Boeing: Lawmakers Create the Illusion of Economic Growth

The legislature unanimously passed a bill today granting Boeing sales tax exemptions for fuel, computers, and construction materials for ten years. The bill also authorizes up to $170 million in bonds to pay for infrastructure needed for the new manufacturing facility. In return, Boeing must invest at least $750 million dollars over the next ten years for real estate and personal property in a single county and create at least 3,800 jobs.

Boeing's decision to expand in South Carolina is good news. Unfortunately, South Carolina taxpayers will have to pay them to do it, said South Carolina Policy Council President Ashley Landess. Clearly, legislative leaders misled the public and rank-and-file lawmakers about the purpose of this special session. The sine die resolution they passed in May did not permit them to consider economic development issues. A handful of politicians crafted a secret deal to take money from South Carolina businesses and taxpayers and give it to a billion dollar company.

"There was no substantive economic analysis presented to lawmakers or the public before the vote, and no way to determine the short- or long-term cost to taxpayers, or impact on business or unemployment in the state."

Here are five reasons the Boeing deal is bad public policy:

1) A short-sighted approach: From August 2008 to August 2009, South Carolina has lost more than 80,000 jobs. The Boeing plan will create 542 jobs a year, for a total of 3,800 over seven years. There is no guarantee these jobs will be given to South Carolinians. South Carolina has the 5^th highest unemployment rate in the nation, and the 46^th lowest per capita income. Politicians targeted tax breaks have failed to create jobs and grow the economy.

2) Costs are unclear: The bill claims this plan will be a net gain for the economy despite the $170+ million price tag. But the state Board of Economic Advisors failed to provide an analysis of the costs and benefits of the proposal.

3) Still no transparency: The bill that passed the Senate today was not the original bill that passed the House back in April. In fact, H 3130 had nothing to do with this incentive package. The leadership gutted the bill behind closed doors, inserted their Boeing deal and pushed it out onto the floor, where it passed unanimously and with no debate.

4) Another step backward on tax reform: Instead of special interest tax breaks, the legislature should implement fundamental tax reform. Eliminating the corporate income tax would be a good start. In FY2009, South Carolina collected $268 million in corporate income tax revenue. In other words, for not much more than the cost of this deal, we could have cut taxes by 5 percent for all South Carolina companies. 

5) No guarantee for the future: In 2004, Washington state gave Boeing $3.2 billion in incentives, but the company chose to build their new plant in North Charleston. Clearly, there is no guarantee the company will reward South Carolina's taxpayers down the road.

For the money we're paying Boeing, we could come close to eliminating corporate taxes for all South Carolina businesses, said Landess. That kind of economic stimulus benefits the entire state and has a real impact on unemployment.

Legislative leaders are congratulating themselves for creating jobs. They didn't. Instead, they increased the cost of government at the expense of already-struggling citizens, who cannot afford the cost of this subsidy.

Nothing in the foregoing should be construed as an attempt to aid or hinder passage of any legislation. Copyright 2009. South Carolina Policy Council Education Foundation, 1323 Pendleton Street, Columbia, South Carolina 29201.