If President Barack Obama can use federal stimulus dollars in an effort to kick-start the economy, Florida lawmakers figure they can use selected tax credits to save jobs in Florida's space industry.
Two bills -- SB 1526 and HB 133 -- would establish credits against corporate income tax for companies that create, or provide investments, for spaceflight projects.
The bills, sponsored by two Space Coast Republicans, Sen. Mike Haridopolos of Merritt Island and Rep. Ralph Poppell of Vero Beach, could, if successful, divert millions of dollars of tax revenues from state coffers.
That's a tough sell for a Legislature grappling with a $3 billion projected budget deficit.
But, if successful, the Haridopolos-Poppell measures could end up generating millions more in tax collections through greater economic activity.
This latter calculation hinges on a new buzzword in the capital: dynamic scoring. (To read several essays explaining this topic, click here.)
With dynamic scoring, revenues are factored over time to produce a fuller picture of economic growth. Following the Laffer Curve, named after Reagan-era economist Arthur Laffer, tax cuts yield more tax collections in the long run.
Not coincidentally, Poppell and Haridopolos also are sponsors of bills that envision exactly that trajectory.
Their HB 121 and SB 1178 would "evaluate proposed legislation based on tools and models not generally employed by the (budget) conferences, including cost-benefit, return-on-investment or dynamic scoring techniques."
"This is the top economic development priority for us," says Jose Gonzalez, vice president of Associated Industries of Florida.
"These bills would allow the speaker of the House and the Senate president to look at the bigger economic picture. Now, we're only looking at a very static picture of up-front costs."
Tony Villamil, dean of St. Thomas University School of Business in Miami, calls it "the difference between accounting and economics."
"Dynamic scoring is another tool in the toolbox of economic development," said Villamil, who worked in the U.S. Commerce Department under George H.W. Bush.
Villamil used dynamic scoring in assisting the state's decision to subsidize high-tech, biomedical ventures at Torrey Pines, Burnham and Scripps.
The director of Office of Tourism, Trade and Economic Development (OTTED) in the first two years of Gov. Jeb Bush's administration sees space-related spinoffs in the same light.
"The decision to fund launch-zone incentives requires solid, professional analysis to make an intelligent decision," Villamil says. "Dynamic scoring can be used specifically where there's a future revenue impact."
Critics of dynamic scoring say its calculations are too subjective, too time-consuming and too prone to error.
"Consistent dynamic scoring is logistically impossible given current technology," said Rudolph Penner, the former director of the Congressional Budget Office.
But, advocates say Washington's shortcomings shouldn't hold back states from innovating.
"For many years, it has been standard practice for the Treasury Department and Joint Committee on Taxation to calculate the revenue effects of tax changes on a static basis; that is, without fully accounting for their impact on key economic variables," said Bruce Bartlett, senior fellow at the National Center for Policy Analysis.
"This is equivalent to a business planning an increase in the price of its product without considering the possibility that sales will fall as a consequence. Any business that did this would soon go bankrupt, because there would be no logical reason not to raise prices to infinity."
Gonzalez said the Commercial Launch Zone Tax Incentives are tailor-made for the dynamic scoring process.
The House and Senate bills would provide carry-forward tax credits, subject to OTTED review of eligibility and OTTED's consultation with Space Florida. Additional safeguards include auditing of tax credits by the Department of Revenue and an annual report to the governor and Legislature.
With some 7,000 private-contractor positions due to be terminated with the Obama administration's cancellation of the Shuttle program and another 15,000 indirect jobs at risk, Florida officials say aggressive, creative incentives are needed to reposition the Space Coast's skilled workforce and to attract new investment.
While skeptics wonder if dynamic scoring isn't just a ruse to funnel more public money into private pockets at a time of severe budget constraints, Villamil says it would be pennywise and pound foolish not to be proactive.
"Fact is, the (state) Economic and Demographic Research office already has the expertise to do dynamic scoring. It's widely used in business for all kinds of work," he says.
Villamil added that the Florida Innovation Incentive Fund used dynamic scoring with a goal that projects would break even in 15 years.
"In the grand scheme of things, it's the right thing to do," Gonzalez says.
Contact Kenric Ward at kward@sunshinestatenews.com or at (772) 224-2386.
