Archive for October 2009
The Fiction Of Government Job Creation
This is especially relevant today – from Bloomberg:
“Government job creation is an oxymoron,” said Bill Dunkelberg, chief economist at the National Federation of Independent Business. It is only by depriving the private sector of funds that government can hire or subsidize hiring.
That’s why “jobs created or saved” is such pure fiction. It ignores what’s unseen, as our old friend Frederic Bastiat explained so eloquently 160 years ago in an essay.
… ‘Nuff said.
Cash 4 Clunkers Cost To Taxpayers: $24,000 Per Vehicle
As I’ve written before on this blog, Cash 4 Clunkers was doomed from the start.
Sure, it helped some people trade-in old cars for new ones. But, as a whole, the program was a waste of our tax dollars.
According to Edmunds.com, Cash 4 Clunkers cost taxpayers $24,000 per vehicle sold.
“Nearly 690,000 vehicles were sold during the Cash for Clunkers program, officially known as CARS, but Edmunds.com analysts calculated that only 125,000 of the sales were incremental. The rest of the sales would have happened anyway, regardless of the existence of the program.”
Thus, taking the $3 billion cost and dividing that by 125,000 vehicles provides the $24K answer.
But how many of those 125K cars were purchased by individuals who could easily afford it and simply took advantage of taxpayers?
The quicker people realize the failure of this program, the better we’ll be able to stop more programs like this from being implemented in the future.
Poll: Are SC Lawmakers Giving Away Too Much To Boeing?
Not Everyone Sees SC Selling Itself to Boeing as Positive
Judging from the reaction of state leaders, one might gather that Boeing’s decision to build a new 787 aircraft assembly plant in North Charleston is the best thing to happen to South Carolina since Gen. Sherman left the Palmetto State 144 years ago.
“Today’s announcement declares to the global business community that South Carolina is back in the game and open for business,” House Speaker Bobby Harrell said in a statement. “This is a great day for South Carolina and make no doubt, marks the biggest economic development announcement our state has seen in at least a decade.”
“Just as the similarly monumental BMW investment catalyzed a now extensive automotive presence across South Carolina more than 15 years ago, we believe Boeing landing decisively in North Charleston will spur on an already growing aerospace hub in our state,” Gov. Mark Sanford added.
The legislature unanimously passed a bill Wednesday granting Chicago-based Boeing sales tax exemptions for fuel, computers and construction materials for 10 years. The bill also authorizes up to $170 million in bonds to pay for infrastructure needed for the new manufacturing facility.
In all, the incentives package is worth $450 million, the Charleston Post and Courier reported, the largest in state history.
In return, Boeing must invest at least $750 million dollars over the next 10 years for real estate and personal property in a single county, and create at least 3,800 jobs.
Unfortunately, there was no substantive economic analysis presented to lawmakers or the public before the vote, which means there was no way to determine the short- or long-term cost to taxpayers, or the impact on business or unemployment in the state, as the Policy Council pointed out here and here.
The bottom line: While Boeing’s decision to expand in South Carolina is good news, South Carolina taxpayers will ultimately be the ones picking up the tab.
Calvin Blackwell, an associate economics professor at the College of Charleston, told the Post and Courier that he is skeptical about such incentives, especially when government competes for industry in a confidential setting.
“Generally, this is not a very good strategy for states to employ,” he said. “It’s a race to the bottom: who can provide the most goodies?”
Another downside, Blackwell told the paper, is that jobs created don’t necessarily go to current state residents, yet they are the ones who shoulder the impact to the tax base.
Other South Carolinians expressed doubts, as well.
“This deal is like a mackerel in the moonlight that shines so pretty on the beach from a distance but when you get closer the more it stinks,” one individual wrote in the comments section of the Post and Courier’s story on the Boeing announcement.
Another asked, “What measures have we put in place to ensure that they create these jobs? What are the levels and pay of these jobs? Will they all go to SC residents? Why are we giving them $450 million worth of incentives for a $750 million return investment?”
“My fear is we gave away the store to get these jobs,” wrote another. “Surely it beats no jobs, but just how much of our soul did we sell to the devil to land this deal? How long will it take to get our $450 million back before we see any bennies? Are they committed to hiring Charleston area people for other than janitorial and low-level jobs?”
A commenter on The State newspaper’s report on the announcement was similarly skeptical: “With a low-interest loan, and no taxes, who wouldn’t come here? Why not give the same incentives to local businesses and local citizens?”
