CHAPTER 7 SOUTH CAROLINA’S Figure 5.8: Industrial Property ...

CHAPTER 5: SPECIFIC TAX REFORMS 11239

Presumably the original intent of imposing a tax rate schedule with graduated

marginal tax rates was to make the income tax progressive. However, what progressivity

exists in the state’s income tax structure is due to the zero tax on the first $2,630 of income,

and because of the graduated marginal tax rates. However, since the marginal tax rate

increases over such small steps in income, as shown in Figure 5.5, most of the progressivity

occurs at lower income levels, not higher levels of income. At higher income levels, the

average tax rate hardly increases at all. This nature of the current tax is directly contradictory

to the goal of progressivity. rSeoallayltChdooHuegsAhthoPinsTtohnEelysRuartfa7tchee it appears that the tax satisfies the
vertical equity condition, it lower income levels reducing the

wealth of these lowestSinOcomUe taTxpaHyers,CnoAt theRinOtendLedIcNonseAqu’enSce.

Figure 5.5T: ASoXuth ICNaroClinEa NincTomI eVtaEx:SC:urrCenOt taSxTraLtesYc,ompared to
inflation-indexed rates, 2009

INEFFICIENT AND DISTORTIONARY

Current Income Tax and Income Tax Rates/Brackets if 1959 Tax
RbyatPeest/eBrrTa. cCkaelctsagno FranSkchHeedfnuelre was Inflation Adjusted to

2009

Taxable Income Tax Average Tax Rate Tax Average Tax Rate
Amount Amount

$5,000 $71 1.42% $125 2.5%

$10,000 $290 2.90% $250 2.5%

$15,000 $604 4.03% $377 2.51%

$20,000 $954 4.77% $527 2.63%

$30,000 $1,654 5.51% $834 2.78%

$50,000 $3,054 6.10% $1,695 3.39%

$75,000 $4,804 6.41% $3,127 4.17%

$100,000 $6,554 6.56% $4,877 4.88%

$150,000 $10,054 6.70% $8,377 5.58%

$200,000 $13,554 6.77% $11,877 5.94%

Figure 5.5 also shows what the average tax rates are for various incomes and taxes
under the current tax system in South Carolina. In the right columns it also shows what the
taxes and average tax rates would be if the 1959 tax tables were indexed for inflation. The
figure clearly shows that the 1959 indexed tax rate structure is more uniformly progressive,
especially at higher levels of incomes. It keeps tax rates extremely low for the lowest income
individuals in the state.

Figure 5.5 also shows that the current tax system charges all income groups more in
taxes than an indexed rate schedule. The only exception is the $5,000 income earner in the
table. As South Carolina income taxes continue to climb while the tax brackets remain
stagnant, the state becomes a relatively high-tax state. This has a negative impact on

1138108 UUNLNELAESAHSIHNIGNGCCAPAIPTIATLAILSIMSM

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mmilliilolinon($(1$21.25.5mmilliilolinonininmmacahcihnienreyryanadndeqeuqiupimpmenetn,t,$1$21.25.5mmilliilolinoninininivnevnetnotroierise,s,anadnd$2$.25.5
mmilliilolinonininfixfitxutruerse)s.).NNotoictiecethtahtatSoSuotuhthCCaraorloinlian’as’sefeffefcetcivtievetatxaxrartaeteononinidnudsutsrtirailalprporpoepretrytyisis
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thtehefigfiugruerebebceacuasueseitiitsisthtehelolwowesets-t-atxaxstsattaet.e).)

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TTexeaxsas 66 $1$,12,6246,43,53858 2.25.35%3%

TTenenensesseseee 1010 $1$,10,303,35,454 4 2.20.70%7%

WWesetsVt Virgirigniinaia 1414 $8$383,32,32434 1.16.76%7%

LLouoiusisainaana 1717 $7$8738,34,04707 1.15.75%7%

GGeoerogrigaia 2020 $7$6706,03,83181 1.15.25%2%

FlFolroirdiada 2424 $6$767,76,86383 1.13.63%6%

AAlalbaabmama a 3535 $5$353,37,7676 1.11.1%1%

NNorotrhthCCaraorloinliana 3737 $4$9419,10,70171 0.09.89%8%

KKenetnutcukcyky 4747 $3$2372,71,010 0 0.06.56%5%

VVirgirigniinaia 4949 $2$4214,14,94898 0.04.84%8%

DDelealwawaraere 5050 $2$3283,88,48040 0.04.84%8%

SoSuorucrec:e:NaNtaiotnioanlaAl sAssoscoiactiaiotnionofoMf Manaunfuafcatuctruerresr(s2(020090)9)
* T* aTxaexsems meaesausruerdedininthtehestastaetse’sla’ rlagregsetsctitcyitoynolyn.ly.

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sesreiroiuosusdidsiasdavdavnatnatgaeg,ei,nintetremrms sofofitsitsabaiblitlyitytotoatatrttarcatcat nadndkekeepepinidnudsutsrtyr.yS. iSnicneceSoSuotuhthCCaraorloinliana
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thtehecocuonutnrtyr,y,ititshsohuoludlddedfeinfiinteitleylymmakaekeititatatlelaesatstcocmompepteitivtievefofrorthteheSoSuotuhtehaesats.t.SiSnicnece
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atataraoruonudnd1 1peprecrecnetntmmigihgthtbebesusfuffifciiceinetnttotoatatrttarcatctmmoroereinidnudsutsrtyr.y.WWorokriknigngtotorerdeudcuecethtehe
vavrairoiuosustatxaexsesapaplpielidedtotoinidnudsutsrtyrywwouoludldsesreiroiuosulsylyimimprporvoevethtehestsattaet’es’scocmompepteitivtievneensess.s.

SuScuhcha asisginginficfiacnatntrerdeudcutciotinoninintatxaexsesononinidnudsutsrtiarilapl rporpoepretrytywwouoludldobovbivoiuosulsylylelaedadtotoa a
rerdeudcutciotinoninintatxaxrerveevneuneusesononinidnudsutsrtirailalprporpoepretryt,y,atatlelaesatstiniintiatilalyll.y.HHowoweveevre,r,thteheovoevrearlalll
rerveevneuneuemmayayininfafcatctinicnrceraesaeseonocnecethtehegrgorwowththrartaeteininthtehestsattaetebebgeignisnstotopipcikckupupanadndmmoroere
inidnudsutsrtyrymmovoevsesinitnotothtehestsattaet.eF. uFrutrhtehremrmoroer,ei,fifthteheofofficfiicailatlatxaxrartaetsesaraerelolwowereerde,dt,htehnenthtehestsattaete

CHAPTER 5: SPECIFIC TAX REFORMS 11331

Presumably the original intent of imposing a tax rate schedule with graduated
marginal tax rates was to make the income tax progressive. However, what progressivity
exists in the state’s income tax structure is due to the zero tax on the first $2,630 of income,

7and because of the graduated marginal tax rates. However, since the marginal tax rate

increases over such small steps in income, as shown in Figure 5.5, most of the progressivity
occurs at lower income levels, not higher levels of income. At higher income levels, the
average tax rate hardly increases at all. This nature of the current tax is directly contradictory

SOUTH CAROLINA’S TAX INCENTIVES:to the goal of progressivity. So although on the surface it appears that the tax satisfies the

vertical equity condition, it really does this only at the lower income levels reducing the

COSTLY, INEFFICIENT ANDwealth of these lowest income taxpayers, not the intended consequence.

DFigure 5.5: South CaroliInSaTinOcoRmTe tIaOx:NCAurrRenYt tax rates compared to

inflation-indexed rates, 2009

Peter T. Calcagno and Frank Hefner

Current Income Tax Income Tax Rates/Brackets if 1959 Tax
Rates/Brackets Schedule was Inflation Adjusted to
2009

TaxaTbhleeIgnocvoemrnemeAntmTooafuxSnot uthACvearraoglienTaauxseRsaitnedusAtrmyToatauxrngteting or Average Tax Rate in
targeted tax incentives

an attem$5p,t00to0 create jo$b7s1and stimul1a.t4e2%economic gr$o1w25th. Targeted tax2.i5n%centives, which
ionrc, liundse$o:1mj0oe,b0c0da0seevse,loopumtrieg$nh2tt9a0gnrdanrtestaranidni2lno.g9a0nt%saxofcrpeudbiltisc, ftua$xn2d5as0b,aatreemfeisnctasl, tionofrlas2sd.t5reu%scigtunreedftionaanttcriancgt

a priva$te15fi,r0m00to a new$l6o0c4ation, help4s.u0p3p%ort or expan$d37a7n existing busin2e.s5s1,%or to prevent a

compan$y20f,r0o0m0 relocati$n9g54to another 4c.i7ty7%or state. In$S5o2u7th Carolina the2s.e63p%rograms range
fpriocmturtea$xi3nc0dr,u0esd0ti0rtys.fWorhliolc$ea1tt,hi6ne5gs4eopr oelxicpiaensd5ai.n5reg1%ccoomrpmoroanteahme$oa8nd3gq4usatartteersg,otvoesrnumbse2idn.7ites8,s%tfhoer the motion
efficacy of

these p$o5li0c,i0e0s0has been$3c,a0l5le4d into que6s.t1i0o%n over and $o1v,e6r9a5gain by many3s.c3h9o%lars and policy

makers$. 75,000 $4,804 6.41% $3,127 4.17%

econom$1Aic0s0g,n0roo0tw0edthi,nseCl$he6catp,i5tve5er4 t3a,xainlocwe6n-.tr5iav6tee%staaxrestqruucitteu$r4ae,8dt7hi7affteirsenbtromaadttbear.s4e.Td8h8ie%sycaornedutocoivlse to
of

central$1e5co0n,0o0m0ic plan$n1i0n,g05a4nd much6l.7ik0e%tax policy$i8n,3g7e7neral often cre5a.5te8%distortions that

affect $re2l0a0ti,v0e00prices a$n1d3p,5r5o4fits. In ad6d.i7ti7o%n, they ma$y1c1r,e8a7t7e the type of d5e.a9d4w%eight cost (see
Chapter 4) that destroys wealth by encouraging firms to shift resources into areas that receive

tiuttefs(wsritotdnhnhaaaipotpsnifgaoxxbdecsepuledugecteeseuliecbeeahvreunssnlciltr.reedfiasiatiepditaciasnrtcAhacvfrunihglFFTTtbaisneallefad,esneeyliifenihhgsloggltandes.yeetecaaSfuurriahandWuetvnliterronpenehoynnreneeghmcuutenrehwrtastiseietrasi55hngaxphhap)netetgdo..enhdh.allon5ot5eioifceeteCswsndgsdFetyexrtatesaatcoeaporadmsaelcblxloetvrsotrsobxedhayoneottmeeolefvishiob.iltnrlorccryietialtynsanstaivoanohsltth,csmhttsahertsnmieoaoeioetlsasenocesyhlmwmbweirtslccnefmnhfesuawcsrohetsacianedhi1amnacfoonwttasdiewy9apohtcnuemeodove5otfatShaglperhrundoet9amraoesrleeitlrcntattlenhuhssxebiahtihtdy.ngeets.hatasaetehhdi.xatTmgaitvepnetsoiecIdritChefptithxoosudesnealspaeeewtlrkyxrtveihrrcrcdeaoecpoioeeeteiostnehinflthrvnlvetseanhpiida.la1itiiincsiytgegsdnudaxn9iathnenegesat5c.ceertn-autdxr9arxafhtttItxceeyhafasnhtcelseiaeexextoeericyattrstaptcsaeosshrxartiuactsepttmaeeroiertlgyadootgtscuafmaegdprerpnletcebiisaoeeceatugmtSxlwir.osfccuielnhaosttathnbrswrisrtgstTuernaeoetaititwchrhmgtmwrthhtigaoyafeghiseaoserpehi.leurgutcCl$rmsapitWeyplemehS5raedvaobotdoa,iloreeenla0eronnosaludtverst0dwthclttitaeiiho0eethheanutinxlhtearxufocnaeConxietsaopu(’inniardfasnlamnmecpoilxsinrctnigondorrotfheeedececaeeommbexlnnesotsrrirgrptieenaltsnhdmla.vryitonetiaotvoicaeunWeirsewt’wekvpnuirafsssesaeleerdpeoreisa,npomnstsiasltssncrvgbtwoefinuphoomegoirrendimhnrasaesnncgeopiocavgs.cuintmtmrsttfenweaaosTeirxxiaattvtmtiiboonhhhhhereititenyhnnyygneeeeeess,

economic development agencies that offer them) in favor of broad-based tax cuts and other

