Is South Carolina “Business Friendly” ?

THE ANSWER DEPENDS ON WHO YOU ARE

Many government officials in South Carolina, particularly elected officials, take pride in frequently announcing that South Carolina is one of the most business friendly states in the nation. These pronouncements (here’s another) makes the state sound like a paradise of economic freedom, where opportunity is ensured for all businesses and where regulation and taxes remain low.

Unfortunately, what state officials seem to mean by the phrase “business friendly” is that if your business has an effective lobbyist, you just might benefit from favorable regulations, targeted tax credits, and/or a variety of infusions of taxpayer money. The “reports” giving South Carolina high marks for business friendliness, moreover, almost always come from glossy magazines that – as The Nerve has revealed – solicit and receive money directly from state departments of commerce, including South Carolina’s. These are not objective sources.

Of course South Carolina is “business friendly” in some respect. The state’s climate, its strategic placement in the southeastern U.S., its access to a major port – all of these factors attract businesses, but none is the result of government policy. The same could be said of California: it’s “business friendly” because it’s California, despite everything its politicians do to make it otherwise.

Reputable policy organizations such as the Tax Foundation paint a much more accurate picture of Couth Carolina’s alleged business friendliness. Our state’s business tax ranks 36th in the nation, and our 7 percent top individual income tax is the 13th highest in the nation. In fact, a new study by the Tax Foundation finds that South Carolina’s combined state and local sales tax rate is the 18th highest in the nation. You won’t see that on many press releases boasting of South Carolina’s “pro-business environment.”

What about regulation? A new study by the Institute for Justice, reported earlier this year by The Nerve, found that South Carolina licenses half of the 102 moderate income occupations they investigated, has the 14th most burdensome licensing laws in the country, and is the 10th most extensively licensed state.

While these regulations are ostensibly for the purpose of protecting the consumer, in many cases their actual purpose is to protect established businesses. Burdensome licensing laws that require both monetary and time commitments from prospective members of an industry raise the cost for entrance into that industry. As a result of these burdens, fewer people attempt to enter industries that require licensure, and already existing businesses in the industry benefit from a reduction in the level of competition. This reduction in competition allows businesses in the licensed industry to charge higher prices for a lower quality product or service. Ultimately, licensure laws often end up harming the person they are supposed to help – the consumer – as well as harming low-income job seekers.

Despite the competition and opportunity-stifling nature of their policies – and despite their supposed desire to make South Carolina more “business friendly” – state lawmakers show no signs of reconsidering these policies. Since the start of the 2013 session, the General Assembly has introduced bills attempting to license interior designers, hair braiders, and musical therapists – to name a few.

At the same time, few if any serious tax reform bills have been introduced. The introduction of bills promoting special tax favors for favored companies and industries has, of course, continued at a brisk pace.

The current state of affairs, in short, is one in which taxpayers and small businesses are punished while special interests receive a steady diet of costly privileges. It’s a cycle in which politicians provide favors to companies of their choosing – generally the ones that can afford lobbyists – and then get to reap the rewards in the form of campaign funding and political capital for all the jobs they’ve “created.”

Whatever else this is, it isn’t what most people think when they hear the phrase “business friendly.”

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