Florida’s Big Economy Should Be No Big Surprise
Florida’s economy is anything but retired. According to the latest in a series of economic forecasts from the University of Central Florida, growth in the state will largely outpace the rest of the country, putting it on the path to breaking $1 trillion by 2018. For those who read Rich States, Poor States, this news should not come as a surprise. Growing in-migration of both retirees and workers since 2010 has been a boon for the Sunshine State’s labor force. Right-to-work labor policy, low corporate marginal tax rates, no personal income tax and a relatively small public sector all mesh to create a rich environment for business growth. As highlighted in the ALEC State Tax Cut Roundup of 2016, Florida joined Ohio, Indiana and Wisconsin in reducing taxes for three consecutive years. Florida lawmakers’ continued success in reducing barriers to entrepreneurship even pushed the state into the top 10 of the ALEC Rich States, Poor States Economic Outlook Rankings for 2016.
In his report, UCF economist Sean Snaith finds that wages are likely to grow at 3.7 percent annually and that the construction and mining and the professional services sectors will drive the lion’s share of growth going forward. Returns from these sectors can already be seen feeding into growing demand in Florida’s housing market. The combined effects of growing demand and low housing inventory have driven median home prices from $122,200 at the nadir of the financial crisis to $213,000 today.
Recently passing New York, Florida is now the 3rd largest state by population. If it stays the course, the Sunshine State could grow into the 16th largest economy worldwide by 2018. That, however, involves what economists call a “ceteris paribus” assumption, or “all else held constant.” As the nation’s constantly evolving business environment shows, that is a pretty radical assumption. That is to say, resting on policy laurels isn’t an option if states want more growth. So how can Florida continue its upward trajectory? Just as successful entrepreneurs are always finding newer, more efficient ways to create value for society, so must the public sector find better ways to accomplish its core functions, while also reducing its burden on the productive sector. The high social cost of a needlessly complex litigation system, as well as the negative consumption effects of high sales and property tax burdens will be a limiting factor in the continued migration of both retirees and workers, making these important topics for future policy innovation in Florida.