3

11438128 UNLEASHING CAPITALISM UUNLNELAESAHSIHNIGNGCCAPAIPTIATLAILSIMSM

mprmaon-agunrfuoafcwatcutthruiirnnignitgpiarptoirvpoepsretrythtytaattxabxienninethftieht ecboucuosinuntnertysrs.yI.inInFgieFgniugerurearle5r.58a.t8hwewerepthrpearsneesanetnfethwtehefeafevffeofcertecidvtievceopmrporppoaepnretiryetsytaotxar x
rinartdaeutsesstdradietaast.afoWfrorSe oSmuotuahtiehnaetsaatisentrenrthnsatsatttaeStseo,suf,otfhrorcCocamormoplapirnaiarsioswno.noT.uThldeherbarenaknbskesgttigevrievneonfffofrobrtyhtehpesrtosamttaetosetsianragereo‘uomtuaotrfkoeaf tla-lll
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mfrmiellinilodlinloyn’($p(1$o21li.2c5.y5mfmoilrliilaolifnoenwininfmirmacash.cihnienreyryanadndeqeuqiupimpmenetn,t,$1$21.25.5mmilliilolinoninininivnevnetnotroierise,s,anadnd$2$.25.5
mmilliilolinonininfixfitxutruerse)s.).NNotoictiecethtahtatSoSuotuhthCCaraorloinlian’as’sefeffefcetcivtievetatxaxrartaeteononinidnudsutsrtirailalprporpoepretrytyisis

toShvtoEeheverLfeirgf7Eiu.g78Cru.e8rTteibmtIiebVmecesaEecusahsuIihegsNiehigtCehiitresEirtsthNhttahehTnaelInotVlhwotehwEeesmeStsm-otC-asottxasRtxisnEtisdantAtudaestuT.et)sr.Ety)r-yfD-rfireIinSednTldyOlysRtsaTttaeIt,eO,DNDelSealwaIwNaraeMr.e.(DA(DeRleaKlwawEaraTerSeisislislitsetdedinin

Recall from Chapter 4 that when taxes are imposed on consumers or businesses the

rtaexcFebFniutgirKgudeuarnnerscea5asn5.8C.b8:iety:IsnhIFindeftddueedusrtasbrltairRcaikealstlPeorPrvboeurospRipneeerepstorsytretysT,fiTonardaxosxentsehtsaoitncifonrSonmsSououm1ut9eh9trshe2,-aer2eas0sts0pet5erecnartinovsnetsleaytatp. eeFtsreoc*sre*,next,2ai20nmc0pr07elea7,sea

in the statSetSacttaoetreporate RtaRaxnaknrka(ot(efo5fd05e)c0r)eases tNhNeetewTt aTaxgaexs of employEeEfefseffcebtciyvtiev.5eT2aTxapxeRrRacteaentet.1 Further,

remeSmoSbuoeturhthCthCaartaortloihnleianataxation1p1rocess creates$i1$n,1d8,i68r4e6c,49t,09c0o0sts and behav3i.3o7.r37a%3l%changes that can
rseuscuhlMtaMisinsis‘SsidsoeisusaisptdhipwipCeiiagrhotlicnoasto’fof4er4r‘ebxucseisnsebssuersdetna$’x1$o,1c2f,r92tea19dx,1i0at,s5t0i0o5on0r. Similarly, iwt2h.2c5ea.85nn%8s%ctareteatgeovanern‘mexecnetsss,
subsidies

burdeTnTe’xeaoxsrasan inefficiency t6h6at creates a ‘w$e1d$,g12e,62’46b,43e,5t3w85e8en the price 2c.2o5.n35s%3u%mers pay and the

priceTbTeunesniennseesssesseeese receive. Th1i0s10type of ‘wedge$’1$c,10r,e30a3t,e35s,45a4d4istortion in th2e.20m.70%7ar%ket by redirecting
rCeasroouWlriWnceeassetsmiVtnaVityrogirirganeiiqnasuipaeesctifoicr ibn1ed41uo4sftfreyr.edFoar tianxstacnr$ce8ed$,3i8t3a,i32nb,32u4r3se4itnuersns fionrtelroecsate1tid.1n6.g7i6n%7to%locthaetinsgtatteo. South
This

negoLtiLoatuoiiousnisaipnaarnoacess is simil1a71r7to the lobbying$e7$f87f3o8,r34t,s0470n7oted in earlier1.1c5h.75a%7p%ters – efforts that

creatGeGeaoderdogirtigaioianal indirect co2s0t2s0that can offset th$e7$67b06e,n03e,83f18it1s of the tax cr1ed.15i.t25%o2r%subsidy.
whicFhlFotTlhroeihrdeiacdraperdoict easpspolifesr.ecTeh2iiv42si4negnctohueratagxescgreredai$tt6e$lr76o7wp,7r6eo,8r6ds38u3tchteiocnoostf for tph1re.1o3.d6s3pu%6ec%ct ibfiyc business for
this this business

than AwAloalbuaalbdmamaotaherwise occu3r53i5n South Carolin$a5$3i5f3,d37i,7re67c6ted purely by1.1f1r.1e%e1%market forces. In

additNioNonro,trhtthhCeCabraeornloienlfianitas of the3t73a7x credit may be $sh4$i94f1t9e,10d,70f17ro1m the targete0d.09b.89u%8si%nesses to existing
pburosdinuKecKestsnieoetnusnt,cukecomykfypolothyeeresb, uosrinc4eo74sns7s.umTheres, swamhiechaan$ga3$al2y3in72si,7c1s,a01na0p0dpilsiteosrt itfhespbeech0ia.0f6vi.c56io%5rf%iormf sconarseumoefrfse,reodr
subsiVdViergisr.ig2niinWaiahile these typ4e94s9of selective or $ta2$r4g21e4,t14e,9d489i8ncentives seem0.04.t84o%8b%enefit businesses

and cDoDenlseaulwamwaerarerse, they instead505c0reate distortions$t2h$3a2t83,r88e,4q80u4i0re us to ask h0o.0w4.84e%8l%se these resources
woulSdoShuoraucvrece:e:NbaeNteaiontnioaanllaAllosAcssaostcoeiacdtiaioitninonoSfooMfuMatnhaunfCuafcaatrucotruelrriesnra(s2(0i2f009t0h)9e) tax credit or subsidy had not been offered
to the* sT*eaTxsaepxsemscimefaiecsausbrueurdseidnnienthstesheesstasitaentset’shla’erlagfreigsreststctiptcyiltaoycnoelyn..ly.

As was discussed in Chapter 5, South Carolina has embedded in its constitution

propertyImItmpaxoprotarastnsatenlsytsl,ym,SeoSnutoturhtahtCioCasraowrloihnlianc’has’sdeifsefcfefrceitmcivtienvaetaetxaaxmrarotaentgeisvisaarlaimolmuossotsctl2a.2s5s.5etsimtiomefsepsgrorgepraetraettirerst.htaIhnan

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smesareinrouiuofsuacsdtidusirasidnavdgavsnaetncattgaoegr,,ei,anifnteeetre-mrinms-sloiefoufitsoitfsabtaaibxlitl(yiFtyItoLtoOatTatrt)tarlcatcwat nawdnadksekpeeapespsineidnudisnutsr1ty9r.y8S.7iS.niTcnehceiSsoSiunotcuhetnhCtCiavraeorloiisnliana

hdaihssacsrtehttehioehnihagirhgyehsientscteatnxatxiivnientahtnehdecotchuoenutfnretyeryoisnoaninnidneugdsouttsritiaartileadlprprorapoteprewtryti,yth,itsitstahstoheuooludrldcboebuenotnyosousfrufpirrcpiirsaielsset.htBahteattiwtietheahnsas
o19noe8n7eofoatfnhtdehel2o0lwo0we0s,ets3pt2ep0rercFacIpaLiptOaitaTinicnaocgmoremeesemsaenandntdsecewocenoronemomniceigcgorgotriwaotwtehdth.r3artaTetsheseininothrtiehgecinocauolnuFtnrItyLr.yO. T applied to

relativeAlyAltlhlatorhguoeguhgnheitwitispisplarponrbtosabbwalbyiltyhnonatomtcrciintriictmiacluamtlhtahrtaetSqouSiuortuehdthCiCnarvaoerlositnlmianeasnesteotitfsits$ta8txa5xrmartaieltletiootont.htehSeilnolcwoewestehtsetinin

thtehetchocrueosnuhtnrotylr,dy,ihtiatshsboheuoeludnldpdredofeginfriientseitsleiyvlyemlymakraekdeuitcietadta, tlferlaoesmatstc$o4cmo5mpmeptieiltliivtoievnefionfrotrhtheteheeaSroSlyuotuh1te9ha9es0ats.t.tSoiSni$cn5ece

GmGeiloeliroogrnigai’ans’sr1a9rta9et5eistiosef$ef1fefcemtcivtiilevlileoylny1i.1n5.25129p9ep9recrfeconertnstaenaldencdNt NocoroturhtnhCtiCeasra.orlToinloianq’asu’saislisfjuyjsuftsoturnutdhnedreFr1IL1pOeprTecrecwnetin,ttha, ara$rta1ete

amtaitlaliraornuonuidnvd1es1tpmepreecnrectn,etnthtmemingiehgwthtbinebdesuustfurffyifciimceinuetnsttoltoocaatatrtetarcoatrctmexmoproaernedinidinnudsuatsrctyro.yu.WntWyorotkhrikanitgnhgtaostoarenrdeaudvcuecreatghtehe

vanavrnaiuroiauolsuustantxaeexmsepsalpaopylpmieliedendttotroiantidneudsoutfsrtyarytwwloeuoalsudtldstewsreirocieuosutlshyleyimsimtpartpoervoaevvetehrtehagestesattdaetu’esr’iscnogcmoempaepctehitivotiefvnetenhsess.sla. st two

SuScuhcha asisginginficfiacnatntrerdeudcutciotinoninintatxaexsesononinidnudsutsrtiarilapl rporpoepretrytywwouoludldobovbivoiuosulsylylelaedadtotoa a

r1 eFrdeuldixcutc(i2ot0ino0n9i)nintatxaxrerveevneuneusesononinidnudsutsrtirailalprporpoepretryt,y,atatlelaesatstiniint iat ilalyll.y.HHowoweveevre,r,thteheovoevrearlalll
r2erWveevhneiluneeubeomtmhayatayxinicnrfeafdcaitcstinaincndrcersaeusabesseiodinoecsneccertehatehteegdrgiosrtwoorwtthitohnrsartaienteitnhienthatelhloesctasattitaoenteboebfgerigensisnoustrocteops ipcfoikcrkucopunpsaunamdnedrms moanroedre
ibnuidsniudnseutssrstyersy,mtmhoevoyevaseresinditnioftfoetrhetenhte.stAsattateat.xeF.cruFerudtirhttehisremormfofsroeert,eai,gfaiftinhtseht etoafxofafibcfiliceailiantlcaotxamxrearatanetdsesraerdaeurecleolswoawebreuersdei,ndet,shsteh’snetnathxtehbeusrtsdatetanete

while a subsidy is a direct payment by the government to the business.
3 Woodward, Miley, and Ulbrich (2000).

