The Palmetto Insider

The blog of the South Carolina Policy Council

Unemployment Tax Credit Slipped into Economic Development Bill

with 4 comments

As we predicted last year, the unemployment tax credit has been revived this year, as legislators look for ways to bolster their claims that they are doing something to address South Carolina’s among-the-worst-in-the-nation unemployment rate.

The credit has been added as an amendment to H 4478 – an omnibus economic development bill that is the brainchild of House Speaker Bobby Harrell and the following team of high-powered consultants: 

  • April Allen – O’Neal Inc.
  • Lewis Gossett – South Carolina Manufacturers Alliance
  • Nick Kremydas – South Carolina Association of REALTORS
  • Burnie Maybank – Nexsen Pruet, LLC; Former Director of the Department of Revenue
  • Otis Rawl – South Carolina Chamber of Commerce
  • George Wolfe – Nelson Mullins – Chairman, Economic Development Practice Group

H 4478 passed the Senate today on third reading. It seems likely the House will concur with the Senate version – which rejected the House’s proposal to eliminate the corporate income tax. So instead of broad-based tax reform, we are again left with targeted tax cuts and special interest subsidies.

So far, more than $1.5 billion in state-driven economic development policies have done nothing to bring prosperity to South Carolina. According to the latest numbers, South Carolina’s unemployment rate is 11.6 percent – 6th highest in the nation.

Granted, there was a large decrease (0.6 percent) in the unemployment rate for April. But it’s not clear whether this is because of new job creation or because of discouraged workers dropping off of the rolls. South Carolina is tied with Michigan as being the worst state in which to find a job – with the average job search taking 19.4 weeks in 2009.

Last year, the credit appeared as standalone legislation: S 690. As we noted in our Best/Worst 2009:

This bill is a bad idea for two reasons: First, the bill arbitrarily provides an estimated $300 million tax cut to certain businesses (firms ready to hire for one reason or another) and workers over others. Second, the credit won’t work. It is too narrow (only applies to those actually collecting unemployment and excludes many small businesses) and too temporary (24 months).

But let’s get to the heart of the issue. If lawmakers really believe a targeted, temporary tax credit is going to create jobs, then wouldn’t a permanent, across-the-board tax cut do even more to stimulate the economy? Likewise, wouldn’t cutting South Carolina’s highest-in-the-nation manufacturing property tax be a better policy than the smattering of targeted tax credits laid out in H 4478?

The difference here is not one of philosophy. Everyone agrees tax cuts create jobs and grow the economy. But cutting taxes for everyone would give lawmakers less control over the political game of picking winners and losers. In the end, this is about power.

The power of the legislative leadership to raise money from lobbyists versus the power of the people and the free market. Power vs. Freedom. That’s what’s at stake here.


Written by Cotton Boll Conspiracy

June 3, 2010 at 11:11 am

4 Responses

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  1. […] Competitiveness Act of 2010,” H 4478 was drafted by House Speaker Bobby Harrell and a team of consultants. Sanford will  join Harrell, with whom the governor is generally at odds, and Department of […]

  2. […] Burnie Maybank was instrumental in writing this same law, which is filled with a variety of new targeted tax cuts. […]

  3. […] interests over fundamental tax reform. That shouldn’t come as a surprise. The chairman of TRAC, Burnie Maybank, is a key player in crafting special interest deals—including the incentive package for Boeing […]

  4. […] It is a curious thing that even as legislators complain about massive budget cuts, they have passed an omnibus economic development tax credit act that provides an array of targeted credits and subsidies ostensibly aimed at stimulating South Carolina’s ailing economy. The so-called “Economic Development Competitiveness Act of 2010” (H 4478) is the brainchild of House Speaker Bobby Harrell and a team of high-powered consultants. […]

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