On “Incentives”

… INTERESTING PERSPECTIVES || By FITSNEWS || Taxpayer-subsidized incentives are back in the news this week after South Carolina outbid several other states to land a manufacturing facility run by carmaker Volvo. So far, at least $204 million has been pledged by state and local governments … although we expect…


|| By FITSNEWS || Taxpayer-subsidized incentives are back in the news this week after South Carolina outbid several other states to land a manufacturing facility run by carmaker Volvo.

So far, at least $204 million has been pledged by state and local governments … although we expect that total to climb.

Our view on incentives?  As noted previously, we oppose them categorically.  Taxpayers should never be called upon to subsidize one company at the expense of another … especially when the owner of the company in question has more than enough money to build his own facilities.

Anyway, our friend Andy Brack over at Statehouse Report – another fine source of Palmetto political opinion – has a different view.

“We wouldn’t have landed BMW, Boeing or Volvo without incentives,” Brack wrote in his latest column.  “That’s just the reality of economic development.”

Of course one part of his column caught our eye …

On the other hand, use of incentives is particularly interesting because it’s being pushed by the ruling Republican Party, which often goes overboard in its zeal to denounce “activist” government.  If anything is “activist” and should raise the blood pressure of those who drink conservative tea, it’s using the power of big government to build incentive packages.

Wouldn’t it be fairer, economist Frank Hefner of the College of Charleston has argued, to completely rewrite tax policy to level the playing field and make it so that you don’t need tax incentives to lure big businesses here?

“The only reason you need to offer incentives is because you’ve created disincentives,” Hefner said.  “I’d prefer a simplification of the tax code for everyone.  If property taxes are too high for Boeing, then they’re too high for a lot of other businesses.”

Exactly …

And therein lies the fundamental unfairness of the system … to say nothing of the need for broad-based tax relief aimed at expanding employment and consumerism.

Incentives have created some pockets of success in South Carolina, to be sure, but on the whole they have failed to create jobs or raise income levels.

But even if they had succeeded – and even if our state were more transparent about them – their provision would still not be a core function of government.

Roads and bridges?  Yes.  Cops, courts and prisons?  Absolutely.

“Economic development?”

Hell no …


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CNSYD May 15, 2015 at 2:10 pm

Still waiting on Folks to tell us which company or companies we shunned when we gave incentives to Boeing. Same question concerning BMW and Volvo. Who was their competition?

Zed May 15, 2015 at 2:32 pm

The very act of giving the incentives to certain industries and not to others means picking winners and losers in the marketplace. It is similar to social engineering … call it economic engineering, maybe, or “workforce” engineering. It certainly is not the “free market” in action.

But then again, more and more, I believe that a truly “free market” does not exist. It may well be a pipe dream.

TroubleBaby May 15, 2015 at 2:46 pm

…good points…there’s also the “seen & unseen” as Bastiat puts it.

We don’t know what companies may not have originated, moved, etc. as a result of a 7% income tax that they themselves can’t avoid(for being “small” for example)- but the fact remains that the lion share of employment in the US is not Fortune 500’s, it’s small/medium sized business.

So it doesn’t take much to consider what high taxes that are selectively applied to small/medium sized business in SC does to the employment picture or overall health of SC’s economy(at least compared to what it might be without higher taxes for smaller companies).

FastEddy23 May 15, 2015 at 7:20 pm

Airbus? Cessna? Bombardier? … Fiat? Volkswagen? Chrysler? Ford? … GM (but not in a right-to-work state LOL)? … Mack Truck (or whoever owns them this week)?

CNSYD May 15, 2015 at 8:52 pm

Were those companies actively seeking to build new plants? Who are the “owners” of Airbus?

FastEddy23 May 16, 2015 at 4:10 am

Airbus is mostly owned by g’ment union pension funds. France has the fattest g’ment employee pensions in all of Europe, maybe the whole world.

The French g’ment, many, many years ago, loaned Airbus a huge “investment”. All of it French taxpayers money. That “investment” has never been paid back to their taxpayers. The French g’ment just keeps on rolling over the bonds … which currently do not pay any interest to bond holders Or taxpayers. … Now, that’s incentives! Free money!

Rocky May 15, 2015 at 2:26 pm

I used to do some work for a consulting group that helped get incentives for companies in another state. The way those worked generally was a company asked for an incentive package that included an upfront amount from the city. The city then used a bond to cover the upfront cost, and paid the bond off of property taxes. So the company got no tax break. But all was detailed, vetted by the city accountants and bond issuers, and were made available to the public. And to pass the incentives required a vote by the City Council that included multiple public hearings. So there was a great deal of transparency. This deal with Volvo doesn’t in many ways pass that test. It includes the state and a utility purchasing the site itself, and investing heavily in infrastructure. Exactly where the cash-strapped DOT gets the money for the interchange on I-26 is also unclear. And the $30 million from the “closing” fund, is less than transparent as well, nor there’s any mention of a claw-back option for the State should the 4,000 employees not show up. I’m not saying, as Wil does, that they don’t exist, but the process seems less than transparent.

