South Carolina’s recent success in attracting new industry and jobs to the state is worth celebrating. State officials say it is due to a business-friendly (right to work) atmosphere, technical education programs and a world-class port.
But there is another part to that picture — tax incentives. And in that area, the state has a lot of work to do to improve accountability.
The Pew Center recently released a study that examines how well — or poorly — each state assesses tax incentives and its return on investment. South Carolina was among the worst. It met none of the criteria the Pew Center established as appropriate for evaluating tax incentives for economic development.
So while citizens can be very pleased and proud that Continental Tire is building a $500 million plant in Sumter County with up to 1,600 employees, it is unclear when or if the state’s pricey incentive package will pay off.
The state offered Continental, Michelin and Bridgestone, all of which decided to make substantial investments in South Carolina last year, a total of $55 million in incentives, mostly for site preparation. That doesn’t include job-creation tax credits that the companies can apply for later.
An analysis by The Post and Courier concluded that more than $900 million in incentives went to bring Boeing to North Charleston.
S.C. Secretary of Commerce Bobby Hitt was quoted in The State newspaper as saying, “Investment is important, but I’m more interested in the jobs than investment.” No doubt, jobs are tremendously important.
And so is ensuring that public dollars for economic incentives are put to the best possible use.
Susan Urahn, managing director of the charitable Pew Center on the States, says states spend billions of dollars annually on tax incentives for economic development. Half of the states, she said, have not taken basic steps to produce and connect policy makers with good evidence of whether these tools deliver a strong return on taxpayer dollars.
In South Carolina, keeping some information secret is prescribed by law. Businesses receiving job development credits, for example, do not have to disclose payroll and investment details.
And state grants awarded for infrastructure improvements needed by new or expanded businesses are reported only by the county or municipality that receives the funds, not revealing how they were spent or what industry they served.
Citizens can access initial performance agreements that companies sign with the state — but only if they file a Freedom of Information Act request.
Amy Love, spokesman for the S.C. Department of Commerce, said the hazard of posting such information online is that the information could be used by companies to leverage more money from the state in the future.
She also said that companies don’t get some incentives until their job and investment targets have been met. And companies cannot continue to receive some tax credits if they fail to live up to their end of the bargain.
Attracting business and industry to South Carolina — or encouraging existing businesses to expand — requires lots of effort, and most often, it requires financial incentives that the companies find more attractive than those other states are offering.
This administration is making much of its job creation efforts, and from all appearances that focus is paying off — with the assistance of incentives.
Those incentives are paid for by taxpayers who deserve an honest and thorough accounting to determine if they are cost-effective. More followup is needed from state officials who are engaged in the business of luring industry to South Carolina.