A bill racing through the South Carolina Legislature raises still more questions about precisely what our goal is with our state's expansive economic development efforts.
The answer used to be straightforward: We want plenty of good jobs for South Carolinians, so we can raise the standard of living for more people and make this a state our children and grandchildren will want to call home. Tax breaks, infrastructure and other tax-funded inducements seemed like a small price to pay when the result was more people with good and great jobs and fewer people who are unemployed and relying on the rest of us for food, medical care and housing or, worse, making a living as criminals. That’s why, for instance, it makes sense to offer more generous incentives to companies moving into areas with the highest unemployment and poverty rates.
Up until recently, the main problem with economic development was that state and local officials insisted on hiding the details of their giveaways from the public, often in defiance of state law.
But that was before natural and induced economic growth drove our unemployment rate so low that the primary complaint from existing businesses is that they can’t find enough employees. It was before the recruitment of Scout Motors and a bevy of other major new employers raised questions about whether companies would have to recruit employees to move to South Carolina to fill their new jobs — at a time when new arrivals put more cars on our overcrowded roads and create more pressure on insufficient housing supply and, particularly for fast-growing areas such as Charleston, threaten our sense of place, and the pleasure of experiencing it.
H.4087, which passed the House earlier this month and cleared a Senate committee last week, doubles down on these trends: It lowers the number of jobs some businesses have to create to get tax breaks. It allows some businesses to count Georgians and North Carolinians toward their S.C. job requirements. It expands the tax breaks for companies that employ practically no employees but use up our water and force utilities to build more power plants — which in turn increases power bills for the rest of us, since utilities make most of their profit not from selling electricity but from building those power plants.
We don’t mean to suggest that we should turn away out-of-state businesses that want to produce a few jobs but not a lot, or that want to include among their workforce remote workers who live just over the state line in Augusta or Charlotte. We’re simply asking why we should use our resources to entice them to move here — sometimes with direct payments, sometimes merely with lower taxes than established S.C. companies pay — when people who are already South Carolinians won’t clearly benefit.
During last week's Senate Finance Committee meeting, Sen. Sean Bennett raised the only critical question about H.4087, noting that every job a company gives to a North Carolina or Georgia resident to qualify for a tax break “is one a similarly qualified South Carolinians doesn’t have.” He's right, but that did nothing to slow the bill.
Recruited companies do pay county, school and sometimes city property taxes, despite the more-than-generous property tax breaks that counties too often and too secretly hand out. It’s not illegitimate for cash-strapped local governments to recruit companies just for that tax revenue. But when their goal is simply to run up the tax collections, they need to be honest about it rather than claiming it’s about jobs — so we can honestly assess whether the reduced tax payments are worth the downsides that come with low-job businesses. Here we’re thinking primarily but not exclusively of Google and other data centers that are sucking up our water and using up our electricity, all while paying cut-rate property taxes.
Another provision in H.4087 changes the special tax incentives for companies that locate their corporate headquarters in South Carolina. Legislators created these because headquarters carry cachet, headquarters jobs tend to pay well and corporate executives tend to be more involved in the communities where they live and work. But recruiters haven’t had much luck luring headquarters here, so rather than figuring out why businesses don’t want to locate their headquarters here — are our schools not good enough, our cities not vibrant enough, our transportation systems not convenient enough? — H.4087 lowers our standards for how many corporate jobs constitute a “corporate headquarters” worthy of a tax break.
Certainly the cachet of a headquarters location has value — as long as it's a real headquarters. But we’re not sure taxpayers should have to underwrite tax breaks in order to increase the chance that some corporate executives will donate to local museums or political campaigns or other charitable or noncharitable causes of their preference.
As with other expanded economic incentives, our concern isn’t about the state picking winners and losers; although there are legitimate questions about that, it's something our entire tax code does. Our concern is about whether the incentives benefit our state and not just the politicians who like to boast about economic development successes, including the poorly vetted ones we expect to see more of with this latest package of incentives.
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