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South Carolina ranks among the worst states in the nation when it comes to monitoring the effectiveness of its taxpayer-funded “economic development” incentives … one of many reasons for our state’s chronically-high unemployment rate.

In fact, the Palmetto State is one of twenty-six states “not meeting any of the criteria for scope or quality of evaluation” of these incentives, according to a new report released this week by the Pew Center for the States.

“Policy makers spend billions of dollars annually on tax incentives for economic development, but no state ensures that policy makers rely on good evidence about whether these investments deliver a strong return,” the Pew Center report concludes. “Often, states that have conducted rigorous evaluations of some incentives virtually ignore others or assess them infrequently. Other states regularly examine these investments, but not thoroughly enough.”

South Carolina? It conducts no examinations … rigorous or otherwise.

Obviously this is a frightening revelation when you consider the dramatic escalation of government’s attempts to pick winners and losers in the South Carolina economy … with your money. According to the S.C. Board of Economic Advisors (BEA) the state’s investment in “targeted tax credits” has soared from $34 million annually in 1998 to more than $1 billion a year in 2010.

“It’s a great day for incentives transparency (NOT)!”

That investment has continued to expand under S.C. Gov. Nikki Haley, who campaigned as a small business backer but has clearly chosen to govern as a crony capitalist instead.

Haley, incidentally, has been busted inflating South Carolina’s job creation numbers – as well as making other, more bizarre claims about our state’s workforce. All of which would seem to reinforce the need for more transparency and accountability, not less.

Will Haley’s administration heed the warnings contained in this report?

We don’t know … S.C. Commerce Department spokeswoman Amy Love did not respond to our request seeking comment.

And what about “Republican” leaders in the S.C. General Assembly? After all their record of picking winners and losers is downright abysmal, right?

This website has consistently argued that government should have no role whatsoever in economic development – aside from maintaining a competitive tax and regulatory climate that encourages job creation, capital investment, income growth and expanded consumerism (something our “Republican” leaders are NOT doing, incidentally).

More specifically, we have condemned these taxpayer-funded corporate giveaways and exposed how they are shifting South Carolina’s tax burden onto the backs of its small businesses.

(For our exclusive report on that shifting burden, click here).

Seven years ago, businesses (and rental property owners) in South Carolina were responsible for less than a third of the state’s property tax collections. According to the state’s chief economist, today they are now responsible for a whopping $3 billion (or 47 percent) of the state’s estimated $6.2 billion property tax burden.

Now we find that there is zero transparency, zero accountability and zero review of the giveaways that are fueling this shift?

Of the roughly 70,000 full-time employers currently doing business in South Carolina, 97.5 percent of them are small businesses. There are also more than 100,000 full-time self-employed South Carolinians. Obviously, most of these companies and individual income earners file individual returns, not corporate returns. And while none of them are getting big government incentive deals – like the $900 million package shelled out to lure Boeing in 2009 – they’re certainly paying for those handouts.

While Haley has rushed headlong into government-run economic development, true limited government advocates like S.C. Sen. Tom Davis have been pushing for expanded transparency and accountability regarding South Carolina’s increasing reliance on incentives. Davis has also been pushing for broad-based individual income tax relief as opposed to the pittance Haley is offering individual taxpayers, small business owners and sole proprietors.

Let’s hope he is successful on both fronts … because our state’s escalating reliance on command economic methods is clearly not paying dividends.

PEW CENTER REPORT ON STATE ECONOMIC DEVELOPMENT INCENTIVES

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