Worth Of Industrial Incentives Questioned

Some lawmakers give tax breaks to companies without promises of employment investments.

GREENVILLE, S.C. (AP) - States like South Carolina are finding that industries that once promised to create hundreds of jobs in exchange for tax breaks are now asking for those financial incentives just to maintain employment levels.
Michelin North America, for example, asked for and got a new tax break that requires it to invest $500 million in its South Carolina operations. But the tax break doesn't require the company to add to its current employment of 8,000 people in the state.
Gov. Mark Sanford said the deal would even let Michelin cut as many as 3,000 jobs and still be eligible for the new credits lawmakers approved over his veto.
''I think it creates a very bad precedent going forward,'' Sanford said. ''You would for the first time lose the nexus between job creation and incentives in our state.''
Michelin, which has an annual payroll of $500 million, says the credits against withholding tax are necessary for its investment that will make plants more efficient and better able to compete with overseas plants.
''For economic development agencies around the country, these are difficult issues,'' said Mark Sweeney, a Greenville consultant who helps companies locate new facilities and advises agencies on economic development.
South Carolina has lost more than 10,000 manufacturing jobs since June 2006 and other states, such as Michigan, that are seeking their industrial base deteriorate are using incentives to keep companies around, said C.R. ''Buzz'' Canup, an Austin, Texas, consultant.
Canup helped Michelin negotiate incentives deals when he worked for Fluor Corp. in Greenville. He said he understands the governor's objections to giving incentives when no jobs are being created.
''But on the other hand, South Carolina has lost a very large number of manufacturing jobs over the last decade, and I would think the state would be very sensitive to working with a major employer to assist in job retention,'' Canup said.
Michelin has an extensive presence in South Carolina, including the French tiremaker's North American headquarters in Greenville County. The company operates plants in Anderson, Greenville, Spartanburg and Lexington counties and a test track in Laurens County.
''This arrangement has worked very well over the past 30 years, for both South Carolina and Michelin, culminating in many Michelin expansions that ultimately benefit the state, our company, our employees, our suppliers and the communities in which we operate,'' said Michael Fanning, the company's vice president for corporate affairs.
Fanning said the company isn't ready to announce expansion plans, but is glad lawmakers ''put in place the mechanism that allows us to expand.''
Others agree with the governor that subsidizing local businesses without the promise of jobs sets a dangerous precedent.
Dean Webster is executive director of the North Carolina Institute for Constitutional Law, a legal advocacy and educational group that has challenged incentives in court. Webster said a side effect of granting huge incentives to companies to come into a location is that other companies already in a state will start to demand similar subsidies to stay put.
They want to ''get in on the gravy train as well,'' he said. That puts government in the position of deciding ''which businesses are deserving of handouts and which are not.''
''Governments can make mistakes on those kinds of decisions,'' he said.
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