South Carolina’s business incentive fund has increased by more than 800 percent since Republican Gov. Nikki Haley took office.
The Nerve reported on Monday that Gov. Haley “has shown a pattern of approving massive increases in the ‘deal closing fund,'” an annual appropriation used to attract corporations to do business in the state that has grown from $5 million in FY 2012 to more than $45.3 million this year—an 807 percent increase in just four years.
“To put it in some perspective,” the Nerve says. “The $45.3 million appropriated for the deal closing fund this fiscal year could have been used to hire 900 police officers or teachers statewide,” and is larger than the total budgets of 57 other state agencies.
Haley’s penchant for business subsidies has attracted criticism from her conservative and libertarian supporters in the past, but she may not deserve all the blame. (RELATED: SC Conservative Groups Feel Betrayed by Haley)
In her first official budget, Haley requested $10 million for the fund, and instead was handed a budget containing a $25 million appropriation. Though she attempted to veto $10 million of the funding, the legislature voted to override it.
Similarly, last year Gov. Haley requested $15 million, but approved a total of $24 million for the fund in the final budget. This year, she attempted to arrest the fund’s growth again, requesting a $24 million appropriation that the legislature nearly doubled by the time it approved a final version of the budget.
One explanation for the legislature’s enthusiasm to fund business subsidies may be that, on the surface at least, they appear to be successful. (RELATED: Opponent Accuses Nikki Haley of ‘Pay-to-Play’ Politics)
According to the Charlotte Observer, North Carolina officials, fearing that their state is missing opportunities for jobs and economic growth, “want to close the gap with South Carolina and other states that offer larger incentive packages and lower tax rates to lure companies.”
Emails obtained by the Observer reveal that North Carolina has repeatedly lost deals to it southern neighbor due to South Carolina’s aggressive incentive efforts. (RELATED: Texas Gov. Rick Perry Wants Tesla in Texas)
In one case, “South Carolina dangled an incentives package 10 times larger than North Carolina’s” to win over a Chinese textile company; while in another instance, a tire company chose to build a factory in South Carolina because it would save millions in taxes relative to North Carolina.
However, many believe that the competition among states to incentivize businesses is ultimately a losing game for taxpayers, who often end up paying for projects that never produce the promised jobs or economic benefits.
Sarah Curry, director of fiscal policy studies at the conservative John Locke Foundation, told WRAL that her organization would like to see incentive programs ended, arguing that, “the state can become much more competitive with a lower tax rate and more targeted infrastructure improvements.”
Some state leaders agree in principle, but are reluctant to “unilaterally disarm,” while other states continue to offer incentives, and have mused that a federal moratorium could provide a way around that problem.
“I’d love to see the federal government say we’re not going to deal with this anymore,” North Carolina Commerce Secretary Sharon Decker said, adding, “Until that happens, we really can’t afford not to be in the game.”
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