The details of an extremely generous subsidy package given by South Carolina to Boeing, Inc. have rightly garnered a lot of attention.  The entire package is valued at around $450 million, and will require the cash-strapped state to borrow $270 million in order to help fund the construction of Boeing’s new facility in North Charleston. Among other things, the package would assess Boeing’s in-state property at a mere 4% of its value for property tax purposes (a fact that may irk other industrial taxpayers who are assessed at a 10.5% rate), promises the company that its tax rate won’t rise during the next 30 years, and allows the company to retain half of what it ultimately does “pay” in property taxes, if it uses the money for site improvements.  

But an extremely detailed study of tax incentives in Pennsylvania, released by Good Jobs First this week, should cause South Carolina policymakers to think twice about their “smokestack chasing” ways.  The report explains, among other things, that state tax bills are generally of little importance in company location decisions, and rarely can such breaks encourage a company to be truly loyal to a state and its workforce (as demonstrated recently in North Carolina).  As a result, selectively reducing taxes for certain companies in order to attract them to a state is a “low-impact but high cost” strategy.  Instead, Good Jobs First provides a number of recommendations for encouraging economic growth in much more sophisticated ways – such as improving workforce training policies, or taking targeted, careful steps to maximize the growth potential of young, small, and local businesses.

The full study can be found here.

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