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Business

Disney faces losing control of its kingdom with Florida bill

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8 minute read

By Mike Schneider in Orlando

ORLANDO, Fla. (AP) — Disney’s government in Florida has been the envy of any private business, with its unprecedented powers in deciding what to build and how to build it at the Walt Disney World Resort, issuing bonds and holding the ability to build its own nuclear plant if it wanted.

Those days are numbered as a new bill released this week puts the entertainment giant’s district firmly in the control of Florida’s governor and legislative leaders in what some see as punishment for Disney’s opposition to the so-called “Don’t Say Gay” lawchampioned by Republican Gov. Ron DeSantis and the Republican-controlled Legislature.

“Disney won’t like it because they’re not in control,” said Richard Foglesong, professor emeritus at Rollins College, who wrote a definitive account of Disney’s Reedy Creek Improvement Districtin his book, “Married to the Mouse: Walt Disney World and Orlando.”

With that loss of control comes an uncertainty about how Disney’s revamped government and Walt Disney World, which it governs, will work together — whether the left hand always will be in sync with the right hand as it has been with the company overseeing both entities.

The uniqueness of Disney’ government, where building inspectors examine black box structures holding thrill rides instead of office buildings, also complicates matters. The district essentially runs a midsize city. On any given day, as many as 350,000 people are on Disney World’s 27,000 acres (11,000 hectares) as theme park visitors, overnight hotel guests or employees. The 55-year-old district has to manage the traffic, dispose of the waste and control the plentiful mosquitoes.

“What kind of control is preferable? Control by a private business or corporation, or control by appointed officials, appointed by governor of the state?” Foglesong said. “Will they have the expertise to be able to make the new district work as efficiently as the old district works?”

The bill prohibits anybody who has worked or had a contract with a theme park or entertainment complex in the past three years, or their relatives, from serving on the revamped district’s board of supervisors, a prohibition that some experts say eliminates people with expertise in the field.

The bill’s sponsor, Florida Rep. Fred Hawkins, a Republican from St. Cloud, defended the exclusion Tuesday.

“This was a provision I requested,” Hawkins said. “We want to try to avoid any conflicts of interest of the new board members.”

Under the bill’s proposals, Florida’s governor appoints the five-member board of supervisors to the renamed Central Florida Tourism Oversight District instead of Disney. Limits would be placed on the district’s autonomy by making it subject to oversight and regulation by state agencies, and it would be unable to adopt any codes that conflict with state regulations. The district also would no longer have the ability, if it wanted, to own and operate an airport, stadium, convention center or nuclear power plant.

DeSantis started gunning for Disney’s private government last year when the entertainment giant publicly opposed what critics call the “Don’t Say Gay” law, which bars instruction on sexual orientation, gender identity and other lessons deemed not age-appropriate in kindergarten through third grade. Republican critics of the Disney district also argued it has given the company an unfair advantage over rivals in issuing bonds and financing expansion.

The Legislature passed a bill last year to dissolve the Disney government by June 2023.

Lawmakers are meeting this week for a special session to complete the state takeover of the district and approve other key conservative priorities of the governor on immigration and voter fraud. A Senate committee approved separate bills Tuesday to expand the governor’s migrant relocation program and allow the statewide prosecutor to bring election crime charges.

Florida Rep. Anna Eskamani, a Democrat from Orlando, calledthe Disney bill on Monday a “power grab” by DeSantis, a potential 2024 presidential candidate who has emerged as a fierce opponent of what he describes as “woke” policies on race, gender and public health. Such positions endear him to the GOP’s conservative base but threaten to alienate independents and moderate voters in both parties who are influential in presidential politics.

The changes proposed in the legislation were welcomed by at least one group of Reedy Creek employees — firefighters who have clashed in the past with district leaders. Tim Stromsnes, a spokesperson for Reedy Creek Professional Firefighters Local 2117, said all the current board cares about is “bonds and low-interest loans for building Disney infrastructure, and zero about treating its employees fairly.”

“We think they are going to be more receptive to first responders,” Stomsnes said Tuesday of the proposed new board. “They’re calling the governor a fascist for doing this … but he is actually fixing a fascist, Disney-owned government.”

