Companies Receiving State Aid Free to Back Political Campaigns

October 23, 2014

Investigative Reports

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NEW QUESTIONS ARISE OVER
ETHICS OF ‘INCENTIVES’

South Carolina Gov. Nikki Haley’s (R) challengers are outraged she accepted contributions from companies receiving lucrative state economic development incentives in the form of tax breaks and cash grants.

Independent petition candidate Tom Ervin recently claimed Haley took more than $130,000 in contributions from companies that were awarded state grants and tax credits. Ervin accused Haley of “using a ‘pay-to-play’ strategy to pump contributions into her re-election campaign.”

Ervin and Democratic candidate Vincent Sheheen expressed further disdain last week when Haley’s campaign released a television advertisement featuring an executive from a company awarded job development credits in January. The New Jersey-based corporation, Kent International, also gave $2,500 to Haley’s reelection campaign in May, according to The State newspaper.

“Our company builds bicycles,” chief executive Arnold Kamler says in the ad. “We’ve been in China since 1987. We worked directly with Governor Haley and we found South Carolina was the best place for us. We’re hiring 200 people in the state.”

To Sheheen, this is an obvious example of “pay-to-play” politics. However, both the ad and the political contributions are completely legal in the Palmetto State and – it turns out – everywhere else.

South Carolina is one of fifteen states that have enacted “pay-to-play” laws, which prohibit contractors from contributing money to politicians who play a role in influencing state contracting decisions. But zero states currently ban donations from companies receiving tax incentives, according to Greg LeRoy, who leads Good Jobs First, a watchdog group that tracks state subsidies.

“There seems to be a double-standard when it comes to economic development,” LeRoy said in an interview Tuesday. “It’s so much less regulated than procurement. Lots of states have rules regarding campaign contributions and other behaviors of contractors. Why don’t we apply the same rule to companies getting these tax breaks?”

In New Jersey, where Gov. Chris Christie’s (R) administration has awarded more than $4 billion in corporate tax breaks since 2010, the legislature is considering a bill to prohibit political contributions from companies currently receiving more than $25,000 in subsidies from a state agency or authority. The legislation is the “first of its kind in the country,” according to LeRoy, who said “it’s about time.”

The bill comes after multiple reports examining links between donations to Christie’s pet causes and tax incentive awards. For example, a review by The Guardian of the 30 largest subsidy deals given out by the Christie administration in the last two years found that roughly half of the corporations had made contributions to the Republican Governors Association, which Christie chairs, worth a total of $1.8 million.

On Monday, Sheheen called for a similar legislation to ban donations from businesses receiving economic development incentives and grants, in response to Haley’s ad.

“There is no level of pay to play that’s worse than that,” Sheheen said, according to The State. “You can’t sink any lower.”

Andrew Perez writes about politics and policy, and previously wrote for the Huffington Post. He currently lives in Washington, D.C. The present article is the fourth in a series of guest columns from a variety of organizations and points of view.