Chapter C7:HSAPoTuEtRh5C:aSCrPHoEAlCPiInTFaEI’CRsT7TAaXxRIEnFcOenRtMiSves 113353

completPerdescuamleanbdlayr ytheearso.riTghinealawintheanst aonf uimmbpeorsoinfgotahetrapxrorvaitseiosncsh. eOdunleedwoeisthnogtrandeueadtetdo
mexaarmgiinnael thtaexdreattaeilss winasortdoermtoakoebstheerveintchoamt ethitsaxinpcerongtirveessiisvec.leHarolywaevseerc,owndhabtesptrosoglruetsisoinvitoy
ethxeistpsroinpetrhtey sttaaxtep’sroivnicsoiomneitnaxthsetrcuocntusrtietuistiodnu.eAtos tahesezceornodtabxesotnsothluetifoirnstit$2h,a6s30a onfuminbcoermoef,
aundsatbisefcaacutoseryorfestuhlets:grnaodtuaetveedrymnaerwginianldutasxtryraqteusa.lifHieosw, ethver,feseinicseathnegmotaiartgeidnafleetaxwhriacthe
imnceraenasseist oisveurnspurcehdiscmtaabllestaenpds isnuibnjceoctmteo, absesinhgowtnaininteFdigbuyrep5o.l5it,icmaol spt roeffethreenpceros,greexssisivtiintgy
oincdcuusrtsriaets cloownteirnuienctompeayletvheelisr, tanxoetshbigasheedr olenvtehlse mofanindcaotemdea. sAsetsshmigehnetrrainticoosm; tehulse,vsehlsi,ftitnhge
athveerbaugredetanxorfataexheasrfdrloyminncerweasfeirsmast taolle. xTihstiisngnaftiurmreso. f the current tax is directly contradictory
to the goal of progressivity. So although on the surface it appears that the tax satisfies the

vTeHrtiEcalEeFqFuiItCy AcoCnYditOioFn, TitAreXalIlyNdCoEesNtThIisVoEnSly at the lower income levels reducing the

wealth of these lowest income taxpayers, not the intended consequence.

Economists and policy makers have argued that competition among states to entice

cFomigpuanriees5th.5ro:uSghosuetlhectCivaerioncleinntaiveins cproomvideestanxo:nCet ugarirnetnotthtaexU.rSa.teecsoncoommy.p“aFrreodmttohe

states' point of view each mianyflaaptpieoanr -bienttdereoxfefdcormapteetsin,g2f0o0r 9particular businesses, but the

overall economy ends up with less of both private and public goods than if such competition
was prohibited.”4 So what effects do these policies have on a state's economic growth?

rsotalteeofgotSavexevriennrmcaelenontftisvthessehoFoneudlsdCetaruateRrellraiReemtnceeiotssn/neIaBnrotvrcemaeo, cimDckaeebigstoTrstloraiiwscxhtthBo.5arnTkreIshnfehicSnaoecevvmheietedadpeTxuunalbceixleniwsRcihnaeaensttdethIis2nvea/0fsreBlte0sairc9atsilptcoeuoksndleiiiAtcnesydvsijefsuasu1stng9itdgeg5dae9ttsithTnotesgartxethbhayet

remove the IcnsoucmobmjpeeecttitiooAfnmTsthotaaauxttneitsgoocAvcevurernrrmaingegentbTseatxtwaRregeaentteisntgatAeismnTdfoaouuxrsntitrnivesesttmhreoAnutvg.ehrafgineaTnacxiaRl aintecentives
TaxaTbhlee

reaxiasmesinime$5pw,o0rh0tea0tnhteqr utehsetioe$nc7so1nreogmaircdinbgenee1cf.oi4tn2so%moficthgerosewtpho$al1inc2di5edsevareelopwmoretnht, twh2eh.5ice%hcorneoqmuiircescuossttso.

Whethe$r10o,r0n0o0t state de$v2e9l0opment inc2e.9n0ti%ves lead to r$e2a5l0job creation and2.e5c%onomic growth

has be$en15,t0h0e0subject $o6f 0m4 uch deba4te.03a%mong econo$m37ic7 scholars. The2re.51is%a breadth of
ethceonstoamt$ei2ca0sn,d0li0tle0orcaatul rleevtehla$.t9Th5ha4esseexsatmudiinees4ds.7ua7gv%gaersiet ttyhaotfepcroo$ng5or2ma7misstsahcraovsesltohnegUd2no.i6ut3ebd%teSdttahteeseaffticbaocthy
of usin$g30s,t0a0te0 inducem$1e,n6t5s4to attract5.m51o%bile firms.6$E83co4nomists have 2fo.7u8n%d the evidence

associa$te5d0,0w0i0th the i$ss3u,0e5o4f tax an6d.1o0t%her develo$p1m,6en9t5 incentives ge3n.3er9a%ting economic
growth$Su7en5lc,e0oc0nti0vviencinincge.n7$ti4v,e8s04include di6re.4c1t %economic in$c3e,1n2ti7ves as well as 4ta.x17a%batements, and
are bro$k1e0n0,0d0o0wn by t$h6e,5N5a4tional As6s.o5c6i%ation of Sta$t4e,8D77evelopment Ag4e.n8c8i%es into several

catego$ri1e5s0: ,0in0d0ustry g$r1a0n,t0s,54loan gua6ra.7n0te%es, industri$a8l,3d7e7velopment bon5d.5s8a%nd guarantees,
cuampbitrael$llc2ao0br0po,o0nr0da0st,iognesn,epr$ra1ilv3oa,b5tel5il4gyastpioonnsboor6ne.dd7s7d,%ecvuesltoopmmizeend$t1cin1red,8du7ist7trcioarlptroariantiionngs, ,s5at.an9td4e%ofuthnedrefdinvaennctiunrge

programs.
FUilgtiumreat5e.l5y aallsloofshtohwesse wsehlaetcttihvee aivnecreangteivteasxhraavteesoanree mfoarjovrargioouals, iwnchoicmhesisatnodctraexaetes

ujonbdserinthtehecusrtraetne.t tGaaxbseysatnedmKinraSyobuiltlh(1C9a9ro8l)inian. aInsttuhdeyritghhatt ceoxlaumminnsesit walhsiochshfoirwmsswinhaOt hthioe
taxes and average tax rates would be if the 1959 tax tables were indexed for inflation. The

f4igBuurrsetecinleaanrdlyRsohlnoicwks(1th99a5t ,tphe7)1. 9M5a9ueinydaenxdeSdpiteagxelra(1t9e9s5t)ruancdtuBreartiisk m(2o0r0e2)uqnuiefostriomnlywhperthoegrrebsensievfiets,
eousptweeciigahlltyheaste hciogshtse. rBlaervtiekls(1o9f94in) caorgmueess.thIattkdeeevpelsoptamxenrtatiensceenxtitvreesmperolyvidloewthefogrretahteesltobweneesftitintocohmigeh

iunndemivpildouymalesnitnatrheaes.stHaotew.ever, he notes that state governments often attract firms to areas that have low
unemployFmigeuntr,eli5m.i5tinaglstoheshboenwefsitsthtahtatthaestcauterrmenayt traexceisvyestferomm cthheasregetyspaeslloifncinocmenetivgerso. uCpaslcamgnooreanind
tgTarhoxowemsthp.sthonan(2a0n04i)nfdinedxtehdatrsaetleectsicvheeidncuelnet.ivTeshemeorenllyyreeaxllcoecpatteiornesoisurtchese r$at5h,e0r0th0aningceonmeraeteeraeranleercoinnomthiec
t5aAbrtliec.lesAfsromSoruetghionCalarFoeldienraal iRnecsoermvee Btaanxkespucbloicnattiinounse intoclucdlei:mMbauweyhialned tShpeiegtealx(1b9r9a5c)k, eBtusrstreeimn aanind
sRtoalgnnicakn(t1,99t5h)e, Csutnantienghbaemco(m19e9s5),aanrdeBlaetcisvie(1ly996h)igh-tax state. This has a negative impact on

6 Esinger (1989)
7 Buss (1999a, 1999b, 2001)

11638148 UNLEASHING CAPITALISM UUNLNELAESAHSIHNIGNGCCAPAIPTIATLAILSIMSM

mremacneaiunvfueafcastcuetlrueirncigtnigvperporiponepcretrynttytiavtxeasxinifnitnhtdehectohcuaontutnrthtyre.yI.nIunFmiFgbiugerurereo5f.58.n8wewe epjrpoerbseessnetpnrthotemheeisfeeffedfcetcbivtyievetphrpeorpoteparretgryteytaetdxax

rbaurtasetisnesedsadstaatiasfoftrohrSeoSmuotuahtjeohaersatfseatrcentronsrtsatitnaetsed,sef,ocfirodrcinocgmompwaphraiorsiosrnoe.cnTe. iThveheserartnhakneskisgnicgveievnnetinfvoefro. rtEhtexhaesmtsatitanetisensagraeoreoveuortuot2fo0af0l0alll

5p0r5o0sgtrsaattametses.sT.aThcrehoe‘sns‘entaeltlatxsa’txa’atneasdnd‘Sea‘feifzfefce(tc2ivt0iev0e1ta)txafxrinartdaest’e’anroaerecvacilacdluecnluacltaetdeodbf abosaevsderdoanlolnpgrproropoweprtehtrytyivnavlsautleaudteedagtar$to2$s52s 5

mdomimlliileolisnotinc($(p1$r21o.25d.u5mctmiloliilrolinoemninpinlmoymamcahceihnnitenrleyervyaenlasdndaesqeuqaiuprimepsmeunletn,to,$f1$u21s.25in.5gmmiflilinilolainocninailniniinvncevenentnotitrvoierise,sa,annaddndf$in2$d.25s.5

mnemiglliailotlinovenininmfipxfiatxuctrtuserse)isn.).NcNoertoitctaieicnethitanhtdautSsoSturoituehtsh.CICanraormloinloianr’eas’sreefecffefcnettcivtsievtuetdatixaexsr,artatehteonoenviniiddneudnsuctsretiraiclaolpnrptoirnpouepreetsrytytiosis

osuvogevgreer7s.t78.8tthimatitmestehsheishgeihgephroerltihctahienasnthatehreemmnoosotstienfidnfeudcsutsirvtyre-yf-rifinreinegdneldynleysrtasattiaent,ge,DjDeolebalswawaorarer.ee.(cDo(Dneloeamlwawiacraergeirsoiswlistlhitsetdeadnindin

tdhetehvefilgfoiugprumerebnebtc.eacTuahsueseietifitfseistchttsehealoclworowesssets-Kt-atexanxstutsacttakety.e).c)ounties were analyzed in a 2008 report of state

government incentives to attract businesses. The authors examined the actual incentives

claimed by these businesses and found that there were weak positive effects associated with

taxFFiingicguenurterive5es5.,8.b8:u:ItnIondndulyustsirntiraibalolrPdPreorropcpoeurentryttieyTs TaanaxdxesefosiunnindSSnooouutehvthiedaeenasctseetreonrfnsstpsaitlatleotvsee*sr*, e,2f2f0e0ct07s7in

adjacent counties. The authors argue that since Kentucky’s incentive packages are similar to
most stateSs,tSattthaeeteir findiRngRasnakncka(on(fob5fe05)a0p)plied tNoNeotetTthaTexraxstates.8 FigurEeEf7fef.fc1et,civtpiervoeTvaTidxaexRsRaataesteummary of

the lSitoSeuortauhttuhCreCa,raorwloinlhianicah has 1co1nsistently fou$n1$d,18,t68h46a,4t9,09s0e0lective incent3i.v37e.37s%3%have little effect

anywMhMeisrisesisiisnsispitphipei United St4at4es. Similarly P$1e$t,1e2,r92s19,1a0n,50d050Fisher (20042, .25p.853%85%), using a meta-
aTnhaelyyTscTeisoxe,naxoscaflsutdhee tmhaotst“cthoemmmoo6sn6tlyfucnitdeadmreenvtiaelw$ps1$ro,o12fb,62lt4e6hm,4i3s,53li8i5st8etrhaatturme aanrryivpeu2ab.2t5li.3t5ch%3eo%fsfaimciaelscoanpcplueasirotno.

belieTveTnetnheanstestsehseeye can influen1c01e0the course of$t1h$,e10i,r303st,3a5,t45e4o4r local econo2m.20i.e70s%7t%hrough incentives

and WsuWebssetisdVtiVeirsgirigtnoiinaiaa degree141fa4r beyond anyth$i8$n38g3,32s,u32p43p4orted by eve1n.16.76th%7e%most optimistic
evideLnLocuoei.us”i9sainaana
1717 $7$8738,34,04707 1.15.75%7%

GGeoerogrigaia 2020 $7$6706,03,83181 1.15.25%2%

FlFolroirdiada 2424 $6$767,76,86383 1.13.63%6%

AAlalbaabmama a 3535 $5$353,37,7676 1.11.1%1%

NNorotrhthCCaraorloinliana 3737 $4$9419,10,70171 0.09.89%8%

KKenetnutcukcyky 4747 $3$2372,71,010 0 0.06.56%5%

VVirgirigniinaia 4949 $2$4214,14,94898 0.04.84%8%

DDelealwawaraere 5050 $2$3283,88,48040 0.04.84%8%

SoSuorucrec:e:NaNtaiotnioanlaAl sAssoscoiactiaiotnionofoMf Manaunfuafcatuctruerresr(s2(020090)9)
* T* aTxaexsems meaesausruerdedininthtehestastaetse’sla’ rlagregsetsctitcyitoynolyn.ly.