What’s Happening in SC on Thursday, 10/29
SCPC IN THE NEWS…
Policy Council: Lawmakers Created the Illusion of Economic Growth with Boeing
http://forums.goupstate.com/eve/forums/a/tpc/f/8661098265/m/5661093539
http://www.wistv.com/Global/story.asp?S=11402281
http://www.thestate.com/local/story/1003977.html
http://www.wmbfnews.com/Global/story.asp?s=11402281&clienttype=printable
Policy Council Cited in Jackson Free Press Story About Health Insurance Reform
FEDERAL STIMULUS WATCH
Oconee County School District Receives $300,00 in Federal Stimulus Funds
http://www.upstatetoday.com/news/2009/oct/28/school-benefit-300k-stimulus-money/
Colleges Use Stimulus Funds to Improve Energy Efficiency
LOCAL GOVERNMENT
Oconee County Explores Spending $17.4M to Build New Jail Next to Existing Facility (follow up)
http://www.upstatetoday.com/news/2009/ pre=”">oct/28/oconee-considers-building-regional-jail/
Taxpayers in Lexington, Richland counties, City of Columbia Could See Tax Increases to Pay for Riverbanks Zoo Upgrades
http://www.thestate.com/breaking/story/1002160.html
HOW IT ENDED UP
Greenville County Council Gives Itself Guidelines for Dispersement of Accommodations Tax; Refuses to Require Enforcement Mechanism
What’s Happening in SC on Wednesday, 10/28
Property Taxes
A referendum might force a second look at point of sale bill
http://www.postandcourier.com/news/2009/oct/27/controversial-bill-may-get-2nd-look/
Education
Kershaw County schools cut administrative jobs in the face of budget cuts
http://www.thestate.com/local/story/1002157.html
Federal Stimulus Watch
Valley Public Service Authority needs more funding along with the $2 million in stimulus funds already in place
http://chronicle.augusta.com/stories/2009/10/28/met_553540.shtml
$29,875 in stimulus funds to be used for road upgrades in McBee
School District of Oconee County receives $311,823 in stimulus funds for energy efficiency improvements
http://www.independentmail.com/news/2009/oct/27/school-district-oconee-county-receives-311823-ener/
Abbeville County Library System awarded $11,000 in stimulus funds
http://www.indexjournal.com/articles/2009/10/28/news/f1028%20funds.txt
Berkeley schools to make cuts after receiving stimulus funds
http://www.postandcourier.com/news/2009/oct/28/berkeley-schools-lose-3-million/
Local Government
Oconee considers whether or not to refund surplus to taxpayers
http://www.upstatetoday.com/news/2009/oct/27/county-tax-refunds-are-rare-not-new/
But is still considering a tax increase to fund capital projects?
http://www.upstatetoday.com/news/2009/oct/27/officials-mulling-local-option-tax/
Haphazard Tax Change a Bad Economic Development Policy
South Carolina’s piecemeal approach to government-mandated economic development was in evidence again as the Senate Finance Committee met this morning. The goal: To pick another economic development winner by amending the state’s tax code.
While legislators have been tight-lipped about the name of the target, media reports identify the company the state is pursuing as aerospace giant Boeing, which said last week it had narrowed its choice for a second assembly plant for its 787 Dreamliner jet to two locations: North Charleston, S.C., and Everett, Wash.
Chicago-based Boeing said it expects to make a decision early next month and South Carolina lawmakers are doing everything they can to sweeten the pot.
The committee discussed revising several aspects of the tax code related to sales and income tax, and bonded indebtedness. These included:
- An amendment to a 2006 statute that would allow manufacturing companies to receive the same exemptions as technology intensive facilities provided they invest at least $750 million and create at least 3,800 jobs directly within 7 years.
- An amendment to a 2006 statute that would accelerate the final 2 percent sales tax phase-out to Nov. 1, 2009, also for companies investing a minimum of $750 million and creating at least 3,800 jobs within 7 years;
- An amendment to a 1951 sales tax exemption for fuel purchases by manufacturing companies that would be extended to “motive power” for test flights by manufacturers. Under the amendment, the exemption would be used by aircraft manufacturers to transport aircraft between manufacturing facilities but would not include transportation of major components parts for construction or assembly.
Additionally, an amendment for apportionment of income formulas was introduced. It would allow manufacturers to negotiate coordinating counsel in the Department of Revenue. It would also ensure that manufacturers who meet certain criteria such as those listed above qualify to negotiate their apportionment formula.
The last amendment introduced related to the issuance of economic development bonds and provides that, in aggregate, no more than $170 million in bonds may be issued at any time and clarifies that no more than $170 million in proceeds from those bonds may be used for any one project.
Finance Chairman Hugh Leatherman said that the goal is to get through first and second reading today and have the third and final reading tomorrow. The committee voted unanimously to send a favorable report to the Senate chamber.
While the Senate Finance Committee was meeting, the full Senate Judiciary Committee sent amendments to the Sine Die resolution to the floor so as to allow legislators to return to Columbia to receive and consider any economic development issues that might arise.
