendingReduction) 100,000 CumulativeNumberofJobs 60,000 20,000 20,000 60,000 100,000 140,000 180,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PublicSector PrivateNonFarm Employment NetJobs FullRepealwith50%TaxRevenueRecovery (50%GovernmentSpendingReduction) CumulativeNumberofJobs 100,000 80,000 60,000 40,000 20,000 0 20,000 40,000 60,000 80,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PublicSector PrivateNonFarm Employment NetJobs CumulativeNumberofJobs 120,000 100,000 80,000 60,000 40,000 20,000 0 FullRepealwith100%TaxRevenueRecovery (0%GovernmentSpendingReduction) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PublicSector PrivateNon Farm Employment NetJobs 55

FiveYearPhaseoutofTPPTax CumulativeNumberofJobs CumulativeNumberofJobs CumulativeNumberofJobs 20%RepealofTPPTaxAnnuallywith0%RecoveryinTaxRevenues 100,000 (100%inGovernmentSpendingReduction) 60,000 PrivateNonFarm Employment 20,000 PublicSector 20,000 60,000 100,000 140,000 40,000 20,000 0 20,000 40,000 60,000 80,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 NetJobs 20%RepealofTPPTaxAnnuallywith50%RecoveryinTaxRevenues (50%inGovernmentSpendingReduction) 80,000 60,000 PublicSector 40,000 20,000 0 PrivateNonFarm Employment NetJobs 20%RepealofTPPTaxAnnuallywith100%RecoveryinTaxRevenue (0%inGovernmentSpendingReduction) 100,000 PublicSector 80,000 PrivateNonFarm 60,000 Employment NetJobs 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 56

ManufacturingSectorExemptfromTPPTax CumulativeNumberofJobs CumulativeNumberofJobs CumulativeNumberofJobs ManufacturingSectorExemptfromTPPTaxwith0%RecoveryinTax Revenues(100%GovernmentSpendingReduction) 15,000 PublicSector 10,000 5,000 0 5,000 10,000 15,000 20,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2,000 4,000 6,000 8,000 10,000 5,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 ManufacturingSectorExemptfromTPPTaxwith50%Recoveryin TaxRevenues(50%GovernmentSpendingReduction) 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PrivateNonFarm Employment NetJobs PrivateNonFarm Employment PublicSector NetJobs ManufacturingSectorExemptfromTPPTaxwith100%Recoveryin TaxRevenues(0%GovernmentSpendingReduction) 20,000 PrivateNonFarm 15,000 Employment PublicSector 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 NetJobs 57

TargetIndustriesExemptfromTPPTax CumulativeNumberofJobs 12,000 8,000 4,000 0 4,000 8,000 12,000 16,000 20,000 TargetIndistriesExemptfromTPPTaxwith0%Recoveryoftax Revenue(100%GovernmentSpendingReduction) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PublicSector PrivateNonFarm Employment NetJobs CumulativeNumberofJobs 20,000 15,000 10,000 5,000 0 5,000 10,000 TargetedIndustriesExemptfromTPPTaxwith50%RecoveryofTax Revenues(50%GovernmentSpendingReduction) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PublicSector PrivateNonFarm Employment NetJobs CumulativeNumberofJobs 30,000 25,000 20,000 15,000 10,000 5,000 0 TargetIndustriesExcludedfromTPPTaxwith100%RecoveryofTax Revenues(0%GovernmentSpendingReduction) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PrivateNonFarm Employment PublicSector NetJobs 58

ManufacturingandTargetIndustriesExemptfromTPPTax Manufacturing&TargetIndustriesExemptfromTPPTaxwith0% RecoveryofTaxRevenues(100%GovernmentSpendingReduction) 20,000 NumberofJobs 10,000 0 10,000 20,000 30,000 Government PrivateNonFarm Employment NetJobs 40,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 NumberofJobs 20,000 15,000 10,000 5,000 0 5,000 10,000 15,000 20,000 TargetedIndustries&ManufacturingExemptwith50%Recoveryof TaxRevenues(50%GovernmentSpendingReduction) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PublicSector PrivateNonFarm Employment NetJobs CumulativeNumberofJobs 50,000 40,000 30,000 20,000 10,000 0 TargetedIndustries&ManufacturingExemptfromTPPTaxwith 100%RecoveryofTaxRevenue(0%GovernmentSpending Reduction) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PrivateNonFarm Employment PublicSector NetJobs 59

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About Florida TaxWatch Florida TaxWatch is a statewide, non-profit, non-partisan taxpayer research institute and government watchdog that over its 32-year history has become widely recognized as the watchdog of citizens hardearned tax dollars. Its mission is to provide the citizens of Florida and public officials with high quality, independent research and education on government revenues, expenditures, taxation, public policies, and programs, and to increase the productivity and accountability of Florida Government. Florida TaxWatch's research recommends productivity enhancements and explains the statewide impact of economic and tax and spend policies and practices on citizens and businesses. Florida TaxWatch has worked diligently and effectively to help state government shape responsible fiscal and public policy that adds value and benefit to taxpayers. This diligence has yielded impressive results: in its first two decades alone, policymakers and government employees implemented three-fourths of Florida TaxWatch's cost-saving recommendations, saving the taxpayers of Florida more than $6.2 billion -- approximately $1,067 in added value for every Florida family, according to an independent assessment by Florida State University. Florida TaxWatch has a historical understanding of state government, public policy issues, and the battles fought in the past necessary to structure effective solutions for today and the future. It is the only statewide organization devoted entirely to Florida taxing and spending issues. Its research and recommendations are reported on regularly by the statewide news media. Supported by voluntary, tax-deductible memberships and grants, Florida TaxWatch is open to any organization or individual interested in helping to make Florida competitive, healthy and economically prosperous by supporting a credible research effort that promotes constructive taxpayer improvements. Members, through their loyal support, help Florida TaxWatch bring about a more effective, responsive government that is accountable to the citizens it serves. Florida TaxWatch is supported by all types of taxpayers -- homeowners, small businesses, large corporations, philanthropic foundations, professionals, associations, labor organizations, retirees -- simply stated, the taxpayers of Florida. The officers, Board of Trustees and members of Florida TaxWatch are respected leaders and citizens from across Florida, committed to improving the health and prosperity of Florida. With your help, Florida TaxWatch will continue its diligence to make certain your tax investments are fair and beneficial to you, the taxpaying customer, who supports Florida's government. Florida TaxWatch is ever present to ensure that taxes are equitable, not excessive, that their public benefits and costs are weighed, and government agencies are more responsive and productive in the use of your hard-earned tax dollars. The Florida TaxWatch Board of Trustees is responsible for the general direction and oversight of the research institute and safeguarding the independence of the organization's work. In his capacity as chief executive officer, the president is responsible for formulating and coordinating policies, projects, publications, and selecting professional staff. As an independent research institute and taxpayer watchdog, Florida TaxWatch does not accept money from Florida state and local governments. The research findings and recommendations of Florida TaxWatch do not necessarily reflect the view of its members, staff, distinguished Board of Trustees, or Executive Committee, and are not influenced by the positions of the individuals or organizations who directly or indirectly support the research. Florida TaxWatch Values: Integrity Productivity Accountability Independence Quality Research

Improving Taxpayer Value, Citizen Understanding, and Government Accountability 106 N. BRONOUGH STREET (32301) P.O. BOX 10209 (32302) TALLAHASSEE, FLORIDA www.floridataxwatch.org Copyright Florida TaxWatch, November 2011