The Palmetto Insider

The blog of the South Carolina Policy Council

The Price of (Government-Driven) “Prosperity”

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Note to politicians: Government’s proper role in the free market is to stay out of the way.

Apparently, that message can’t be repeated enough. Case in point: The “Economic Development Competitiveness Act of 2010” (H 4478). This massive piece of government overreaching provides an array of targeted credits and subsidies to special interests.

SCPC Issue Analysis:

Economic Development Bill Rewards Special Interests Over Independent Businesses

 

If you are experimenting with hydrogen vehicles or making wind turbines, for example, you win. Same for companies that turn waste grease into fuel, manufacture lithium ion batteries, or operate a nuclear plant. If, instead, you are like most of  the ninety-seven percent of South Carolina’s employers who run small businesses and account for 50 percent of private sector jobs, you will not be benefitting from this legislation—you will be paying for it.

When H 4478 was introduced, it appears politicians knew it was going to be controversial. That’s because the original bill offered a carrot—the gradual elimination of the corporate income tax—to horse-trade for the expansion in government-manipulated economic development. But that broad-based tax break was cut from the bill. The rationale? Lawmakers said it was too expensive—even though the incremental tax cut would not have been implimented until FY13-2014—at an initial cost of only $16.8 million. A drop in the bucket in budget terms.

But what they left in the bill was hundreds of millions of dollars in tax breaks that will ultimately come out of the pockets of taxpayers and Main Street South Carolina businesses.

The larger purpose of H 4478 is to solidify government’s role in using tax dollars to manipulate the state’s economy via tax credits and subsidies. The legislation is the General Assembly’s version of a “jobs bill” or stimulus package for South Carolina.  … And, we all know how well federal efforts at that have been working.

Simply put, taxpayer funded economic incentives don’t work, and there’s little accountability for how the Legislature doles out this money. Thus, in spite of having spent more than $1.5 billion on economic incentives over the last few years, South Carolina’s employment and income levels continue to be among the worst in the nation.

The question is: If billions of dollars for special interests isn’t buying economic prosperity, what is it buying?

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Written by Robert Appel

June 11, 2010 at 2:38 pm

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