– South Carolina
South Carolina has a long history of offering enormous tax credits and workforce-training subsidies. One major recipient has been the German automaker BMW, awarded a $150 million package in 1992 to open an assembly plant and another $100 million for an expansion in 2003 (see below). In recent years there has been a focus on aerospace. In 2004 Vought Aircraft Industries and its joint venture partner Alenia Aeronautica got subsidies worth more than $100 million to build a manufacturing complex in Charleston to produce components for Boeing. In 2009 Boeing itself was rewarded with subsidies believed to be worth up to $900 million for agreeing to open a production line for its Dreamliner aircraft at the same location (see below).
In 2011 Boeing found itself the target of a National Labor Relation Board filed by the Machinists union, which charged that the Charleston plan was an illegal form of retaliation against union activism by workers in Washington State. The highly politicized controversy ended in December 2011 with a settlement in which the Machinists agreed to drop its charge and Boeing agreed to produce its new 737 Max passenger jet in Washington State.
Critics have charged that the revenue losses associated with these huge giveaways have caused underfunding of education, social services and infrastructure. Despite attracting lots of new jobs, South Carolina persistently ranks very low on such measures as educational attainment and road safety.
Four of the major subsidy programs we examined are tax credits, including the Job Tax Credit program; companies claimed more than $50 million under it in 2009. Another job-creation subsidy, Job Development Credits, give companies cash rebates based on the personal state income tax payments of their employees. Enacted in 1995, the program was scaled back in 2004 after the state Secretary of Commerce raised concern that the program was being “treated as an entitlement and not as a deal closer.” However, the fiscal impact of the program stayed high: between 2005 and 2009, it remained around $60-70 million per year. In 2010, the Economic Development Competitiveness Act expanded the Economic Impact Zone Investment Credit program to cover the whole state (and shortened its name to Investment Credit).
In 2010 then-Gov. Mark Sanford negotiated a subsidy deal with online retailer Amazon.com for a distribution center project in which the company would not only receive traditional subsidies but was also allowed to forgo collecting sales tax from its South Carolina customers for five years. Sanford's successor Nikki Haley criticized the sales tax deal, which was first blocked in the legislature but was finally approved amid intense pressure from the company.
South Carolina does not provide online company-specific disclosure or outcome data for most of the major subsidy programs examined for our report; limited information on recipients of Job Development Credits is available in annual reports on enterprise zones. Aggregate annual amounts claimed are reported for the four tax credit programs by the Board of Economic Advisors here. Funding information for the fifth program, readySC, is provided by the State Board for Technical and Comprehensive Education here.
Key Subsidy Programs
|Subsidy Program||Recent Annual Cost||Online Recipient Disclosure||Recipient Disclosure Score*||Job-Creation/Job-Quality Score**||Monitoring/Enforcement Score***|
corporate income tax credits for manufacturers; in 2011, the program changed its name from Economic Impact Zone Investment Credit and was extended to the entire state
|$24.4 million (2009)||
Job Development Credits
payments based on worker personal income tax withholding for firms which meet job creation, wage, and health benefit requirements. (Disclosure source discovered after our report was published.)
|$70.3 million (2009)||
Job Tax Credit
corporate income tax credit for job creation; recently expanded to include agribusiness
|$51.2 million (2009)||
longstanding customized workforce training program provided at no cost to qualified businesses
|$13 million (2012)||
Research & Development Credit
corporate income and other tax credits for qualified R&D expenses
|$16.1 million (2009)||
* The score is derived from the Good Jobs First report Show Us the Subsidies (December 2010).
** The score is derived from the Good Jobs First report Money for Something (December 2011).
*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).
Major Subsidy Deals
Boeing (2009) and Vought Aircraft Industries (2004)
South Carolina was one of the “losers” in the 2003 competition staged by Boeing for its initial production facilities for the 7E7 Dreamliner. But the state kept wooing the airplane manufacturer as well as some of its major suppliers. In 2004 Vought Aircraft Industries, a key supplier of the fuselage and other components of the Dreamliner, agreed to build a $560 million, two-plant manufacturing complex with more than 600 jobs at Charleston International Airport.
The facility, to be operated by Vought and its Italian joint venture partner Alenia Aeronautica, was offered a package of tax breaks, land and training assistance initially estimated at $80 million, then $116 million. The state also agreed to issue up to $160 million in bonds to help finance the complex. In 2007 the Vought workers in Charleston voted to be represented by the Machinists union (which was decertified two years later). Vought experienced production problems, and in 2008 Boeing bought out its share of the venture with Alenia that operated one of the two plants; the following year it purchased the other plant, which had been operated by Vought alone. During that time there were reports that Boeing was considering Charleston for a second Dreamliner production line, prompting the legislature to enact the framework for a huge subsidy deal.
In October 2009 Boeing made it official, announcing that it would spend at least $750 million on the new production line and create thousands of jobs. The state's subsidy package was initially estimated at $450 million, a large part of which reflected generous property tax abatements. In January 2010 the Charleston Post and Courier published an analysis of the package that concluded it could be worth more than $900 million.
In April 2011 the Machinists union filed a National Labor Relations Board complaint against Boeing, saying that the move to Charleston was an unlawful form of retaliation against labor activism in Washington State. The case caused an enormous uproar until it was settled in December 2011 as part of an agreement in which Boeing agreed to build another new jet in the Seattle area using union workers. (Key sources)
Several states were said to be finalists when BMW was deciding where to locate its first U.S. assembly plant, but it appeared that South Carolina had the inside track. The German automaker was apparently lured by the prospect of a relatively cheap and likely non-union workforce. To add another inducement, the South Carolina legislature passed a $35 million subsidy package that turned out to be just the beginning of what the state was ready to offer the company, which formally announced in June 1992 its decision to use a site near the Greenville-Spartanburg Airport. BMW said it planned to make an initial investment of between $250 million and $300 million on the plant, which would eventually employ 2,000 workers. The company later revealed that it intended to build two plants at the site, increasing its projected investment to at least $600 million and the size of the ultimate workforce to 4,000. Not much was said about the state and local subsidies being offered to BMW, which at the time were estimated at $130 million and were later pegged at $150 million.
The company’s aim of keeping the plants non-union provoked an angry response not only from the United Auto Workers but also from Germany’s IG Metall metalworkers’ union. In the years since BMW began production in 1994, the company has expanded the operation several times. With the increased investment came increased subsidies, including a new package of more than $100 million in 2003. The company’s workforce rose at the same time, surpassing that 4,000 target. But in recent years BMW has relied heavily on contingent workers hired through a temp agency to handle periods of increased production. In March 2011 BMW announced a $100 million expansion at the Greer plant. (Key sources)
Wal-Mart in South Carolina
- At least 3 Wal-Mart locations have received subsidies worth about $38.5 million in South Carolina.
- At least 4 Wal-Mart locations in South Carolina have challenged their property tax assessment.
- Many Wal-Mart workers are ineligible for health coverage from their employer or choose not to purchase what is available, because it is too expensive or too limited in scope. These workers often turn to taxpayer-funded health programs such as Medicaid. South Carolina among those states that have not disclosed data on the employers with the most workers or their dependents enrolled in such programs.
For more information, see the South Carolina page of Wal-Mart Subsidy Watch.