Small steps

Friday’s editorial examines the provisions of a new economic development bill signed into law this week by the governor.

Lost in the high drama of a historic election and a budget crisis, Gov. Mark Sanford signed a complex package of economic-development incentives this week designed to give state and local governments more flexibility in luring jobs to South Carolina.

So little attention has been paid to the bill thus far that it’s tough as yet to gauge the potential impact of its provisions. The bill’s backers have repeatedly cautioned that it is not “a silver bullet” against South Carolina’s stubbornly high unemployment rates, but rather, as Sanford spokesman Ben Fox said Thursday, “a gathering of small but positive steps.”

Among the many changes the bill makes:

·  The property tax on manufacturing warehouses, currently at 10.5 percent, can now be lowered to 7 percent during recruitment negotiations.

·  The “Investment Tax Credit” that gives new manufacturers a corporate income tax break on new equipment they purchase will be expanded statewide. Previously, it was only available in certain areas of the state - around Horry, Charleston, Aiken and Barnwell counties - that had been affected by military base closings in the mid-1990s.

·  The Department of Commerce is being given direct control of $7.5 million of the $30 million Endowed Chair program, which partners with private industries to create new professorships in specialized fields at the state’s three major research universities. Commerce’s portion becomes a recruiting tool, officials said.

   For example, had it been available during the Boeing negotiations, Commerce might have offered to create an endowed chair at Clemson for aerospace engineering. Clare Morris, spokeswoman for the Centers of Economic Excellence program, hailed the move as an “interesting concept” and said the program had been increasingly involved in economic development efforts anyway.

·  Investments in the alternative energy industry will be encouraged through a tax credit to renewable-energy manufacturers (wind, solar and so forth) that relocate to South Carolina. These companies will receive a tax credit for five years on 10 percent of their construction and equipment costs, if their project is large enough.

·  The state’s current tax-incentive structure for new business in certain counties was smoothed out, removing any non-economic criteria from the process for calculating benefits.

·  Notably absent from the final version of the bill is the original draft’s elimination of the state’s 5-percent corporate income tax in hopes of attracting new businesses. Though not a significant source of income for the state - about $130 million per year - lawmakers were probably wise to postpone that move until the broader findings of the state tax realignment commission are complete.

The bill, the pet project of House Speaker Bobby Harrell this session, was written in part with the help of industry leaders such as S.C. Manufacturers Alliance president Lewis Gossett, S.C. Chamber of Commerce President Otis Rawl, S.C. Realtors Association CEO Nick Kremydas and S.C. Economic Developers Association April Allen.

On the other hand, the bill has been criticized by the S.C. Policy Council, a Columbia-based think tank (usually in agreement with Gov. Sanford) that promotes smaller government. “New and unproven industries are getting the nod over established, independent businesses left to pick up the tab,” the council wrote in an analysis of the bill. Further, the council argues that the bill’s provisions are designed with specific employers in mind.

If anything, the bill may illustrate just how fine a line there is between increasing “economic competitiveness” and giving away tax breaks. Yet, this particular bill appears to reduce the state revenue by very little in its current form (many of the tax credits are optional, to be offered when projects are proposed) and with such a dire need for new jobs, the bill is probably worth a try.

Among the many changes the bill makes:

·  The property tax on manufacturing warehouses, currently at 10.5 percent, can now be lowered to 7 percent during recruitment negotiations.

·  The “Investment Tax Credit” that gives new manufacturers a corporate income tax break on new equipment they purchase will be expanded statewide. Previously, it was only available in certain areas of the state - around Horry, Charleston, Aiken and Barnwell counties - that had been affected by military base closings in the mid-1990s.

·  The Department of Commerce is being given direct control of $7.5 million of the $30 million Endowed Chair program, which partners with private industries to create new professorships in specialized fields at the state’s three major research universities. Commerce’s portion becomes a recruiting tool, officials said.

   For example, had it been available during the Boeing negotiations, Commerce might have offered to create an endowed chair at Clemson for aerospace engineering. Clare Morris, spokeswoman for the Centers of Economic Excellence program, hailed the move as an “interesting concept” and said the program had been increasingly involved in economic development efforts anyway.

·  Investments in the alternative energy industry will be encouraged through a tax credit to renewable-energy manufacturers (wind, solar and so forth) that relocate to South Carolina. These companies will receive a tax credit for five years on 10 percent of their construction and equipment costs, if their project is large enough.

·  The state’s current tax-incentive structure for new business in certain counties was smoothed out, removing any non-economic criteria from the process for calculating benefits.

·  Notably absent from the final version of the bill is the original draft’s elimination of the state’s 5-percent corporate income tax in hopes of attracting new businesses. Though not a significant source of income for the state - about $130 million per year - lawmakers were probably wise to postpone that move until the broader findings of the state tax realignment commission are complete.

The bill, the pet project of House Speaker Bobby Harrell this session, was written in part with the help of industry leaders such as S.C. Manufacturers Alliance president Lewis Gossett, S.C. Chamber of Commerce President Otis Rawl, S.C. Realtors Association CEO Nick Kremydas and S.C. Economic Developers Association April Allen.

On the other hand, the bill has been criticized by the S.C. Policy Council, a Columbia-based think tank (usually in agreement with Gov. Sanford) that promotes smaller government. “New and unproven industries are getting the nod over established, independent businesses left to pick up the tab,” the council wrote in an analysis of the bill. Further, the council argues that the bill’s provisions are designed with specific employers in mind.

If anything, the bill may illustrate just how fine a line there is between increasing “economic competitiveness” and giving away tax breaks. Yet, this particular bill appears to reduce the state revenue by very little in its current form (many of the tax credits are optional, to be offered when projects are proposed) and with such a dire need for new jobs, the bill is probably worth a try.