Choosing a fight with Walt Disney could have been politically unwise on the part of Ron DeSantis, governor of Florida, but economically, he was right. The preferential treatment given to the $157 billion entertainment behemoth is unjust. The municipalities that govern the enterprises usually don't benefit much from providing incentives, even in comparable situations where they are more reasonable.
In exchange for special designation, Disney committed to assist in draining the Florida swamp and building an amusement park, which led to the company receiving special status in 1967. Disney was granted control over its own district as a result of the deal, which allowed it to, among other things, collect more taxes on others within that area to finance its own capital projects. The favorable treatment continued until 2022, when previous Disney CEO Bob Chapek stood out against a legislation in Florida that prohibited discussions of sexuality and gender in schools. With the help of Florida lawmakers, DeSantis took advantage of the remarks and took over the special board earlier this year.
Disney submitted a counterclaim last week to reclaim control. DeSantis continues to perform poorly in the polls as he competes with former US President and Republican presidential candidate Donald Trump for the nomination. It's possible that the Disney controversy is partly contributing to the problem. A recent New York Times/Siena survey found that more than half of Republican primary voters agreed that the government shouldn't decide what businesses can support.
However, it is worthy to query why the business merits receiving top-notch tax treatment. Other businesses didn't get these benefits, such as Comcast, which owns a theme park in Florida. While corporations usually obtain tax benefits and incentives to relocate to states, Disney's favoritism, as evidenced by the fact that their arrangement was perpetual, seems outrageous. For its construction in North Carolina, Apple received 846 million dollars in subsidies, lasting for 39 years, which is a long time, but it is not forever. In Virginia, Amazon recently received subsidies totaling up to 750 million dollars, but they were only granted for 15 years.
State and local governments spend approximately 95 billion dollars a year on development subsidies, yet even with sunsetting incentives, this investment may not be successful. According to research done in 1994 by economist Timothy Bartik, incentives often have a negative effect on revenue. They don't always result in a slam dunk, even if they work. Under its contract with Apple, North Carolina is anticipated to lose money. According to Florida's own evaluations in 2021, the entertainment sector only gets back 7 cents for every dollar it receives in tax breaks. DeSantis didn't select the right battle, but it's the right war.