North Charleston plans tax cut for city's largest businesses, particularly for Boeing
A few of the largest companies in North Charleston, in particular the Boeing Co., would pay sharply lower business license fees under a plan City Council is poised to adopt.
At a glance
North Charleston's proposed business license fee changes would cut in half the tax owed on gross income above $250 million. The tax on lower amounts of income would not change.
Also, the tax on income above $7.5 billion would be reduced by 99 percent. That's an amount of income the Boeing Co. could achieve based upon aircraft production goals in North Charleston. Currently, no business in the city reports that much annual income.
The move to severely reduce the tax paid by just four companies comes weeks after North Charleston adopted a new budget that raised the city's property tax rate.
Under the proposed business license fee change, which City Council has tentatively approved, the tax on annual gross business income above $250 million would be cut in half.
The tax on gross income above $7.5 billion would drop by 99 percent.
City officials initially refused to name the four companies large enough to enjoy the tax reductions, or confirm that only Boeing would likely qualify for the larger tax break.
“We've never had anybody reach that ($7.5 billion) limit,” said Warren Newton, the city's director of administration and finance.
“I'm not at liberty to discuss anyone's gross income,” he said. “Of course, you can do the math yourself and see what the average plane retails for.”
The list price for Boeing's 787-8 Dreamliner, assembled in North Charleston, is $206.8 million. The company has said it plans to produce three of the passenger jets each month, which works out to just about $7.5 billion in potential annual sales.
City spokesman Ryan Johnson later identified the four companies that would receive a tax break, after The Post and Courier and the S.C. Press Association insisted the names were public information.
They are, in alphabetical order, Daimler Vans Manufacturing, Select Health of South Carolina, Boeing and Trident Regional Medical Center.
Boeing spokeswoman Candy Eslinger said the company had discussed the business license fee with the city. Both Eslinger and Newton described the rate cut as an incentive that will encourage large businesses to grow.
“This is an important issue for large businesses in North Charleston, and we have had discussions with the city regarding business license fees and the long-term impact to both the city and to Boeing,” Eslinger said. “Even with the graduated rate, Boeing will continue to be one of the highest payers of business license fees in North Charleston, paying upwards of $1 million at full production, in future years as the graduated rate takes effect.”
But if Boeing would eventually pay $1 million yearly under the new rates, that also means the rate cuts will save the company at least that much money.
The license fee reduction would join a long list of local and state incentives worth in excess of a billion dollars that were used to lure the aerospace giant to South Carolina and expand once here.
The business license fee is among the more complicated taxes. Businesses pay different rates based on the category of business they are in, and then pay different percentages of those rates on different amounts of their gross income.
For example, a manufacturer such as Boeing would, under current rules, pay a fee of $1.90 for each $1,000 in gross income — but would only pay 10 percent of that amount on income above $250 million. Companies pay between 60 and 100 percent of the tax on income under $250 million.
The proposed fee cut would allow companies to pay just 5 percent of the tax owed, on gross income above $250 million, and just one-tenth of 1 percent on income over $7.5 billion.
Newton said the changes would have cost the city treasury “less than $150,000” had they been in place during the past year.
The big impact will be seen as Boeing ramps up to full production.
For example, if a manufacturer had gross income above $250 million, under the new rates they would save $95,000 in business license fees on every $1 billion in revenue. On revenue above $7.5 billion, a company would pay a business license fee of just $1,900 per billion.
Eslinger said the fees Boeing will pay will more than cover the public services received.
“Boeing has its own fire department; we are a zero waste to landfill site; and our site is covered under the CCAA (Charleston County Airport Authority) police services,” she said.
A final vote of City Council is required for approval of the plan. The initial vote for the fee reductions, on June 27, was unanimous, but Finance Committee Chairman Bobby Jameson said he's not sure that he or other members of council understood the details.
“If we did that — raising taxes on the people and then lowering them for the four largest companies — well that's as wrong as a football bat,” he said.
Reach David Slade at 937-5552 or Twitter @DSladeNews.