FastEddy23 May 15, 2015 at 7:14 pm

Yep. If Gruberment insists on standing there while the taxpayers are all bent over the beer barrel, patiently waiting … Well, some Sharpy will come along and take advantage.

(Rocky: It would be great if you would come clean more regularly.)

RuthJMaki May 16, 2015 at 4:21 am

?$77 /hr on the computer@md17//



Jonny Logic May 15, 2015 at 2:46 pm

The BEST incentive a state or city should offer is that area itself. There’s a reason we have to bribe companies to come to SC; that reason being ITS F’ing SC. The smart money would be put into infrastructure, raising wages, schools, recreation, arts, etc. Make it place that employees beg to have companies move to. That’s how Minnesota keeps so many Fortune 500 companies in the state. If we had their resources with our weather, SC would be a hot bed for jobs.

CNSYD May 15, 2015 at 3:14 pm

“South Carolina fell five places but still landed in the top 10 of Chief Executive magazine’s 2015 “Best and Worst States for Business” survey.

In the publication’s annual survey, completed by 511 CEOs across the United States, states are measured across three categories to achieve their overall ranking: Taxes and regulations; quality of the workforce; and living environment, which includes such considerations as quality of education, cost of living, affordable housing, social amenities and crime rates.”

So these CEOs lied? Or are you just in lock step with Folks?

Jonny Logic May 15, 2015 at 3:27 pm

Nah, Folks would never want higher wages or gov’t investments in arts or schools. I would be curious to know how much these CEO’s consider SC when looking for relocation and/or like the ‘incentives’. I just don’t see a ton of businesses relocating here.

FastEddy23 May 15, 2015 at 7:46 pm

Just wondering: does any g’ment school have a shop class?

My sister-in-law is teaching her fourth graders to do high school geometry and algebra, communicate with each other in business English and how to make a Vermeer with mirrors … All 600 of them.

TroubleBaby May 15, 2015 at 3:42 pm

I’m really not going to argue it either way(for now), but I’ll only say these survey’s are always to be taken with a grain of salt.

There’s lots of questions to ask on such a survey, like what industry was each CEO in, where does he live, what is his knowledge base, etc.

So in that spirit, here’s another one:

It’s slightly different, but starting a business is a good indicator of the health of economies as well…SC isn’t the worst, but it isn’t the best by that study.

It’s always good to try to assess from as many sources as possible using multiple criteria.

Victorious Secret May 16, 2015 at 10:52 am

“[S]urveys are always to be taken with a grain of salt.”


FastEddy23 May 15, 2015 at 7:33 pm

No, those CEOs did not lie. … except for the education part.

FastEddy23 May 15, 2015 at 7:31 pm

You are not completely foolish here. If your g’ment were not so inbred and corrupt, the smart manufacturering money would flock here.

(I’m still considering it for me and … he, he, he …)

snickering May 15, 2015 at 3:11 pm

Governor Haley and her sidekick Bobby Hitt don’t care how much of your tax dollars they spend unless it’s a give away to “BIG CORPORATION”.

Bible Thumper May 15, 2015 at 6:20 pm

That’s true, because no one who disagrees with snickering could possibly have noble motives for anything they do. Anyone who disagrees with snickering is pure evil.

snickering May 16, 2015 at 6:53 am

Oh Thumper, I’m Blushing.

snickering May 23, 2015 at 1:32 pm

Thanks Thumper, One of my best hobbies/missions is to point out just how ignorant/stupid, or lie the Republican’s do so well. And the pleasure I get for the sheer ignorance of the Tea Baggers make my day. But Please Thumper I’m Blushing.

Bible Thumper May 23, 2015 at 2:31 pm

“One of my best hobbies/missions is to point out just how ignorant/stupid, or lie the Republican’s do so well.”

As your initial post points out, this is not necessary. Just make the accusation. Don’t say how or why they are ignorant/stupid, just call them that. Don’t back up the accusations of lying. Just call them corrupt liars.

I created a chart so you won’t get confused.

________ Haley Hitt Action Motivation chart ________
______________ Approve ___________ Motive
snickering______ Yes ____________ corrupt/liars
snickering_______ No ____________ corrupt/liars
Voters __________ Yes ____________ corrupt/liars
Voters __________. No ____________ corrupt/liars

Manray9 May 15, 2015 at 6:37 pm

Why won’t companies relocate to the free market Nirvana of South Carolina without being bribed?

