Time For South Carolina To Shine a Light on Taxpayer Giveaways

November 10, 2020

South Carolina State House. Image by Jeff Turner, via Flickr
South Carolina State House. Image by Jeff Turner, via Flickr.

South Carolina is a state that has given large subsidies to big companies – Boeing, Michelin, Volvo, Continental Tire, Google to name a few – and it has also been one of the worst in the country when it comes to revealing the full costs of those deals.

The public is very much in the dark about basic information like: Who is getting subsidies? How much? Are companies creating jobs and investing as promised? What are the terms of the agreements between companies and the state?

Only because of investigative reporting we do know that the state has most likely provided billions in public assistance to megadeal projects, which Good Jobs First defines as incentives totaling at least $50 million. At last, taxpayers and transparency advocates got a win in October, after a South Carolina court ruled that the state’s Department of Commerce unlawfully kept information about subsidy deals away from public view.

In response and not surprisingly, a former high-ranking economic development official published an opinion in The Post and Courier arguing that South Carolina Department of Commerce should keep subsidy information hidden from taxpayers. The opinion contains common misunderstandings about the transparency of business subsidies.

Good Jobs First has been researching state and local subsidy transparency for more than 20 years. Over those years, we have seen no evidence that greater disclosure negatively impacts a state’s business climate or its economic development, as the writer claims. We cannot point to an example where a company rejected a location because of transparency around the deal. In fact, the opposite is true: better disclosure practices lead to greater accountability.

In New Jersey, for example, a state subsidy audit led to creation of a state task force which uncovered misuse and corruption of the state’s incentive programs. Those programs were terminated, and the state now works to design more accountable and effective programs.

Transparency is also a common practice, so South Carolina is hardly setting a precedent. States like North Carolina, Tennessee, Florida, Kentucky, Mississippi, Louisiana put online data on which companies are getting subsidies, the amount, how many jobs are created and the wages those positions pay. If you want more examples, just look at Subsidy Tracker, our database of economic development incentive awards. Almost every state discloses subsidies – including grants, tax credits and rebates, workforce development grants, property tax abatements, tax increment financing, etc. – to varying degrees. South Carolina is lagging.

No one is asking for company tax returns or employees’ personal information, as the writer inaccurately alleges, just a list of companies that benefit from subsidies and how much they receive in public assistance.

Besides disclosing which companies are getting subsidies, how much and what the outcomes of the deals are, there is also no harm in disclosing subsidy applications, contracts or Memorandum of Understandings between a state and companies. Some states have shared those documents with us, like Mississippi; others put them online, like Florida, Virginia (Amazon’s HQ2) or Austin, TX ( Tesla). These documents do not include secret information on company operations but instead stipulate both parties’ commitments — the number of jobs to be created, company investment, wage levels, and state public assistance.

The public deserves to know this information because there are costs to every economic development deal. When a project is built, more people move in, their kids need to be educated, water must by supplied, garbage taken out, roads built to contain new traffic. In other words, to accommodate new growth, states and localities need new revenue to provide the accompanying increase in public services. When taxes are abated for economic development deals, less revenue is available to pay for public services. And when there is no new revenue, two things might happen: services are cut and/or taxes on everyone else are raised.

South Carolina residents cannot fully educate themselves about incentives without having access to basic data. They must know a deal’s costs and be able to track benefits. Our research documented South Carolina schools losing $423 million in FY19 to corporate tax abatements. People should know where that revenue went instead or, as supporters of incentives claim, the specifics of how residents benefitted from the incentives.

Our research shows that while politicians routinely praise small businesses for their contributions to job creation, they give big corporations the majority of incentives: 80 to 96 percent of incentive awards go to large, multinational corporations such as Boeing, Volvo, or Google. Small businesses too deserve to know how much larger companies are getting.

South Carolina is one of the worst states for transparency in the country, but it does not have to be like this. It is time for a meaningful change. Now more than event, with the economic downturn caused by the pandemic, South Carolina residents deserve to know what they get in exchange for money given away on their behalf.