Friday, October 28, 2005

George Mindling Column 10-28-2005

The Real Reason Florida Lost Out on Technology


When Florida enacted the Unitary tax in 1983, it started an economic collapse and fiscal fallout Florida has not recovered from some 22 years later.

In the LeRoy Collins Institute report titled “Tough Choices, Shaping Florida’s Future,” released on October 4th, researchers search for answers to questions about Florida’s position in the high tech industries that many of us who were in the business years ago take for granted. In the report, one comment expressly misses the technological industrial growth that Florida squandered.

”…Our economy missed out on periods of industrial growth because that is not what we did. For industry, we lacked raw materials, cheap energy, and a central location,” states David Denslow, University of Florida. Apparently David has never been to Boca Raton.

Florida was set to be the east coast Silicon Valley, competing with North Carolina’s bid for growing the Research Triangle Park. IBM had moved matrix printer manufacturing to Boca (all Bahia printers were made in Boca) before the Personal Computer was even announced. Of course, once the PC was brought to market, Boca was the heart of the IBM PC empire. High tech companies flocked to the area. Seagate had a huge facility just up Congress Avenue from the IBM Yamato Road plant.

IBM took out an option on 5000 acres not far from Gainesville, with the hope of building an assembly plant. Hampered by inclement weather in its traditional northern facilities, IBM wanted a facility that would be available for transportation all year round to supplement its ability to ship worldwide at any time. Florida was a place employees wanted to move to and bring their families. It was a great location for building families and satisfying future needs of the company at the same time. It was a university town, another asset IBM valued highly.

However, shortsighted and greedy Florida lawmakers decided to enact the now infamous Unitary Tax of 1983. Basically, any company doing business in Florida would have to pay taxes on total revenues worldwide, not just on sales within the state of Florida. The effect on international companies such as IBM was devastating. The CEO of IBM supposedly met with Florida’s governor to convince Florida to repeal the new tax. When no relaxation of the tax became obvious, IBM effectively closed the Boca plant and moved the whole PC operation to Austin, Texas. They then sold the 5000 acres in Gainesville and basically wrote Florida off the future expansion list. Payback can be brutal, and Florida is still trying to recover from its shortsightedness. The law was eventually repealed but not until the damage was done. When IBM left Boca, so did most of the ancillary businesses that worked with IBM. Ask anyone in Boca who was there at the time what happened.

While the LeRoy Collins paper is invaluable in its number crunching, there are telltale gaps in its ability to convey the long-term effects of bad legislation. Let’s hope the paper doesn’t generate another round of mistakes.

George Mindling

2 comments:

  1. Hi George,
    Does Florida still has that taxing policy in effect? It seems that here in Georgia we give away the store to get companies, not just high tech, to commit to the State and we still lose about as many as we eventually attract.

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    Replies
    1. Hi Bob, the infamous Unitary tax was repealed after less than two years, but the damage was done. IBM and many others had already said adios!

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