To the relief of taxpayers in neighboring Orange and Osceola counties, the district won’t be dissolved, a prospect that had raised fears that the counties would have to absorb the district’s responsibilities and raise property taxes significantly. The Reedy Creek Improvement District has more than $1 billion in bond debt.

In a statement, Orange County said officials were monitoring the bill.

The new bill appears to address some key questions raised by last year’s legislation, primarily preserving the district’s ability to raise revenue and service outstanding debt, said Michael Rinaldi, head of local government ratings for Fitch Ratings.

Foglesong expects a legal challenge should the bill pass. Disney didn’t respond to an inquiry asking about any potential lawsuits.

“Disney works under a number of different models and jurisdictions around the world, and regardless of the outcome, we remain committed to providing the highest quality experience for the millions of guests who visit each year,” Jeff Vahle, president of Walt Disney World Resort, said in a statement.

Disney could make an argument that their rights as a private business are being undermined, Foglesong said.

“It will have political appeal, the arguments they make, in a Republican state for a potential presidential candidate,” Foglesong said. “It will be like, legally, ‘How can you do this to us?’ and politically, ‘How can you do this to a corporation that has done so much for the state of Florida?'”

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Associated Press writer Anthony Izaguirre in Tallahassee, Florida contributed to this report.

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Follow Mike Schneider on Twitter at @MikeSchneiderAP

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Federal government’s ‘fudget budget’ relies on fanciful assumptions of productivity growth

Published on

From the Fraser Institute

By Niels Veldhuis and Jake Fuss

Labour productivity isn’t growing, it’s declining. And stretching the analysis over the Trudeau government’s time in office (2015 to 2023, omitting 2020 due to COVID), labour productivity has declined by an average of 0.8 per cent. How can the Trudeau government, then, base the entirety of its budget plan on strong labour productivity growth?

As the federal budget swells to a staggering half a trillion dollars in annual spending—yes, you read that correctly, a whopping $538 billion this year or roughly $13,233 per Canadian—and stretches over 430 pages, it’s become a formidable task for the media to dissect and evaluate. While it’s easy to spot individual initiatives (e.g. the economically damaging capital gains tax increase) and offer commentary, the sheer scale and complexity of the budget make it hard to properly evaluate. Not surprisingly, most post-budget analysts missed a critically important assumption that underlies every number in the budget—the Liberals’ assumption of productivity growth.

Indeed, Canada is suffering a productivity growth crisis. “Canada has seen no productivity growth in recent years,” said Carolyn Rogers, senior deputy governor at the Bank of Canada, in a recent speech. “You’ve seen those signs that say, ‘In emergency, break glass.’ Well, it’s time to break the glass.”

The media widely covered this stark warning, which should have served as a wake-up call, urging the Trudeau government to take immediate action. At the very least, this budget’s ability—or more accurately, inability—to increase productivity growth should have been a core focus of every budget analysis.

Of course, the word “productivity” puts most people, except die-hard economists, to sleep. Or worse, prompts the “You just want us to work harder?” questions. As Rogers noted though, “Increasing productivity means finding ways for people to create more value during the time they’re at work. This is a goal to aim for, not something to fear. When a company increases productivity, that means more revenue, which allows the company to pay higher wages to its workers.”

Clearly, labour productivity growth remains critical to our standard of living and, for governments, ultimately determines the economic growth levels on which they base their revenue assumptions. With $538 billion in spending planned for this year, the Trudeau government better hope it gets its forecasts right. Otherwise, the $39.8 billion deficit they expect this year could be significantly higher.

And here’s the rub. Buried deep in its 430-page budget is the Trudeau government’s assumption about labour productivity growth (page 385, to be exact). You see, the Liberals assume the economy will grow at an average of 1.8 per cent over the next five years (2024-2028) and predict that half that growth will come from the increase in the supply of labour (i.e. population growth) and half will come from labour productivity growth.

However, as the Bank of Canada has noted, labour productivity growth has been non-existent in Canada. The Bank uses data from Statistics Canada to highlight the country’s productivity, and as StatsCan puts it, “On average, over 2023, labour productivity of Canadian businesses fell 1.8 per cent, a third consecutive annual decline.”