FastEddy23 May 15, 2015 at 7:10 pm

Slippery legal beagles and finger licking taxsuckers a plenty?

FastEddy23 May 15, 2015 at 7:01 pm

“… Rewrite the tax codes so [SC government] does not have to offer incentives to lure businesses here …” – Prof. Hefner.

Good man. Why doesn’t Frank Hefner have an advisory position in SC state government?

BTW: that’s pretty much what happened in Texas … The Texas legislature and governor flattened out most of the business taxes and loop holes in Texas tax codes and stopped giving away the farm to cronies. (Back then, They had had enough and had nearly bankrupt the state treasure with “special incentives”.)

Now with an almost flat state tax playing field for businesses, every one wants to move their businesses there. Latest move: Chevron … from Richmond/San Francisco to Houston!

My Rant May 15, 2015 at 7:25 pm

Income levels for skilled wage earners in South Carolina are soooooo low, there is an undisputable very serious shortage of craftsman in the state. Instead, shady contractors are recruiting illegal aliens that are doing very serious and risky inferior work on public projects that can make buildings less safe than their structural design calls for. When a contractor comes in from out of state, can’t even place structural load bearing concrete footings correctly where they should be, and contracting inspectors and government entities look the other way, that is dangerous. It puts the lives of those who will occupy these buildings at risk – particularly on new school construction projects. Why is the law not being enforced? Are those over at the Dept of Labor, Licensing and Regulation asleep at the switch? Are code inspectors and construction management firms being paid off to ignore serious problems because they are not doing what they are paid to do in the first place? Nevertheless, so many citizens of South Carolina are having to work 2 and 3 jobs just to keep a roof over their heads and food on the table.

CNSYD May 15, 2015 at 8:49 pm

Thank the GOP and the “free market” crowd. It started with Campbell who destroyed LLR. Now the “free market” crowd (Folks is a prime example) doesn’t want regulation, e.g. rules and inspection. Just let the “market” decide. You know, who builds structures that don’t collapse on their inhabitants. Of course you don’t know who that is until afterwards.

Twirls May 16, 2015 at 10:14 pm

The free market works. Big government doesn’t. Witness Charleston Naval Ship Yard failure. Hope your retirement is good.

TroubleBaby May 17, 2015 at 3:27 pm

One has to wonder how any buildings were built before codes & regulations.


nitrat May 15, 2015 at 7:47 pm

Why doesn’t FITS or the SC Policy Council investigate the breaks Georgia-Pacific, aka Koch Industries, has gotten over the year?

FastEddy23 May 15, 2015 at 7:54 pm

One thing Georgia Pacific has going for it. They plant five trees for every one they cut down.

erneba May 16, 2015 at 11:58 am

Without incentives, SC would get nothing, as long as you have states in the region ready, willing, and able to supply incentives, SC is out of the race.
It is a matter of mathematics, hold long would it take SC and the local communities to realize a payback on 500 acres of barren land in Berkeley county. If the upfront package is 204 million and it takes less than ten years to see a pay back in taxes and fees for the corporation, then it may not be a bad deal.
Remember, some of this 204 million, if not all of it, is not in form of an direct payment from the treasury to the corporation. It is reduced taxes and other fee reductions to the corporations for a number of years.
The potential for the area is great, look at Boeing and BMW and what those companies have done for the local areas and the state, I would venture to say that any incentives extended have long since been paid off, and the state and local residents consider those companies locating here to be a net plus.
If we don’t extend some kind of incentives package, we will certainly get nothing, over the short and long term.
Hell, take a chance, Columbus did, and he discovered America. Look at this as being another Boeing or BMW, not Mack Truck.

Bob May 18, 2015 at 11:12 am

Columbus discovered America Strange the 200 million people who were there when he arrived, never knew it was lost.

erneba May 18, 2015 at 12:13 pm

Columbus was actually on a covert mission to do some shopping for Queen Isabella at Miami Beach. King Ferdinand was pissed.

Bob May 18, 2015 at 11:15 am

If Corporations are people too, incentives are welfare.

FastEddy23 May 18, 2015 at 11:32 pm

Or bonuses … Or gifts … Or commissions …

But, taking your logic a bit further, incentives should not be taxed, just like welfare.

FastEddy23 May 18, 2015 at 11:17 pm

Speaking of incentives, the Boeing Company is taking orders for the new 737/Max due to begin production in 2017.

So far Boeing has orders for more than 2500 … !!!

It is still “up in the air” as to which Boeing plants will get most of this business. 2500 airplanes times $100 Million per airplane is an interesting incentive, right?

Southwest and RyanAir will be the first recipients.

According to RyanAir CEO, this bird “will be a game changer” … 5% better fuel economy, lower pollution, bigger seats, more legroom, quieter…

Sources:Wikipedia and Forbes Magazine.


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