While South Carolina elected officials were busy this past session indebting South Carolina taxpayers an additional $120 million for the benefit of a single – one already located in-state – North Carolina’s elected officials were busy making actual tax cuts across the board.
A little background. South Carolina policymakers have long preferred a “targeted” approach to attracting investment: that is, they “target” preferred corporations for tax breaks. When the preferred corporations expand in or relocate to South Carolina – which they sometimes do – our politicians get credit for “recruiting” them. Meanwhile, all non-preferred businesses, many of them having been in the state for years, continue to pay the full five percent corporate income tax. South Carolina politicians claim they’re making the state “business-friendly,” and they are. “Business-friendly” for those they happen to like.
North Carolina also took steps toward reducing every taxpayer’s income tax burden. The Personal Income Tax rate was reduced to 5.75 percent for all North Carolinians, eliminating a three-tiered system of rates between 7.75 percent and 6 percent. South Carolina, of course, has a much more regressive income tax rate – seven percent on income $14,000 and above – but our policymakers showed no interest in doing anything about it.
North Carolina isn’t done yet. Its legislature also capped the state’s gas tax. While that happened, a handful of bills were introduced in South Carolina’s General Assembly to raise the gas tax on the grounds that we have the lowest gas tax in the nation – as if having a low tax is itself a reason to raise it. Not only that, but North Carolina’s Senate Finance Chairman actually wants to eliminate the income tax entirely in the 2015 legislative session.
So which state is looking more attractive to an outside investor? South Carolina, where a connection with the lawmaking class is the best way to get a lower tax rate, or North Carolina, where the tax is actually lower for everybody and likely to go lower? Granted, North Carolina distributes its fair share of special tax breaks, too, but it’s also making those breaks less necessary by pursuing broad-based tax cuts.
What about all the jobs our politicians “announce” from week to week in high-profile press conferences? Aren’t jobs being added? Here’s where the reality sets in. An “announced” or “recruited” job isn’t the same thing as a job, and these jobs announcements have been happening for years even as South Carolina consistently has one of the worst unemployment rates in the nation. Indeed, despite all the headline-making announcements of the past year – and there have been scores – the state Commerce Department just announced that in the month of July 3,962 dropped out of the workforce. Unemployment, meanwhile, rose to 8.1 percent.
That’s not an anomaly either. In 1999, South Carolina industries employed 1,561,727 people, whereas in 2010 that number had actually dropped by about 60,000 to 1,502,853.
If South Carolina is ever going to compete for jobs and capital with other states, our politicians will have to kick their addiction to special favors for favored companies and the news-making “jobs announcements” that go along with them.
Jamie Murguia is Research Director at the South Carolina Policy Council.