ImImpoprotratnatnlytl,y,SoSuotuhthCCaraorloinlian’as’sefeffefcetcivtievetatxaxrartaeteisisalamlmosotst2.25.5timtimesesgrgeraetaetrerthtahnan
GGeoerogrigai’as’statxa,xa, nadndalamlmosots4t 4timtimesesgrgeraetaetretrhtahnanNNorotrhthCCaraorloinlian’as’.sT. ThihsispuptustsSoSuotuhthCCaraorloinlianaataat a
sesreiroiuosusdidsiasdavdavnatnatgaeg,ei,nintetremrms sofofitsitsabaiblitlyitytotoatatrttarcatcat nadndkekeepepinidnudsutsrtyr.yS. iSnicneceSoSuotuhthCCaraorloinliana
hahsasthtehehihgihgehsetst atxaxininthtehecocuonutnrtyryononinidnudsutsrtiarilalprporpoepretryt,y,it itshsohuoludldbebenonosusruprrpirsiesethtahtatit ithahsas
onoeneofotfhtehelolwowesetspt eprercacpaiptaitainicnocmomesesanadndeceocnoonmomicicgrgorwowththrartaetsesininthtehecocuonutnrtyr.y.

AAlthltohuoguhghititisisprporboabbalbylynontotcrcitrictiaclatlhtahtatSoSuotuhthCCaraorloinlianasestetitsitstatxaxrartaetetotothtehelolwowesetstinin
thtehecocuonutnrtyr,y,ititshsohuoludlddedfeinfiinteitleylymmakaekeititatatlelaesatstcocmompepteitivtievefofrorthteheSoSuotuhtehaesats.t.SiSnicnece
GGeoerogrigai’as’srartaeteisisefeffefcetcivtievleyly1.15.252peprecrecnetntanadndNNorotrhthCCaraorloinlian’as’sisisjujsutstunudnedrer11peprecrecnetn,ta, arartaete
atataraoruonudnd1 1peprecrecnetntmmigihgthtbebesusfuffifciiceinetnttotoatatrttarcatctmmoroereinidnudsutsrtyr.y.WWorokriknigngtotorerdeudcuecethtehe
vavrairoiuosustatxaexsesapaplpielidedtotoinidnudsutsrtyrywwouoludldsesreiroiuosulsylyimimprporvoevethtehestsattaet’es’scocmompepteitivtievneensess.s.

SuScuhcha asisginginficfiacnatntrerdeudcutciotinoninintatxaexsesononinidnudsutsrtiarilapl rporpoepretrytywwouoludldobovbivoiuosulsylylelaedadtotoa a
rerdeudcutciotinoninintatxaxrerveevneuneusesononinidnudsutsrtirailalprporpoepretryt,y,atatlelaesatstiniintiatilalyll.y.HHowoweveevre,r,thteheovoevrearlalll
r8eHrveoevynetuneetuaeml. m(a2ya00yi8n)infafcatctinicnrceraesaeseonocnecethtehegrgorwowththrartaeteininthtehestsattaetebebgeignisnstotopipcikckupupanadndmmoroere
i9nPidneudtesurtssrtyarnymd moFivosehvseersin(2itn0ot0o4th)tehaesmtsaetttaae-t.aenF.auFlyrustrhistehiresmrwmohroeerr,eei,tfhiefthtreheseoulfotfsficfoiifcaivlaatlraitoxauxsrarptaaetpseesrasraeorneloalwotowepreiecrdea,dret,hteehxneamnthitneheedstsaatntadete

summarized using a variety of statistical techniques to test whether the overall findings are statistically
significant.

Chapter C7:HSAPoTuEtRh5C:aSCrPHoEAlCPiInTFaEI’CRsT7TAaXxRIEnFcOenRtMiSves 113375

PreFsuigmuabrely 7t.h1e: oErimginpailriicnatelntStoufdiimepsoosifngTaaxtaIxncraetnetisvcheedEufleficwaitchygraduated

marginal tax rates was to make the income tax progressive. However, what progressivity
existsSintutdhye state’sRiengcioomn/eTtiamxestructure is due to Fthiendzienrgostax on the first $2,630 of income,
aAnmdbrboesciauuss(e19o8f9)thNeatgiorandaulastteuddymoafrginal tax rateNs.oHevoiwdeenvceer,ofsiinncceentthivee immapragcint aoln tax rate
increases over suchdesvmelaolpl msteenpts iinnceinntciovmese,, as showmnaninufFacigtuurrieng5.v5a,lumeo-asdt doefdthoer upnroegmrpelsosyivmiteynt,
occurs at lower in1c9o6m9e–1l9ev8e5ls, not higher levels thoufsinsucgogmees.tinAgt thhaigt htaexr iinncceonmtievelsewveelrse, the

average tax rate hardly increases at all. This natureinoeffftehceticvuer.rent tax is directly contradictory

tTorothgeang(o1a9l9o9f) progNraetsisoinvaitlys.tuSdoyaolfthsotautgeh on the sGurefnaecrealitfisacpaplepaorlsictyhafot utnhde ttoaxbesamtiisldfileys the

vertical equity conedciotinoonm, iict grreoawllyth daoneds this onlyefaftectthievel,owwheirleitnacrogmetedleinvceelnstirveedsurceidnugcethde

wealth of these lowdeesvteilnocpommeent apxrpoagyraemrs,s,not the inetecnodneodmciconpseerqfouremncaen.ce (as measured by per

1979–1995 capita income).

GFaibgeuanred 5.5: So3u66thOhCioafriormlisn, 1a9i9n3–c1o9m95e taxS:mCallurrerdeuncttiotnaixn ermatpelosymcoenmt bpyabruesdinetsoses

Kraybill (2002) inflation-indexedwrhaitcehsr,ec2e0iv0ed9Ohio’s tax incentives.

Fox and Murray Panel study of impacts of No evidence of large firm impacts on local

(2004) entry by 109 large firms in ecInocnoommey.Tax Rates/Brackets if 1959 Tax
the 198C0usrrent Income Tax Schedule was Inflation Adjusted to
Edmiston (2004) Panel studRyaotefsl/aBrgraecfkiremts
Employment impac2t0o0f9large firms is less than

Taxable Incomee1n9t8rA4amn–Tc1oae9ux9nin8t Georgia, Tax Rate grosTs ajoxb creationA(bvyeraabgoeuTt a7x0%Ra),teand thus
Average taxAimncoeunnttives are unlikely to be efficacious.

$5,000 $71 1.42% $125 2.5%
Hicks ($21000,40)00 cPaasnien$lo2sst9ui0ndy15ofcoguamntii2ne.gs90% Nwoith$em2th5pe0looypmeneinntgoorfinacloarm2ge.e5ig%mapmabcltisngasfsaocciliiatyte.d

$15,000 (mat$ch6e0d4 to 15 non4-g.0a3m%bling The$re37is7significant emp2lo.5ym1%ent adjustment
$20,000
coun$ti9e5s)4 4.77% acro$s5s2i7ndustries. 2.63%

$30,000 $1,654 5.51% $834 2.78%
LHaicFkasiv(e$250a0n0,d50)00
PMaEn$eGl3As,0tut5ad4xyionfceMnticivh6eigs.1,a0n%’s iTnadx$u1sint,6rci9ee5nst(iwvehsohleasdalneoainm3dp.3ma9ca%tnounfatcatrugreintegd), but
$75,000
199$54–,2800044 6.41% did$l3e,a1d27to a transient in4c.r1e7a%se in construction
$100,000
$6,554 6.56% em$p4lo,8y7m7ent at the cost 4o.f8r8o%ughly $125,000
$150,000
$10,054 6.70% per$j8o,b3.77 5.58%

Hicks $(2200007,0a0) 0 Pan$e1l3s,t5u5d4y of Calif6o.r7n7ia%’s Th$e1r1e,c8e7i7pt of a grant di5d.9in4c%rease the

EDA grants to Wal-Mart in likelihood that Wal-Mart would locate within

Figure 5.5 tahleso19s9ho0sws what the average taaxcroautenstya(raebofourt v$a1r.2iomusilliinocnogmeenseraanteddtaax1e%s
under the current tax system in South Carolina. Inintchreearsieghint tchoelupmronbsaibtilaitlysoa schoouwntsywwhoautldthe
taxes and average tax rates would be if the 1959 rteacxeitvaeblaesnewwerWe ailn-dMeaxretd), fbourt itnhfilsahtiaodn.noThe
figure clearly shows that the 1959 indexed tax rateeffsetcrut cotnurreetiasilmemorpelouynmifeonrtmolvyeprarlol.gressive,

especially at higher levels of incomes. It keeps tax rates extremely low for the lowest income

iHnidcikvsid(u2a0l0s7ibn)the sPtaatnee. l study of entry by large No permanent employment increase across a
Figure 5.5 raelstaoilsehro(wCasbtehlat’st)he current tax qsyusatseim-excphearrimgeesntaalll pinacnoelmoef galrloCuapbsemlao’srestionres

taxes than an indexed rate schedule. The only excferopmtio1n9i9s8tthoe 2$050,30.00 income earner in the
tSaoburlcee.: HAicsksSanoduSthhugChaartro(2l0i0n7a). income taxes continue to climb while the tax brackets remain
stagnant, the state becomes a relatively high-tax state. This has a negative impact on

11838168 UNLEASHING CAPITALISM UUNLNELAESAHSIHNIGNGCCAPAIPTIATLAILSIMSM

mmanaunfuafcBatcutsrusirni(gn1gp9r9po9rpoae,pre2try0ty0ta1tx)axicnliantihmtehsecotchuoanuttnrtthyr.eyI.rneInsFeiFagriugcruheret5h.5a8.t8wstweateperpedrseevsnetnlothptehmeeefenffetfceatcgivteienvcepireposrpoceporetnrydtytuactxat x

rhaartasetsleisdttaldetaateafcoofronrSoomSuoitcuhtevhaaeslatuseetrenarnsdtsattaehtsae,tsf,sotfraotrceocgmoompvaperarinrsiomsnoe.nnT.tsTheshheroarunaklndsknsgoigvtievmneenfdofdrolrtehtweheistthsattapetsreisvaraaetreeoluootucotaftoiaof lnalll

5d0e5c0sitssaitotaentses..sT.AThcehce‘on‘rendteintagtxa’txo’anaPdnodo‘el‘efeffeefcettciavtlie.ve(ta1tx9a9xr9art)ae,t’eth’areaeraeccactluacaluclluailtmaetdpeadbcabtsaeosdfedodneovnperplorpoempreteryntytvavsltaurlaeutdedgaitae$ts 2$i52s 5

mofmitlelinilolinoun(k$(n1$o21w.25n.5mbmielcliilaoluinosneintihnmemsaecahecichnoiennreoyrmyainacdndeeqveuqeilupoimpemernsetn,lta,$c1$k21.t25h.e5mnmielliciloelisnosnairnyininsikvnievlnlestnotroierised,se,annatidnfyd$2t$h.25e.5

mapmipllirilolipnorniiantinefimxfitxeutrhueorsed)s.)a.NnNdotohictaiecvethtlaihmtatSitoSeduotudhtahCtaCafraorrloinalian’asl’ysesfiefsfe.fceTtcihvteievtetoaotxalxrmartoaestteoonofntiennidnudsutesrdtiraiblaylprepocrpoenproetrymtyicsis

odevovevreelr7o.p78m.8teimtnimteasegsheihngichgiehrsertihstahthnaenthetechoemnmomsotsictinidnmudpsutasrctyrt-yfs-rtfiuredineydn.ldylystsattaet,e,DDelealwawaraer.e.(D(Delealwawaraereisislislitsetdedinin

thtehefigfiugTruehrebesebeceaceuacsuoesneiotimitsistchtehimeloplwoawcetsets-t-autxdaixsetsattaoet.fe)t.e)n contain serious flaws. As a result, they may

overstate the employment and economic gains associated with a new or expanded plant.