The Senate voted unanimously, 44-0, to amend the Sine Die resolution, while the House also gave unanimous approval, 109-0.
While South Carolina’s unemployment rate remains of great concern, revising the tax code every time a major corporation wants to look at building or relocating in the Palmetto State is impractical and inefficient.
Moreover, such proposals run counter to the goal of the Taxation Realignment Commission, tasked with the goal of studying South Carolina’s tax code in an effort to weed out disincentives that discourage new businesses and residents.
If South Carolina really wants to spur economic growth, it should look at abolishing corporate and personal income taxes — or at the very least lowering overall tax rates, if only by eliminating special-interest tax credits, as the Policy Council recommended in The S.C. General Assembly: Best & Worst of 2009.
Simply eliminating the corporate income tax would not only make South Carolina more economically competitive, it would also pressure legislators to cease playing favorites with special interest tax breaks, such as those currently being discussed by lawmakers.
What’s Happening in SC on Tuesday, 10/27
Article of the Day
Comptroller General Richard Eckstrom continues to question federal stimulus
“Most of the money has gone to grow some of the big all consuming government programs that were currently in place.”
Federal Stimulus Watch
Marion County schools receive $264,000 in federal stimulus funds to improve energy efficiency
SRS receives stimulus funds to remove radioactive waste
http://www.aikenstandard.com/Local/1027Waste
Economic Development
Charleston County Aviation Authority to adopt incentives programs to attract new airlines
http://www.postandcourier.com/news/2009/oct/27/idea-taking-off/
Government Waste
City of Columbia to install electric charging stations for the abundance of electric cars in the city
Southern Shrimp Group Left Out of Federal Funding Net
Unruly U.S. crustaceans are apparently under control.
At least, that’s what one might gather from the fact that a $5 million federal appropriation for Wild American Shrimp Inc. didn’t make the Congressional cut.
Requested by both Sen. Lindsey Graham and Rep. Henry Brown, among others, the money would have gone to “continue a national research and development program for new products, improved quality assurance, and marketing, of domestic wild shrimp.”
However, an earmark for the Charleston-based organization was not included in the FY2010 Commerce, Justice, and Science Appropriations bill, which is working its way through the legislative process.
Charleston-based Wild American Shrimp, the marketing arm of Southern Shrimp Alliance, is described as a “non-profit organization dedicated to developing new U.S. Gulf and South Atlantic products and implementing a quality assurance certification program that gives consumers a meaningful choice and assures that they are purchasing a premium product harvested from a sustainable shrimp fishery in domestic waters.”
One of its goals is, ultimately, to reduce foreign competition. Wild American Shrimp argues that U.S.-harvested shrimp are of higher quality than crustaceans imported from many other parts of the world, and it’s gotten millions of taxpayer dollars in the past to promote that view.
The organization, formed in 2004 to assist shrimpers in South Carolina, North Carolina, Georgia, Florida, Alabama, Mississippi, Louisiana and Texas, received a $5 million federal appropriation in FY2006 and another $1 million in FY2005.
It also received nearly $3.7 million from the National Oceanic and Atmosperhic Administration, according to a 2004 press release.
It’s also received some unwanted attention from those who question the validity of the appropriation:
- “Are American shrimp unruly and lacking initiative?” Senator John McCain asked on the floor of the Senate in 2004, inquiring about the $1 million appropriation for the “Wild American Shrimp Initiative” that was included in the $388 billion omnibus spending bill passed by Congress that year.
- “I don’t know about you, but I like shrimp — and anything that enhances their initiative is okay with me,” added famed libertarian Harry Browne tongue in cheek, a short time later.
In 2007, Wild American Shrimp announced plans to introduce a self-funding process, which would include a combination of federal government assistance, voluntary industry contributions, foundation grant applications and a financial assessment to be paid on each pound of Certified Wild American Shrimp sold.
However, it’s not clear how successful that initiative has been as Wild American Shrimp officials declined to return calls.
What’s Happening in SC on Monday, 10/26
ECONOMIC DEVELOPMENT
Seattle Times reports Charleston to land Boeing because of “financial incentives”
http://seattletimes.nwsource.com/html/businesstechnology/2010120809_charleston23.html
Kemet Corp. to bring back manufacturing business; SC Launch $200,000 investment cited as reason
http://www.gsabusiness.com/news/31360-kemet-bringing-back-manufacturing-presence
FEDERAL STIMULUS WATCH
Spartanburg Community College to open Union County Advanced Technology Center; Career Source finds funding for students through $2.7M in stimulus funds
City of Charleston receives $1.1M in federal stimulus for energy efficiency
http://www.postandcourier.com/news/2009/oct/26/grant-aimed-at-energy-efficiency/
