The Palmetto Insider

The blog of the South Carolina Policy Council

Incentives for Hiring Out-of-State Workers? It’s Happened Before

with 3 comments

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While attracting new businesses to S.C. is crucial, handing out job development credits for positions that go to out-of-state residents makes little sense.

To hear Palmetto State leaders tell it, economic development deals like the one that will bring Red Ventures LLC to South Carolina are “win-win” scenarios with benefits o’ plenty, from increased money flowing into state coffers to more jobs for state residents.

If only it were that simple.

Last week, Red Ventures said it would move its operations 3 miles, from North Carolina over the border to a new facility in Lancaster County. The company plans to transfer 250 jobs and announced it would hire up to another 1,000 workers in the next five to seven years.

“Here’s a great example of what can happen when the county and the state work together,” state Sen. Mick Mulvaney (R-Indian Land) said. ” It’s all about pulling together with the common goal of creating jobs.”

Added S.C. Secretary of Commerce Joe Taylor, “The company’s decision to grow and create 1,000 new jobs in South Carolina is also an indication that our business-friendly climate and pool of talented labor force is working to attract high-tech, high-growth companies offering exceptional job opportunities.”

But it took more than just a “business-friendly climate and pool of talented labor force” to lure Red Ventures south.

Incentives the company will receive include:

  • South Carolina will cut Red Ventures’ property taxes by 50 percent for 18 years;
  • The state ReadySC workforce training program is working to design and implement customized job training programs for Red Ventures’ employees and helping identify skilled workers for future positions;
  • The S.C. Department of Commerce is giving Lancaster County a $250,000 grant for related infrastructure upgrades.

And if the above weren’t enough “incentive,” Red Ventures will also be granted job development credits, which the company will be able to collect once it “creates” new positions. Job development credits return a portion of new employees’ withholding taxes to the company.

However, final agreements have not been executed regarding Red Ventures’ job development credit incentives so no details are available, according to the Commerce Department. The company has up to a year to sign the final agreement, Commerce added.

What makes this incentive a real wild card is that apparently there’s no requirement that companies hire South Carolinians in order to take advantage of the job development credits.

A company like Red Ventures, for example, could theoretically hire all its new employees from just over the border in North Carolina and still receive the credits, depending on how the incentive package is drawn up.

And the company might even be eligible for job development credits for the 250 jobs – positions already in existence – it will move from its North Carolina location to its new site in Lancaster County.

Sound far fetched? It’s happened before.

When Continental Tire moved its headquarters from Charlotte to Lancaster County last year, it brought approximately 300 existing corporate positions. Those jobs were viewed as newly created jobs in South Carolina and thus were eligible for job development credits, according to a report in the Rock Hill Herald.

South Carolina has one of the highest unemployment rates in the nation. While attracting new businesses to the Palmetto State is a good thing, handing out job development credits for positions that go to out-of-state residents makes little sense.

Government-driven economic development is a questionable proposition in the first place, but incentives that do little to benefit South Carolinians are incentives that we can most certainly do without.

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Written by Cotton Boll Conspiracy

October 15, 2009 at 2:52 pm

3 Responses

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  1. Not sure I agree with your conclusions. I agree it would ultimately be a greater benefit to our state if this company hired nothing but South Carolina residents. However, even if this company never hires a south carolina resident (doubtful, especially since there are many people living in that same area already that choose to live in SC, but work in Charlotte due to the cost of living among other things) it still benefits our state. They could stay in NC and leave the area where they are building their new facility empty. This is a sure shot way to guarantee that we get absolutely NO benefit out of it. But having them here helps regardless. The county is going to get some infrastructure upgrades which could help bring additional businesses.
    So we either return some of the withholding taxes after they create some jobs, or let them stay in NC, where we collect ZERO taxes from them, which does nothing to benefit our state. I would be willing to bet that they already have SC residents working for them now.

    Brian

    October 16, 2009 at 9:42 am

  2. […] The Palmetto Insider | Incentives for Hiring Out-of-State Workers? […]

  3. […] The Palmetto Insider | Incentives for Hiring Out-of-State Workers? […]


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