Several issues should be noted here, first there is no one accepted methodology for counting

jobFsFiagingudurienrce5om5.8.e8:. :IWnIndhdiuleustnsretirwaialjolPbPrsormopapeyretbryetycTrTeaaaxtexedsebsiynitnhSeSotaourutghettheeaedasftisretmrenrtnhsetrsaetatiestseli*sk*,el,2y20to007be7a
freac-silhiutyffilninSgCtSaaottnafetttoehne, lMociasRlsRailsanasbkinpok(pro(iff,oo5fwr0c5h)e0e)irne an epNfefNeortcreetTtntaTotxaofxifllththeewnoewrkejorEsbEfsef.meffceIptncilvto2ievy0eeT0daT1xa,lixNRveRaisdtasetaaenndopweonrekdeda
90

in thSe oSfuiovtuhethCcoCauraonrltoinleiasnasurround1i1ng the plant (P$e1a$,v18y,68426,0490,0970)0. Thus, only 130.37p.37e%3rc%ent of the jobs at

the nMewMisisNsisiissssispaipnippilant were ta4k4en by individu$al1$s,12w,92h19o,10,e50i05th0er were previ2o.2u5.s85l%y8%unemployed prior
tinocolupTdeTeinnxiegnaxgsaostuhteopflasntattoer(mHoicvk6es6d atnodMSahduisgohnarCt$o21$u0,12n0,6t27y46),,.43M,5I3t8i5si8ssisnsoiptpki,nofrwomn2f.m2r5o.3o5m%r3e%tdhiestaimntplaocctastitoundsy,

whetTheTrnenthenseessejsoeebes that work1e01rs0 leave are fill$e1d$,10,r30e3m,35a,45in44vacant, or are2.20e.l70i%m7%inated when they

moveWWteosettshVteVinrgieriwgniinajoiab openin1g41s4. Further, the be$n8e$3f8i3t ,3o2,f324t3h4ese jobs to th1e.16s.7t6a%7te%can be mitigated
dbeepneeLfnidLotsiuonoiugsfisanoinaenanwawjhoebtshearrelasubbo1jr7e1c7mt itgoraotveesrsftraotmemoe$un7$tt87oa38nf,34ds,04tda70ot7eubtloe fciollunthtiensge1w.1p5.oh75se%7in%tioinndsi.reFcitnoalrlyri,ptphlee

effecGtsGeaoerroegrigeaviaaluated. The i2n0d2i0rect effects attem$7$p67t06t,0o3,83m18e1asure the eco1n.1o5.m25%2ic%benefits the new

jobs FcrlFoelaroitrdeiadtharoughout the e2c4o2n4omy. This conc$e6$p76t7w,76i,8l6l38b3e explained in1.1m3.63o%6re%detail in the case
studyAbAlaeOlblaofabtwmeanm.a afirms that r3e53ce5ive these selec$t5$iv35e3,37i,7n6c7e6ntives are s1u.1b1.j1e%1ct% to little or no
accouNnNotarotbrhtilhCitCayraoarlnoindlianraarely c3re73a7te the number o$f4$j94o19b,1s0,70o17r1the hourly w0a.g09e.89%8ra%tes they promise.

ThesKeKefniertnmutcuskcwykiyll often mov4e74t7heir operations e$l3$s2e37w2,7h1,e01r0e0when the tax0i.06n.5c6e%5n%tives or subsidies
scpeeasceiVaVliitrozgireigdneiinxapiihasyt.sicInal pasasretitcsu4wla94irl9,l r‘eclaolclatceenbteecrasu’ $se2a$n42tdh14e,14yh,94ic8g9ah8n-teeacshilycoambapna0dn.o0i4en.84s%8o%ntheastiteeminplfoayvofreowf

anothDeDerleianlwaswaeraerceh of a larger5m050ore attractive inc$e2$n32ti83v,88e,48p04a0ckage (LeRoy02.040.840%85%).

SoSuoWrucrehc:e:nNaNtahioteniosanelaAlssAessloescociacttiiaivotneionoifnoMcf eManautnifuvafceatsuctruearrtestrr(sa2c(02t009i0)n9d) ividuals from other states or cities to the
local*lT*aabTxaoexrsefmsomeraceseau,sruearddeddiniitnthiotehnesatasltaeptsue’sbla’lrliagcregssetescrtivtcyiitcoyenoslyn.mly.ay be needed to accommodate them. If the new

company in the area has been granted relief from state and local taxes, and the tax revenue
GsgpeGeenoenerodrgariingtaeIgi’amdsI’wmpstfaroiptolxarlom,txrfaa,tanantlathnldlnyetodla,ynnla,meSolwmoSothusooefttusirhr4ttmhe4tCximitCdasiromtaeoiersnelosigsgnlnirgabneo’ruaatse’stacseietnorefevetrfshfeetfsracheetnactsihvtn.NieeTvNsoeehrtoitaasrhtxtadhtCxdarCxiaatrritaasooerhtnloeiianiflsiltaniis’ncaasog’l.asmsTlm.tmsoTh,asoihytstshistpde2uep.2i5stun.st5tcrsStorieyomStaiuomasetuesshedtsmhCggrCaagoenrravaoeyrtealoeirjtnrloneianbmrtasahettaahannatsat na
sthesereiroiniuocsuesdnitdsiviasdeasvdagvniavtnaetgnaegt,eoi,ntihnteetrnemremws soffoirfimtsitasarbaeibliintlyitteytnodtoeadtatrtttaorcactcratenaadtnedk. ekeepepinidnudsutsrtyr.yS. iSnicneceSoSuotuhthCCaraorloinliana
hahsasthtehIehfihgthihgeehseetsfftiactxaaxcinyintahsteshoeccociauotnuetndrtyrwyointohnintihdneudssuetsrttiyarilpaelpsrporopofeprpetorytl,yic,itieitsshsoihsuoliudnldbseebreinoonuossusdruoprurpibrstiesietthtbahetagtistiththahesas
oqunoeenseotifootfnht,ehwelohlwoywetshetespyt eparerrceacspaoiptapitoainpicunolcamormewseisathnadnstdeacteeocnogonomovmeicrincgmrgoerwnotwtsh?thrTarthaeetseasinnisntwhteehrecogcuooneustnrtbyr.ayc.k to Chapters
3 and 4AAaltnhltdohuothguehghidtiistisciuspsrpsoirbooanbbaolbyflynbonutositcnrceitrsiscteiacslatlehmtahtpatSlooSyuoitnuhgthCrCaersaoorluoinrlicaneassestteotitsliotstbatbxayxrafrtoaertettoatoxthtebhreleoalwokwesseatsntindin
tohttehheercoscuuobnustnritydr,iye,sittithsahstohauodluddldtodedofewinfininteeitrlesy’lypmrmoafkaietkse.iTtihtaitsatlloelbaebsatysitncogcmoompftepeteniticvtrieevaetfeofsroarthbteihdedSionSguotuwhtehaaersabts.et.tSwiSeniecnnece
GtwGeooeroogrrigami’aso’srraertaestteaistiesefaefnfefdcetcoivtrievlleoylcy1a.l15.g25o2pveeprrecnremcneetnntatnsadntdhNaNot roctarhtnhCiCanrcaorrleoianlisane’ast’hsiseisjvujasultustuenuodnfedrtehr1e1pinepcrecerencnteitnv,tea,sartahrtaeete
afitarmtaraocrauonnudnexd1tr1apceptrefcrreocnemtnttmhmeigsihegthgtobvebeersnusmfuffiefcniicetineetnntttiotiteoas.tatrttarcatctmmoroereinidnudsutsrtyr.y.WWorokriknigngtotorerdeudcuecethtehe
vavrairoiuosuNstautxamexseesraopaupslpielsidteudtdoiteoisnidnpudosuitnsrttyryowuwotuotlhudaldstestrheiroeiruoesulsaylryeimicmplerpoarrvoevpetohlteihtiesctsaatltaetb’ese’nsceocfmoitmspepftoeitrivtuievsneinensgess.sse. lective
financiaSluSicunhccheanastiisvgiengsinf.1icf0iac“naGtnotrevrdeeudrncutocirotsino, nimninatyatxoaerxsse,solnoegniinsidnlaudtsuotsrrstiar,ilaaplnrpdorpoceporeutryntycwiwlouomludeldmobbovebirvosiuojsuulsysltyilfeylaedathdteotsoea a
rpeurdebudlciuctciotiinnovneinsitnmtaetxanxtrservoeenvneutnheuesesgornoonuinniddnsudsutthsrtiaratilaplprripovrapotepere-tsryte,yc,taotartledlaeescatisstiioninintsiatiltaloyll.yin.HvHoeswotweivenevrea,r,cthotemhemovouevnreiatrlyalll
rerveevneuneuemmayayininfafcatctinicnrceraesaeseonocnecethtehegrgorwowththrartaeteininthtehestsattaetebebgeignisnstotopipcikckupupanadndmmoroere

i1n0iSdneudesutBsretyrnynmemtotvoanevdsesDiniitLnootortehntezhoes(ts1at9tae8t.3e)F., uFErustirhntgeherermr(m1o9ro8er9,e)i,,fBiftuhtsehs e(o1fo9f9ficf9iiaca,il2a0tla0tx1a)x,raErtlaelitssesaanraderReloolgwoewersree(r2de0,d0t,0h)te,hnSeantihzteh(2es0t0sa1tta)e,te

and Calcagno and Hefner (2007).

Chapter C7:HSAPoTuEtRh5C:aSCrPHoEAlCPiInTFaEI’CRsT7TAaXxRIEnFcOenRtMiSves 113397

result inPrjeosbusm, ainbclyomteh,eanodrigtainxalrevinetneunets othf aitmapreoseisnsgenatiatlatxo rtahtee esccohneodmuilce awndithsogcrialduwaetelld-

mbeairngginoafl atacxomramteusnwityasortostmataek”e(Pthoeoleinectomale. 1t9ax99p, r1o)g.rHesisnikvlee.yHeot wale.v(e2r0, 0w0h) actlapimrogtrheastsibvoithy

elexgisistslaitnortsheanstdatet’hseinpcuobmliec taaxrestrnuoct urperoisviddueed towtihthe zeenroutgahx oinftohremfairtisotn$2f,r6o3m0 oefcionncomiec,

adnedvelboepcmauesnet aogfenthcieesgarabdouat ttehde emcaorngoimnailc itnaxcenratitvees.s oHfofewreedvearn,dscinacllefotrheanminacrgreinasael itnaxaurdaites

ionfctrheeasesaogevnerciseusc. hWshmilaellsestveeprsalinauitnhcoorms ed,oacsosnhcoewden tihnaFt itgaurgreti5n.g5,hmasosat poofltihtiecaplrcoogmrepssoinveitnyt

otocciut,rsthaety lfoawiletroirneccoomgenizlevethlsa,t ntaortgehtignhgerinldeuvsetrlsiesofmianycowmeell. bAet ahnigihnerfficniceonmt eallloecvaetliso,nthoef

arevseoruagrceetsa.1x1 rate hardly increases at all. This nature of the current tax is directly contradictory

to the gIonadluostfripersosgereeksisnivgitpyr.efSeoreanlttihaol utrgehatomnentht edosmurifnaactee ittheapppoelaitriscatlhaptrotchesstabxecsatuisefievsottehre-

vtaexrptiacyael resqhuaivtye vcoernydiltiitotlne, initcerenatilvlye tdooebse twheisll oinflyormatedtheabloouwt ethr einccoosmtseaslseovceilasterdedwuictihngthethse

wtaexailnthceonftitvhesperologwraemstsinancodmtoe ctarexaptaeyaenrsy, mnoetatnhseoifntoerngdaendizceodnosepqpuoesintcioen. . The jobs ‘created’ at

a new plant are easily visible to the state or local community; they will not see the jobs that

aFreigloustreels5ew.5h:erSeoinutthhe Cecaornoomliynaduientcoothme ehigtahexr:tCaxubrurrednentstiamxporsaetdesoncoothmerpbaurseindestsoes
and consumers. Nor dporothdeuyicnesfelreaeatthiloeonsuc-taiprnuctde eraexnsdeodugrcrroeaswtetbhesi,nb2gei0anl0glo9csapteendt away from productive
ventures that could instead on lobbying

government officials to obtain these favors. In addition, taxpayers may be unable to see that

