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Economics professor: Do the benefits of company tax breaks outweigh the costs?

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CHARLESTON COUNTY, SC (WCSC) -

In May, Charleston County council voted to give Boeing a tax break for the next three decades as it invests another billion dollars and brings 2,000 more jobs to North Charleston, but, while tax breaks are a common practice, are they always a cost-effective one?

A 2 percent tax rate for the next 30 years, that's the deal negotiated between Boeing and Charleston County.

"There's no such thing as a benefit without a cost," says Dr. Frank Hefner, an economics professor at the College of Charleston.

Hefner says large manufacturers consider land availability, natural resources, and labor force when selecting a new location. He says when all of those don't quite come together, incentives tip the balance.

"Then you have to look at, whether in the process of awarding these incentives, they're awarded in a clear-cut manner, transparent, and accountable manner."

County officials say the property tax rate for manufacturers in South Carolina is 10 percent. Boeing will pay a fifth of that.

Hefner says if a 10 percent tax is too high for Boeing, than it's too high for other manufacturers and should be reworked altogether."

"Why don't we have a discussion instead on what is the correct property tax assessment for all firms and that doesn't come out very often, and, typically, it's because most people think that if you reduce the property tax for everyone, you just won't collect enough taxes."

Council member Elliott Summey says incentives are part of attracting companies like Boeing.

"For us to be able to compete with the rest of the country and the rest of the world for folks like Boeing, we have to put incentives on the table."

Summey says Boeing must live up to their end of the deal.

"The misnomer really about incentives is that we're just giving away buckets of money. That's not the case."

Along with the county's incentives, the state is also giving Boeing $120 million in incentives to expand.

 

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