Economic Development

Funneling Economic Development Dollars to Nonprofits

H 3191: This bill would expand the power of the Jobs-Economic Development Authority (JEDA), allowing it to fund, not just businesses, but nonprofits; and not just programs aimed at creating jobs, but activities that “provide other significant public benefits.” The proposal would also allow JEDA to issue bonds, “without limitation,” to finance the acquisition of tangible or intangible assets – that is, virtually anything. Essentially, the legislation would allow JEDA funds for supporting nonprofits that don’t create jobs but provide vaguely defined “public benefits.” In short, the bill would make an unaccountable agency even more unaccountable.

Subsidizing High-Risk Startups

H 3779: This bill is intended to encourage “angel investing” – early investing in unproven and risky start-ups. The Nerve reported on this troubling idea in July. The bill would give angel investors a 35 percent income tax credit (capped at $100,000 per investment). The total cost to taxpayers would be $5 million per year (the cumulative, annual cap on all credits). In effect, this bill forces taxpayers to subsidize risky investments – investments the free market might not otherwise tolerate … such as hydrogen-powered cars. The bill contains no protections for taxpayers should these investments fail. Ordinary taxpayers won’t reap any of the profits either.

Creating New Economic Development Agencies

S 211: This legislation establishes a state agency to “carry out economic development and educational improvement activities” aimed at improving the economy of any county within 30 miles of I-95. These activities are to be pursued in light of recommendations from the December 2009, I-95 Corridor Human Needs Assessment. The authority would receive state funding, though the legislation does not specify how much. The authority would also be controlled by a 19-member board, with the majority of board members appointed by the Legislature.

Creating Redundant Economic Development Authorities

H 3633: This bill would create a semiautonomous government agency under the Agriculture Department known as the Agribusiness Economic Development Authority. Its function would be to offer taxpayer funded incentives to new agriculture-related businesses in South Carolina. The authority would be permitted (among other things) to enter into contracts with federal or state agencies or private companies; extend, sell, or purchase agricultural loans; and borrow money and issue bonds. How this new authority would be distinct from the Rural Infrastructure Authority, an agency created last year but not yet funded, remains unclear.

Picking Winners & Losers Instead of Cutting Taxes

H 3720: This bill would give a 10-year corporate income tax break to any company seeking to move or expand its national corporate headquarters in South Carolina. As reported by The Nerve, the bill seems to have been written on behalf of two Greenville companies. A similar credit – which cost $9 million in FY2009 alone – is already offered by the state.

Making Incentives More Transparent

H.4432:  This bill wouldn’t kill the “incentives racket” whereby well-positioned companies lobby for, and get, millions in taxpayer-supported favors that don’t apply to their competitors. What it would do is bring sunlight to a notoriously murky practice – an idea SCPC has taken the lead in promoting. Titled “Economic Incentive Transparency Act,” the bill would apply to all “incentives” and defines that term all-inclusively (“any tax credit, subsidy, tax exemption, loan, workforce training, or other service, grant, or property, as well as anything else that has a fair market value to a single recipient,” etc.).

In order to be eligible for an incentive, a beneficiary would have to submit a publicly available and detailed application, which would be subject to an open hearing, as well as submit annual reports to the Department of Revenue. The law would require any incentive to be introduced as a separate bill, subject to a public hearing, sunset after 5 years, and given as a forgivable loan (forgivable under the condition that the amount of jobs promised are actually created). Beneficiaries who fail to deliver their job creation promises are barred from further incentives. The bill also requires the BEA and an independent economist to prepare a comprehensive cost-benefit analysis of any incentive, and requires the Department of Revenue to publish an annual report outlining all economic development spending.

Subsidizing Hollywood Producers

S 49: This bill would have increased payroll tax breaks from 15 percent to 20 percent and doubled rebates (from 15 percent to 30 percent of expenses) on in-state purchases made by film production companies. In lieu of the bill, however, the General Assembly again passed a budget proviso (39.13) increasing film incentives by the same amounts. The Senate had stripped the proviso out of its budget, but it was added back once the budget went to conference committee. The Policy Council has written about how ineffective film incentives are at creating jobs. In fact, they typically do the opposite – for each tax dollar given in rebates, the government loses $0.81 in revenue.

Doubling Down on Economic Incentives

S. 1013:  This bill proposes that economic development funds used by the Department of Commerce to bring new business into the state be made equally available to existing South Carolina businesses. When the Department of Commerce determines that a new business prospect is worthy of incentives, then the money spent on those incentives must also be offered to South Carolina companies capable of expanding into that market. The bill may be well intended, but a likely consequence would be that over time state officials, in order to comply, would simply increase the already massive amount spent on special incentives. As we’ve pointed out before, the amount spent by South Carolina on incentives has exploded over the last fifteen years, to no discernible effect on economic growth or competitiveness.