(fthHineiaicrnkcfseuatutnhrdeeSstahuxubgsbihdialilrestsw2d0iil0vl7eCb)r.etueRrhdraiegttnoehtswe/IrBanrircndaocmotkhreeedtTesorawxtonearms oorfItnipzcSoeoclmhiateniecddaTulsalleeyxrwvRiniaacfsetleuIste2nh/n0fBelt0aripa9atilucobkpnelriiAtcvsdadijftuee1bs9ctteo5idms9stTupoeaadnxietos

WTHaAxaTblAe IRncEomTeHEAEmTCoauxOnNt OAMveIrCagIeMTaPxARCatTeS OAFmToaTuxnAtRGETAEvDerTagAe XTax Rate

INCEN$5T,0IV00ES? $71 1.42% $125 2.5%

$10,000 $290 2.90% $250 2.5%
woAfilttahhtotprura$gocA1hmtil5nti,hasg0oxe0sub0ignuohscfieantnatettxsrivaseciensts$i,cn6hepg0anr4vtobievvueisldoisninnehggsasbvejeose4b,ln.sop0nrea3ongn%vddibodereisenengrdicjeaohnsbidnstohgar$esnt3ehdh7dei7eganshstrwaicttaehhy,einmthogoigptshhrteowpssauptyabe2trl.eit5icot,1ym%f,piwornosaitstnhppceueprbrietolyximc,piesretss

fcionnasnicdee$r2et0hx,ep0me0r0tbsadcopnoslidc$ey9r.5I4thheams albraedad4yp.7ob7lei%ceyn.dIistcuhsassed$a5lhr2oe7awdytaxbienecnendtivsceus2s.t6she3ad%t tahrogwet stpaxecific

icnocmenptainv$ie3es0s,0ct0rhe0aatte tianregqe$ut1i,t6ise5ps4e, cciofimc plcico5am.t5ipo1an%nsieasnd cirneeaftfe$ic8i3ein4necqieusi.tieFsu,rthceorm, 2pth.l7iecy8a%tsiohnrisnk atnhde tax
irfbneuadensfuecf,ctiicionti$hneg5uns0scto,ia0efsxs0hs.0itrfaeFttivuenergntghuoteehvr$e,ea3rtvnb,h0amue5iryle4danebstnhl.erFionfifnkoarttalhlt6xyhe.e,1est0tahb%axeanrsdebi’casrsefld,uitunttlchceiutn$iseog1vn,si6shtda9iexfo5ntficnreesgvttaehtthneaeut egtbaouarvgrvedearetin3elnma.d3boe9lifne%tct.faeoxnFretiinsvtahealeslnydbb, raisnigc
tghreorwe’tsh$li7int5tl,te0h0ee0vfiodremncoef$tg4ho,a8to0dt4arpgaeytiendg ijno6cb.e4sn1,t%iavsesdebmrionngstg$rr3aot,e1wd2t7hininthteheprfeovrimouo4sf.1fig7go%uorde. pFaiygiunrge 7.2

jroebpso,rtas$s1dt0he0em,0ao0vn0esrtraagtedci$on6st,5hp5ee4prrejovbioutos f6ai.gt5tur6ar%ec.t Faiugtuorme o7b.$2i4ler,e8p7fao7crtsortihees atvoertahgee4v.c8ao8rsi%topuesr sjotabtetso that
caoatftfrreacrcoetdm$a1ipun5atc0one,mi0ne0otsi.0bvielse tfoaca$to1trr0ai,ec0st5ft4oorethigenvcaar6rio.c7uo0sm%sptaatneisesth. at $o8ff,3er7e7d incentives to5.a5t8tr%act foreign

$200,000 $13,554 6.77% $11,877 5.94%

Figure 5.5 also shows what the average tax rates are for various incomes and taxes
under the current tax system in South Carolina. In the right columns it also shows what the
taxes and average tax rates would be if the 1959 tax tables were indexed for inflation. The
figure clearly shows that the 1959 indexed tax rate structure is more uniformly progressive,
especially at higher levels of incomes. It keeps tax rates extremely low for the lowest income
individuals in the state.

Figure 5.5 also shows that the current tax system charges all income groups more in
taxes than an indexed rate schedule. The only exception is the $5,000 income earner in the
table. As South Carolina income taxes continue to climb while the tax brackets remain
stagnant, the state becomes a relatively high-tax state. This has a negative impact on

11 See Dewar (1998), Buss (1999a 1999b), Wiewel (1999), and Finkle (1999).

11380188 UNLEASHING CAPITALISM UUNLNELAESAHSIHNIGNGCCAPAIPTIATLAILSIMSM

mmanaunfuafcatcutruirnigngprporpoFepreitgrytuytartxaexin7in.th2teh:ecUocuo.nSutnr.tyrA.yI.unIntFoiFgiPugruleare5n.5t8.8Iwnweveperpsersteemsnetentnhtethsee*feffefcetcivtieveprporpoepretrytytatxax Announced S
Incentives
rartaetsesdadtaatafofrorSoSuotuhtehaesatsetrenrnstsattaetse,sf,ofrorcocmompaprairsiosno.nT. TheherarnaknsksgigvievnenfofrorthteheIsntsaitttaeitaselsaEraemreopuoltuootyfomafelalnllt $1
5m0m5il0sliiltoslaittnoaetns(e.$s(CT.1$2Toh1.me2h5.e‘5pnm‘aenmintellyitilaoltxiano’xn’ainniandnmd‘mae‘cfaefhcfeifhcneitecnirvteSyiervtyaeatatnatexdanxdrearqteaeuqt’eiup’aimrpaemreecAneactnnl,actnl,$uco1l$uau21ltna.e25tcd.e5edmbmmabielsalienilsodlteinodDonnoianntipneirpnoirvnpoevepnreettnryottryovEieravissleatu,silemu,adenaaddnattdea$$t2$2$.2552.55
mmilliilHolinoynuinnindfaixfiitxutruerse)s.).NNotoictiecethtahtatSAoSluoatubhtahmCCaaraorloinlian’as’sefeffefcetcivtiev2et0a0txa2xrartaeteononinidnudsutsrtiraila2lp,r0po0rpo0epretrytyisis
ovoevrer7.78.8timtimeseshihgihgehrerthtahnanthtehemmosotstinidnudsutsrtyr-yf-rfireinednldylystsattaet,e,DDelealwawaraer.e.(D(Delealwawaraereisislislitsetdedinin
thtehefigfiugruerebebceacuasueseitiitsisthtehelolwowesets-t-atxaxstsattaet.e).)

FFigiguurere55.8.8: :InIndduustsrtiraial lPProropperetrytyTTaaxxesesininSSoouuththeaeastsetrenrnstsatatetse*s*, ,2200077

StSattaete RRanaknk(o(fo5f 05)0) NNeteTt aTxax EEffeffcetcivtieveTaTxaxRRataete

SoSuotuhthCCaraorloinliana 11 $1$,18,6846,49,090 0 3.37.37%3%

MMisissisissispipipi 44 $1$,12,9219,10,50050 2.25.85%8%

TTexeaxsas 66 $1$,12,6246,43,53858 2.25.35%3%

TTenIennenpseassresteieceular, the fig1ur01e0shows that co$st1$p,10e,30r3j,o35b,454ra4nges from a lo2w.20.70o%7f%$59,000 to a high
of t$h1eW9Wm2e,si7edts3dVt0lV,eirigionrifgtneitirnhaeiisastignrgoluypew1n4o1itu4hgehxtpheenhdiigtuhreasndju$ls8o$t3w8o3v,b32eo,r32t4$h384o1c,c0u0r0i.nAAs leaxb1pa.l1m6a.i76an%.7eS%doaubtohvCea, rgoilvienna is
in

the dLifLofiuociusilsatineaasnain accounting171fo7r new jobs and $in7$c87o38m,34e,04u70s7ing economic1i.1m5.75p%7a%ct studies, and the

geneGraGel oecroognrigacilausion from the2e02c0onomic literatur$e7$t6h70a6t,03s,83e1l8e1ctive incentiv1e.s15.h25a%2v%e been shown to
epcroodnuFocmlFoelirocfirdebiwadeanifefaint ytobceonveefirtst,h2ie42t4hisignhoct ocsletsarpwerhjeot$bh6.$e76r7th,76e,86s3e83firms are gene1r.1a3.t63in%6g%enough

AAlaTlbaoabmafmuarather examine353t5he issue, Figure$5$735.33,37,p7r67e6sents the tota1l.11.e1c%1o%nomic incentives

proviNdNoedrotrhbthyCCathraoerloiSnlioanuath Caro3l73in7a state governm$e4$n94t19f,1r0o,70m1711994-2007. O0v.09e.8r9%8th%is 14 year period
smtailtleiKosnKepneeintnnutd2cui0knc0ykg7yfaolrmionscteannti8v4ef74so7lhdaisncirnecarseea.seMdosf$rt3o$n2m3o72t,a71ob,0v1l0yer0in$31299m9 iallnidon200.i060n.5061%5s9%p9e4ndtiongoivnecrre$a2s5e0d
by laVrVgiregirigpnieinaricaentage change4s94,9more than doub$l2$in42g14,14t,h94e898spending from0.04e.84a%8c%h of the previous

yearsD, De1l0eal1waawanraedre118 percent,5r05e0spectively. Whil$e2$n32o83,s88t,a48t04is0tically signifi0c.a04n.84t%8c%orrelation appears
to exSisoStuorbucreec:tew:NeaNetaiontnioasnplaAel snAsdsosicnoiacgtiaiootnionnofeoMcf oMannauonfmuafcaitucctrueirrnescr(se2n(02t00i9v0)9e)s and employment, it is interesting to note
that *inT* aTxtahexsems ymeeaeasaurssruerdefodinlilntohtewhesitnasgtaetset’shla’erlasgregsetlscatirtcygiteoynoliynn.lyc.reases in spending the percentage change in

employment is negative. Thus, while spending in South Carolina on economic incentives

increaseIdmImpsouprbotsratnatnlytil,ayl,SlyoSuootuvhtehrCCarao1rlo3inl-iyan’easa’rsefpefefefrceitocidvt i,eveetmatxapxlorayrtameteinsitsaalanmldmo soptsetr2s.2o5.n5atlimtiimnesceosgmrgeraetdaeitrdertnhtoahtna. n
GDGeoseprogirtiegai’tash’estataxas,xsa,unardanndaclaemlsmoosofts4pt o4tliimtcimyesemsgargekraetraestrettrhhatahtnainNcNoernottrhitvhCeCasraworloinluianld’as’.csrT.eThaithseispjoupbtusstsSaoSnudotuhtihCgChareaorrloinlicanoaamtaaet a

slesvreieroliuso,sunsdeidistiahsdeavrdavhnatnsatgkaeg,peit,npintaectremrwmsisothfoftithsietsasbapibelintlyditiytnogto.atatrttarcatcat nadndkekeepepinidnudsutsrtyr.yS. iSnicneceSoSuotuhthCCaraorloinliana

hahsasthtehehihgihgehsetst atxaxininthtehecocuonutnrtyryononinidnudsutsrtiarilalprporpoepretryt,y,it itshsohuoludldbebenonosusruprrpirsiesethtahtatit ithahsas

onoeneofotfhtehelolwowesetspt eprercacpaiptaitainicnocmomesesanadndeceocnoonmomicicgrgorwowththrartaetsesininthtehecocuonutnrtyr.y.

AAlthltohuoguhghititisisprporboabbalbylynontotcrcitrictiaclatlhtahtatSoSuotuhthCCaraorloinlianasestetitsitstatxaxrartaetetotothtehelolwowesetstinin

thtehecocuonutnrtyr,y,ititshsohuoludlddedfeinfiinteitleylymmakaekeititatatlelaesatstcocmompepteitivtievefofrorthteheSoSuotuhtehaesats.t.SiSnicnece

GGeoerogrigai’as’srartaeteisisefeffefcetcivtievleyly1.15.252peprecrecnetntanadndNNorotrhthCCaraorloinlian’as’sisisjujsutstunudnedrer11peprecrecnetn,ta, arartaete

atataraoruonudnd1 1peprecrecnetntmmigihgthtbebesusfuffifciiceinetnttotoatatrttarcatctmmoroereinidnudsutsrtyr.y.WWorokriknigngtotorerdeudcuecethtehe

vavrairoiuosustatxaexsesapaplpielidedtotoinidnudsutsrtyrywwouoludldsesreiroiuosulsylyimimprporvoevethtehestsattaet’es’scocmompepteitivtievneensess.s.

