A recent editorial in The Post and Courier suggested big business tax breaks could be harming local taxpayers. As president of South Carolina’s largest economic development organization, I’d like to further explain the issues so citizens understand that tax breaks, aka “incentives,” actually help our communities.
Along with some of the most beautiful coastlines in the country, South Carolina has the highest manufacturing property tax rate in the nation. What manufacturing company is going to choose the highest property tax rate when locating a new plant? None. Zero. Zilch.
To address the extraordinarily high manufacturing property tax situation, South Carolina counties use “fee-in-lieu” agreements that allow companies to pay a set fee for their manufacturing property taxes instead of paying according to the highest-in-the-nation manufacturing property tax rate. This allows South Carolina to compete with Georgia, Alabama and other states vying for new work. Without those fee-in-lieu agreements South Carolina would have a much harder time winning a Boeing, Volvo, or BMW. And all those fee-in-lieu agreements do is begin to level the playing field with other states by bringing manufacturing property taxes down to the range charged by our neighbors.
When it comes to reporting incentives and determining their value, a national organization that establishes accounting and financial reporting standards for local governments has instituted a new reporting system.
It’s clearly not a perfect system, but what’s apparent to us by reading the recent editorial in The Post and Courier is that some people may be trying to compare the current value of a fee-in-lieu (incentive) agreement to what South Carolina would collect via its manufacturing property tax rate. That comparison is not valid because it would never happen in real life.
No large manufacturing company is going to pay any South Carolina county the highest-in-the-nation manufacturing property tax rate. That company will just choose another state in which to locate. So as a community, we get 100 percent of nothing but for the economic development incentives which help level the playing field.
Our schools are vital to our future. And educators across this state have been partners in economic development. They help us recruit new industry, train our existing workforce and prepare the way for future employees.
But school districts are also required to report local government funding under the new reporting system. The school districts can also calculate their estimated funding using the manufacturing property tax rate. This would boost their estimated funding numbers, and when compared to actual funding, show big losses due to “tax breaks.” Yet we stand firm in our position that no manufacturing company is ever going to locate and willingly choose the highest-in-the-nation manufacturing property tax rate. That company will just locate in another state.
So a school district or county isn’t losing money by deploying a tax incentive; it’s just not pulling in as much revenue as would be received under the highest manufacturing property tax rate in the nation.
The bottom line is that new companies always generate new tax revenue for our communities. We might disagree over the rate charged, but there will be no tax collected without a company existing in our state.
To help educate our citizens and further this discussion, the South Carolina Economic Developers’ Association will launch a new effort in 2019 in which we will publish helpful information explaining more about incentives, the economic development recruitment process and the new reporting system.
As South Carolina’s leading professional organization dedicated to economic development, we have members who both live in our communities and understand these issues.