A new study argues South Carolina’s tax incentives meant to encourage out-of-state businesses could be causing a significant shortfall on school funding.
The advocacy group Good Jobs First said the state is missing out on $318 million each year from the breaks it offers to new corporate economic investments in South Carolina. That is the second-highest total in the country, according to the report.
“When economic development subsidies are given in order to attract jobs, they end up depleting school finances,” group spokesman Scott Klinger said. “Which we think undermines the long-term economic competitiveness of states which rely heavily on this.”
Klinger argues the lost tax revenue could have paid for 6,300 teachers at a $50,000 minimum salary or More than 3,800 new school buses. He argued the lost property tax revenue falls particularly hard on school boards, who are powerless against the state or county governments which often approve the incentives.
The data comes from a relatively-new accounting rule which requires governments report total tax incentives they offer to businesses.
However, state commerce officials argue South Carolina needs the incentives to be competitive since its property taxes are comparatively high. They gamble the new jobs created will bring in new tax money to help offset the breaks. It’s also unlikely SC would ever charge its full 10.5 percent manufacturing property tax to new companies it attracted, since the rate is one of the highest in the region. The state passed an exemption last year which would allow any manufacturer to effectively reduce that rate to 9 percent.
South Carolina trailed only New York for total incentives offered to businesses which opened inside state borders. Those incentives are almost always predicated on the benefactor company reaching specific job targets or investment levels. Those breaks are then complicated by a 2006 state law which prohibits county governments from using homeowners’ property taxes to pay for education.
Klinger said the actual financial impact was likely higher, since fewer than half of all school districts nationwide reported their estimated losses from tax incentives, in violation of the new standards. The group said the high rate of non-reporting means the report cannot be viewed as a comparison of all 50 states.