SuScuhcha asisginginficfiacnatntrerdeudcutciotinoninintatxaexsesononinidnudsutsrtiarilapl rporpoepretrytywwouoludldobovbivoiuosulsylylelaedadtotoa a

rerdeudcutciotinoninintatxaxrerveevneuneusesononinidnudsutsrtirailalprporpoepretryt,y,atatlelaesatstiniintiatilalyll.y.HHowoweveevre,r,thteheovoevrearlalll

rerveevneuneuemmayayininfafcatctinicnrceraesaeseonocnecethtehegrgorwowththrartaeteininthtehestsattaetebebgeignisnstotopipcikckupupanadndmmoroere

inidnudsutsrtyrymmovoevsesinitnotothtehestsattaet.eF. uFrutrhtehremrmoroer,ei,fifthteheofofficfiicailatlatxaxrartaetsesaraerelolwowereerde,dt,htehnenthtehestsattaete

Chapter C7:HSAPoTuEtRh5C:aSCrPHoEAlCPiInTFaEI’CRsT7TAaXxRIEnFcOenRtMiSves 113319

FiguPrreesu7m.3ab:lySothuethorCigainraolliinntaenSt poefnidmipnogsinogn aIntcaxenratitevesschCedoumle pwairthedgrwadiuthated
aemxnRadi(ers2gta0sbil0neiI1ancnlaMctuhtesaeniexltlsiitoorvaanefTttse)eo‡t’tshsaelwiEnagccsoroRanmEtdCoeomueamoalimstctaItepanxdpklceoseemtrynrtuJathmicroe%vgtbueeiin‡rCnneachtloiasnamtagdnexeudietnraatITxotnoetptscah.roleoHmgzroeeerwsoseGitvvaeerx%r.o,oHwCnshointtawhhcneeegvefetiihrnrs,et what progressivity
State and Local $2,630 of income,
s (Millions) margi%nalChtaxngerainte
118 incrYeaesa$er1s1o8v†er sucIhncsemntaivlelss$te5p9s,0i0n0i†Enccoonmome,icaIsnschenotwivnesin FigurEem5p.5lo,ymmoenstt of thePperrsoognraelsIsnicvoitmye

o1c9c9u4r-s19a9t5 lower $in3c2o,2m62e,68le7vels, not higher -levels of income. At -higher income leve-ls, the

a1v9e9r5a-g1e99t6ax rate h$a3r2d,9ly15i,n62c5reases at all. Thi2s.0n%ature of the current1t.a8x%is directly contr4a.9d%ictory

to19t9h6e-19g9o7al of pro$3g3r,e4s8s3i,v63it2y. So although 1o.n7%the surface it appea2r.2s%that the tax sati4s.f6i%es the

v1e9r9ti7c-a1l99e8quity co$3n5d,i2t1io5,n2,56it really does th5.i2s%only at the lower 3in.7c%ome levels redu5c.i6n%g the
w1e9a9l8t-h19o9f9these lo$w34e,s8t8i9n,7c5o7me taxpayers, n-o0t.9t%he intended consequ3e.0n%ce.
4.1%

1999-2000 $70,340,202 101.6% 2.4% 5.9%
F20i0g0-u20r0e1 5.5: S$1o53u,7t2h7,C118arolina inco11m8.5e%tax: Current t-a0.x9%rates compa2r.e3%d to

2001-2002 $151,836,661inflation-in-d1.e2%xed rates, 2009-2.3% 1.5%

2002-2003 $152,138,291 0.2% 0.9% 2.0%

2003-2004 $175,649,647 15.4% Income Tax R0a.2te%s/Brackets if 19549.6T%ax
2004-2005 Schedule w2a.s1%Inflation Adjuste4d.5t%o
2005-2006 $182,636,0C09urrent Income T4a.0x%

$185,439,957 Rates/Brackets1.5% 2.1%2009 6.2%

2006-2007 $254,610,950 37.3% 2.4% 3.5%
SouTrcae:xSaobutlheCIanrcoloinma eBoardAomTf EoacuxonnotmicAAvdevrisaogrse Tax Rate Tax Average Tax Rate

Amount

EFFICA$5C,Y00O0F TAX IN$7C1ENTIVES F1O.4R2%THE FILM$I1N2D5USTRY: A CA2S.5E%STUDY

$10,000 $290 2.90% $250 2.5%
states s$eT1eh5me,0f0eial0mgeirntdousotfr$fy6e0ris4tvheersye aingcgerne4st.i0svi3ve%es.inAssewekaisngm$ie3nn7ct7eionntievdesinfroCmhaspttae2tre.56g1o%ovnercnlmusetnetrss,anndo

particu$la2r0b,0ia0s0 exists fo$r95o4r against th4i.s77in%dustry. The$5re2a7l question that2s.h6o3u%ld be asked is

what is$3s0o,0s0p0ecial ab$o1u,t6t5h4e film in5d.u5s1tr%y (or film $cl8u3s4ter) that warran2t.s78s%pecial types of
incentiv$We5s0h.,a0Tt0h0emnafkuersthte$hr3e, ,w0f5hil4ymnoint dpurosvt6riy.d1e0ss%piemciilaalr? inTchee$n1tii,vn6ed9su5tsotryothhearsinadunsut3rm.i3eb9se?%r of desirable

feature$s:75c,r0e0at0ive, ente$r4t,a8in0i4ng, enviro6n.4m1e%ntally clea$n3, ,1an2d7 so on. The a4n.s1w7%er perhaps was

best su$m10m0a,0ri0z0ed in a$F6,e5d5e4ral Reserv6e.56B%ank of Min$n4e,8a7p7olis publication4:.8“8C%all it a movie
tarnadilesrt$af1orsr5,0es,c0po0en0nodmsicadl$eov1te0lo,o0fp5m4meonnte:yAofn6il.m7lo0pd%rgoidnugctaionnd c$foo8mo,3dp7,a7nhyirceosmloecsatlos tao5sw.5nc8rw%ewithaintsddeirxetcrtaosr.

Reside$n2ts00r,u0n00into th$e1ir3,f5a5v4orite stars6.7at7%the local c$o1f1fe,8e7s7hop, and the 5lo.9c4a%tion is seen by
millions of viewers on the big screen - a great boost for tourism.”12 In an effort to capture this

economFicigduervee5lo.5pmalesnot,sahlomwosstwehvaetrythsetaateveinratghee tcaoxunratrtyesharseaffoirlmvaorfiofiucse.iMncormeeismapnodrtatnaxtleys,

ualnmdeorsttheevecruyrrsetantetaoxffseyrstaemveirny SfaovuothraCblaeroinlicnean.tIivnethpeacrkigahgte ctoluthmenfsilimt ailnsdousshtroyw. sFiwguhraet t7h.4e

tparxeessenatnsdthaeveseralegcetitvaexirnacteenstiwveosultdhabteseifvethrael 1s9ta5t9estaoxffetarbtloesthweefrielminidnedxuesdtryfo. rInindfeleadti,oinf.eTachhe

fsitgautereiscalettaermlypstihnogwtso tchraetatehea 1‘c9o5m9 pinedtietixveedatdavxarnattaeges’triuncttuhreefislmmionrdeuustnriyfoarnmdlythpertoogorlesisitvaex,

einscpenctiiavlleys,athheinghtheerrleevsehlosuoldf ibneconmoesu. rIpt rkiseeepthsattaxearcahtesteaxtetr‘eumpeslythleowanftoe’r tehaechlotwimeset aincoothmeer

isntadtievirdauiaselss inthtehestsatkaetes. Since so many states are competing with each other for a limited

numberFoigf ufirlem5s.,5thaelseo tsyhpoewssubthsiadtiethseencucorruernatgteaxa ‘sryascte-mto-cthhaergbeosttoamll ’inacsoemacehgsrtoautepsramisoersethine

taxes than an indexed rate schedule. The only exception is the $5,000 income earner in the

table. As South Carolina income taxes continue to climb while the tax brackets remain

stagnant, the state becomes a relatively high-tax state. This has a negative impact on

12 Cobb, Kathy, “Roll the credits and the tax incentives,” Fedgazette, (Federal Reserve Bank of Minneapolis)

Sept. 2006

11482108 UNLEASHING CAPITALISM UUNLNELAESAHSIHNIGNGCCAPAIPTIATLAILSIMSM

manmatneaunifunafcatthcuetruiirrniggngepnrpeorrpooepsrietryt.ytaAtxasxinointhetehNeceocwuonutYnrtyor.rykI.nIpnFroiFgdiuguruceree5r .5n8.o8wtewedeparpbersoeeusnettnCthotehnenefeefcfetfciectciuvttie’vsepirpnorcporepereatrsyteytaitnxax
rtharteaeitrsesduadbtaastiafdoiferosrS:oS“uoTtuhtehaegsaotseotrednrnsetsawttaestsei,sf,tohfroarct oCcmoompnanpreaicrsitosincou.ntT. cThoehuerladrnasknpskusgr igtvhieveneNnfoefwrorthYtehoesrtksattcaertsedsairaterheoiguohtueotrfo.”af1l3alll
5050stsattaetse.sT. Thehe‘n‘entetatxa’x’anadnd‘e‘feffefcetcivtievetatxaxrartaet’e’araerecaclacluclualtaetdedbabsaesdedononprporpoepretrytyvavlauleudedata$t 2$525
mmilliilolinon($(1$21.25.5mmilliilolinonininmmacahcihnienreyryanadndeqeuqiupimpmenetn,t,$1$21.25.5mmilliilolinoninininivnevnetnotroierise,s,anadnd$2$.25.5
mmilliilolinonininfixfitxutruerse)s.).NNotoictiecethtahtatSoSuotuhthCCaraorloinlian’as’sefeffefcetcivtievetatxaxrartaeteononinidnudsutsrtirailalprporpoepretrytyisis
ovoevrer7.78.8timtimeseshihgihgehrerthtahnanthtehemmosotstinidnudsutsrtyr-yf-rfireinednldylystsattaet,e,DDelealwawaraer.e.(D(Delealwawaraereisislislitsetdedinin
thtehefigfiugruerebebceacuasueseitiitsisthtehelolwowesets-t-atxaxstsattaet.e).)

FFigiguurere55.8.8: :InIndduustsrtiraial lPProropperetrytyTTaaxxesesininSSoouuththeaeastsetrenrnstsatatetse*s*, ,2200077

StSattaete RRanaknk(o(fo5f 05)0) NNeteTt aTxax EEffeffcetcivtieveTaTxaxRRataete

SoSuotuhthCCaraorloinliana 11 $1$,18,6846,49,090 0 3.37.37%3%

MMisissisissispipipi 44 $1$,12,9219,10,50050 2.25.85%8%

TTexeaxsas 66 $1$,12,6246,43,53858 2.25.35%3%

TTenenensesseseee 1010 $1$,10,303,35,454 4 2.20.70%7%

WWesetsVt Virgirigniinaia 1414 $8$383,32,32434 1.16.76%7%

LLouoiusisainaana 1717 $7$8738,34,04707 1.15.75%7%

GGeoerogrigaia 2020 $7$6706,03,83181 1.15.25%2%

FlFolroirdiada 2424 $6$767,76,86383 1.13.63%6%

AAlalbaabmama a 3535 $5$353,37,7676 1.11.1%1%

NNorotrhthCCaraorloinliana 3737 $4$9419,10,70171 0.09.89%8%

KKenetnutcukcyky 4747 $3$2372,71,010 0 0.06.56%5%

VVirgirigniinaia 4949 $2$4214,14,94898 0.04.84%8%

DDelealwawaraere 5050 $2$3283,88,48040 0.04.84%8%

SoSuorucrec:e:NaNtaiotnioanlaAl sAssoscoiactiaiotnionofoMf Manaunfuafcatuctruerresr(s2(020090)9)
* T* aTxaexsems meaesausruerdedininthtehestastaetse’sla’ rlagregsetsctitcyitoynolyn.ly.