In other words, labour productivity isn’t growing, it’s declining. And stretching the analysis over the Trudeau government’s time in office (2015 to 2023, omitting 2020 due to COVID), labour productivity has declined by an average of 0.8 per cent. How can the Trudeau government, then, base the entirety of its budget plan on strong labour productivity growth? It’s what we call a “fudget budget”—make up the numbers to make it work.

The Trudeau fudget budget notwithstanding, how can we increase productivity growth in Canada?

According to the Bank of Canada, “When you compare Canada’s recent productivity record with that of other countries, what really sticks out is how much we lag on investment in machinery, equipment and, importantly, intellectual property.”

Put simply, to increase productivity we need businesses to increase investment. From 2014 to 2022, Canada’s inflation-adjusted business investment per worker (excluding residential construction) declined 18.5 per cent from $20,264 to $16,515. This is a concerning trend considering the vital role investment plays in improving economic output and living standards for Canadians.

But the budget actually hurts—not helps—Canada’s investment climate. By increasing taxes on capital gains, the government will deter investment in the country and encourage a greater outflow of capital. Moreover, the budget forecasts deficits for at least five years, which increases the likelihood of future tax hikes and creates more uncertainty for entrepreneurs, investors and businesses. Such an unpredictable business environment will make it harder to attract investment to Canada.

This year’s federal budget rests on fanciful assumptions about productivity growth while actively deterring the very investment Canada needs to increase living standards for Canadians. That’s a far cry from what any reasonable person would call a successful strategy.

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Alberta

Alberta government should create flat 8% personal and business income tax rate in Alberta

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From the Fraser Institute

By Tegan Hill

If the Smith government reversed the 2015 personal income tax rate increases and instituted a flat 8 per cent tax rate, it would help restore Alberta’s position as one of the lowest tax jurisdictions in North America

Over the past decade, Alberta has gone from one of the most competitive tax jurisdictions in North America to one of the least competitive. And while the Smith government has promised to create a new 8 per cent tax bracket on personal income below $60,000, it simply isn’t enough to restore Alberta’s tax competitiveness. Instead, the government should institute a flat 8 per cent personal and business income tax rate.

Back in 2014, Alberta had a single 10 per cent personal and business income tax rate. As a result, it had the lowest top combined (federal and provincial/state) personal income tax rate and business income tax rate in North America. This was a powerful advantage that made Alberta an attractive place to start a business, work and invest.

In 2015, however, the provincial NDP government replaced the single personal income tax rate of 10 percent with a five-bracket system including a top rate of 15 per cent, so today Alberta has the 10th-highest personal income tax rate in North America. The government also increased Alberta’s 10 per cent business income tax rate to 12 per cent (although in 2019 the Kenney government began reducing the rate to today’s 8 per cent).

If the Smith government reversed the 2015 personal income tax rate increases and instituted a flat 8 per cent tax rate, it would help restore Alberta’s position as one of the lowest tax jurisdictions in North America, all while saving Alberta taxpayers $1,573 (on average) annually.

And a truly integrated flat tax system would not only apply a uniform tax 8 per cent rate to all sources of income (including personal and business), it would eliminate tax credits, deductions and exemptions, which reduce the cost of investments in certain areas, increasing the relative cost of investment in others. As a result, resources may go to areas where they are not most productive, leading to a less efficient allocation of resources than if these tax incentives did not exist.

Put differently, tax incentives can artificially change the relative attractiveness of goods and services leading to sub-optimal allocation. A flat tax system would not only improve tax efficiency by reducing these tax-based economic distortions, it would also reduce administration costs (expenses incurred by governments due to tax collection and enforcement regulations) and compliance costs (expenses incurred by individuals and businesses to comply with tax regulations).

Finally, a flat tax system would also help avoid negative incentives that come with a progressive marginal tax system. Currently, Albertans are taxed at higher rates as their income increases, which can discourage additional work, savings and investment. A flat tax system would maintain “progressivity” as the proportion of taxes paid would still increase with income, but minimize the disincentive to work more and earn more (increasing savings and investment) because Albertans would face the same tax rate regardless of how their income increases. In sum, flat tax systems encourage stronger economic growth, higher tax revenues and a more robust economy.

To stimulate strong economic growth and leave more money in the pockets of Albertans, the Smith government should go beyond its current commitment to create a new tax bracket on income under $60,000 and institute a flat 8 per cent personal and business income tax rate.

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