ImImpoprotratnatnlytl,y,SoSuotuhthCCaraorloinlian’as’sefeffefcetcivtievetatxaxrartaeteisisalamlmosotst2.25.5timtimesesgrgeraetaetrerthtahnan
GGeoerogrigai’as’statxa,xa, nadndalamlmosots4t 4timtimesesgrgeraetaetretrhtahnanNNorotrhthCCaraorloinlian’as’.sT. ThihsispuptustsSoSuotuhthCCaraorloinlianaataat a
sesreiroiuosusdidsiasdavdavnatnatgaeg,ei,nintetremrms sofofitsitsabaiblitlyitytotoatatrttarcatcat nadndkekeepepinidnudsutsrtyr.yS. iSnicneceSoSuotuhthCCaraorloinliana
hahsasthtehehihgihgehsetst atxaxininthtehecocuonutnrtyryononinidnudsutsrtiarilalprporpoepretryt,y,it itshsohuoludldbebenonosusruprrpirsiesethtahtatit ithahsas
onoeneofotfhtehelolwowesetspt eprercacpaiptaitainicnocmomesesanadndeceocnoonmomicicgrgorwowththrartaetsesininthtehecocuonutnrtyr.y.

AAlthltohuoguhghititisisprporboabbalbylynontotcrcitrictiaclatlhtahtatSoSuotuhthCCaraorloinlianasestetitsitstatxaxrartaetetotothtehelolwowesetstinin
thtehecocuonutnrtyr,y,ititshsohuoludlddedfeinfiinteitleylymmakaekeititatatlelaesatstcocmompepteitivtievefofrorthteheSoSuotuhtehaesats.t.SiSnicnece
GGeoerogrigai’as’srartaeteisisefeffefcetcivtievleyly1.15.252peprecrecnetntanadndNNorotrhthCCaraorloinlian’as’sisisjujsutstunudnedrer11peprecrecnetn,ta, arartaete
atataraoruonudnd1 1peprecrecnetntmmigihgthtbebesusfuffifciiceinetnttotoatatrttarcatctmmoroereinidnudsutsrtyr.y.WWorokriknigngtotorerdeudcuecethtehe
vavrairoiuosustatxaexsesapaplpielidedtotoinidnudsutsrtyrywwouoludldsesreiroiuosulsylyimimprporvoevethtehestsattaet’es’scocmompepteitivtievneensess.s.

SuScuhcha asisginginficfiacnatntrerdeudcutciotinoninintatxaexsesononinidnudsutsrtiarilapl rporpoepretrytywwouoludldobovbivoiuosulsylylelaedadtotoa a
rerdeudcutciotinoninintatxaxrerveevneuneusesononinidnudsutsrtirailalprporpoepretryt,y,atatlelaesatstiniintiatilalyll.y.HHowoweveevre,r,thteheovoevrearlalll
rerveevneuneuemmayayininfafcatctinicnrceraesaeseonocnecethtehegrgorwowththrartaeteininthtehestsattaetebebgeignisnstotopipcikckupupanadndmmoroere
inidnudsutsrtyrymmovoevsesinitnotothtehestsattaet.eF. uFrutrhtehremrmoroer,ei,fifthteheofofficfiicailatlatxaxrartaetsesaraerelolwowereerde,dt,htehnenthtehestsattaete

13 Foderaro (2008).

Chapter C7:HSAPoTuEtRh5C:aSCrPHoEAlCPiInTFaEI’CRsT7TAaXxRIEnFcOenRtMiSves 11431

FigurePr7es.u4m: aIbnlycetnhetivoerisginfoalr iFntielnmt oInf dimupsotrsying– aSetalxecrtaeted sScthaetdeusle with graduated

mSatargteinal tax rates wasDteoscrmipatikone otfhIenceinntcivoeme tax progressive. However, what progressivity

exAilasbtsamian the state’s incoEmxemeptiaoxns sotnrusacletsu, ruese,isanduloedgtinog ttahxeszero tax on the first $2,630 of income,
and because of the grIancdoumaetteadx crmedaitregquinalatol 2t5ax% rates. However, since the marginal tax rate
increases over such smab35elltw%setepenapy$sr5o0lil0nex0p0ine0ncsaoensdmre$eb1,a0taemsfoillisor hsna.olawriesnpianid FtoigAularbeam5a.r5es,idmenotsswt hoenf etxhpeenspersoagreressivity

occurs at lower incomeA 2le5-v3e5ls%, cnreodtit ohrigrehbaetre floervsoeulnsd oprfodiuncctioonme. At higher income levels, the
average tax rate hardly Tinhecmreaxaimseums aamt oaulnlt.oTf rheibsatensaitsucraeppoedf atth$e5cmuilrliornenfotr t2a0x09i,s$d7.i5remciltliolyn fcoor 2n0t1ra0d, ictory
to the goal of progressaivndit$y1.0Smoillioanlftohro2u0g11h. on the surface it appears that the tax satisfies the

veFrlotriidcaal equity conditioFnilm, si,tTVreCaollmymedrcoiaelss, atnhdiMs uosinc lVyideaots othf e$62lo5w00e0rorinmcooremaree eliegibvleelfosr rae1d5u-2c2in%g the
wealth of these lowest icnacshormebeatetaxpayers, not the intended consequence.

Multiple Commercials and Music Videos with $500000 or more in qualified expenditures

Figure 5.5: SouthareCeliagibrleofloirna a15-i2n0c%ocamsherebtataex: Current tax rates compared to
Indie Films or Documentaries with qualified expenditures between $100000 and $625000
are eligiibnleffolar ati1o5-n17-i%ncdasehxrebeadte. rates, 2009
Digital Media projects of $300000 or more are qualified for a 10 % cash rebate

All qualified productions are eligible for a sales tax exemption

Georgia 3AA0nnC%aadcurdtoRraistxriaosecnttnreaheeltds1/ibIt0Bona%rcradoGcmflekaoeterttgaTsiaxaEcxrnetderittaoinfm2e0nItn%PcSrboocammhseoeedtdiooTunnalceaaxnmwRbinaeaimsatudemIds2ne/in0fdBvl0earbs9atytimcionekcnnleutdAtosinfdgi$jfa5un10s09te05d090t.Toax

Taxable Income animated Georgia logo on approved projects.

Kentucky 8T%axsales tax exemption. Rate Tax Average Tax Rate
Amount Amount
$5,000 Average Tax
$10,000
$15,000 Refundable sales tax incentive
Marylan$d20,000
$30,000 R$e7fu1ndable income t1ax.4cr2ed%it up to 20 % o$f e1x2p5enditures over $5000020..5%

$C2o9m0mercials can app2ly.9fo0r%the income tax cr$ed2it5, 0if they have expenditure2s .o5v%er $200000.

Documentaries and Broadway productions are eligible if they have expenditures over
$$65000400. 4.03% $377 2.51%

$2955%4rebate on in- s4ta.7te7c%osts on a minimum$5o2f 7$500000. 2.63%
$E1x,e6m5p4tions from sta5te.5sa1le%s tax on qualified$it8em3s4. 2.78%

Mississi$pp5i0,000 $230,0%54rebate on spe6nd.1ing0i%n Mississippi $1,695 3.39%
$75,000
$100,000 25 % rebate on salaries that are subject to Mississippi Income Tax withholding up to $1
$150,000 $m4i,ll8io0n.4 6.41% $3,127 4.17%

$m260i,ll5io%5n.4rebate on sala6rie.s5n6o%t subject to Mi$ss4is,s8ip7p7i Income Tax withhold4in.g88up%to $1

$1E0xe,0m5pt4ion from the 6st.a7te0's%7 % sales tax o$n8s,o3m7e7items and a reductio5n.o5n8o%thers.

North $C2ar0ol0in,a000 $1235,5%5t4ax credit on a6m.7in7im%um of $250,0$0011o,f8in7s7tate spending. 5.94%

South Carolina 20% cash rebate for in-state employee wages

Figure 5.5 also 1s0h%owcasshwrebhaatet fothr eouta-ovfesrtaatgeeemtpaloxyereawteasgesa(ruep tfoo$r3v,5a0r0io) us incomes and taxes

under the current tax sy2s0t%emcashinrebSaoteuftohr sCalaariresoolifnoau.t-Ionf sttahteepreirgfohrmtincgoalrtuismts,ninscluidtinaglsstountspheorfowrmsewrs hat the

taxes and average tax r3a0t%escawshoruebldatebfoer iinf-sttahteesu1p9p5lie9s (itfa$x1,0ta0b0,l0e0s0wspeernet) indexed for inflation. The

figure clearly shows thaSatletshaend1a9cc5o9mminoddaetixoensdtatxaexxemraptteionsstirfufilcmtuburdegeitsismovoerre$2u5n0i,0fo00rmly progressive,

especially at higher levels of incomes. It keeps tax rates extremely low for the lowest income
Through the Governor's Motion Picture Opportunity Fund a cash rebate can be attained at
inVdirigviniiaduals in the
state. the discretion of the governor.

Figure 5.5 also Ssthaotewsaslesthtaaxtantdheuseceuxrermepntitontsaaxndssytsatteeamnd clohcaalrlogdegsingatlalxienxecmopmtioensg. roups more in
taxes than an indexed rSatattee oswchneeddpurolep.erTtyhperovoidneldyfreeexception is the $5,000 income earner in the
taSboluerc.e:AWsebSpoaguetshof CStaatreoFliiFlnmreaeOrfiefnnitccaelosomf ae35t0a0x0essqucaorenftoiontuoefficteobucildliinmg inbRiwchmhoilned. the tax brackets remain
stagnant, the state becomes a relatively high-tax state. This has a negative impact on

11484128 UNLEASHING CAPITALISM UUNLNELAESAHSIHNIGNGCCAPAIPTIATLAILSIMSM

mmanaunfuafcIantcutruoirnridgnegprrpotrpoeprejturytsytiaftxyaxintihntehtehiecnocueonutnirvtyre.ysI.,nInaFiFgniugurumereb5e.58r.8wowef epqrpueraseensnteitntathtitevheefefsfetfcuetdcivtieievseprhpoarpoveperetrybtyetaetxnax

rpaertareftsoesrdmadteaadtaf.ofTrohrSeoSsuoetuhstethuaedsatisetrsenrunsstesattareetseg,sif,oofnroarclocemocmopnaproaimrsiosinco.niT.mThpehaercatrnamknskosdgeigvlisevneinnfoofrordrtheterhestotsatteaestsetisamraearteoeuottuhotefosafola-lll

5ca05l0lsetsdattaemtse.usT.ltThipehlei‘en‘rentetfaftexac’xt’a. naTdnhd‘ee‘femffefucetlcitvtipievlieteartxaxerafrftaetc’et’arcaearelccaculalcaluctleuasltaetdehdebabasadesdeidtoinonparplorpoimepreptryatcyvtasvlauilneudeadatalo$tc2$a52l5

mecmiollinilolinmony($(c1$a21u.25s.e5dmmiblliyilolianonnininincmrmeaacashceihnienreylroyacnadlnddeiqerueqciuptimpsmpeenentn,dti,$n1$g21..25F.5omrmiellixiloalimnonpinlien,intivhnevnemtnotoroinereisey,s,asnpadennd$t 2$o.25n.5

mfomiolldiilolinonitnhienfilxfoitcxuatrulersree)s.s)t.NauNortoaicntietcsetbhtayhtattSheoSuoftiuhlmthCcCarraeorwloinlwian’oasu’sledfeffbefceetciavtiedvietraetxcatxrearxtaepteonnodnitnuidnrued.sutTsrtihraielalpsarpolraporeypretprytayidsis

otovoetvhreer7e.78m.8tpimltoimeyseeshsihgiinhgehtrheerthrtahensatnathutehraemnmtoasoststainirdneudssutslrtyro-yf-rfitrehinedsneldylmysetsattlaest,eis,DDteeleramlwaweadraera.en.(Di(nDedleairlwaewcatraeerxeispieslnislditsietduedrien.in

tWhtehefingfiugtrhueerebrebecseatcauausuresaeinttiitseimsthtpehlelooylwoewesets-stp-atexanxsdtsatthaete.e)i.r) salary in the local economy on food, gasoline,

clothing, and so on, they exert an induced impact. The multiplier attempts to measure the total

of all of these impacts. The multiplier effects are often termed ‘ripple effects,’ invoking an

imFagFiegiogufuraerreo5c5.k8.8t:o:IsnsIenddduinusttsortiaraipalolPnPdrorgopenpeerertaryttiynTgTariaxpxeplseessinaicnrSoSossoututhhethewaeaastetsert.reAnrnnsutsmatatbeteser*so*,f ,c2o20m0p07u7ter

models are available which allow researchers to localize economic impacts. One of the most
widely usSetdSattaestoeftwareRRamnaokndk(eol(fso5f i05s)0)IMPLANNNet,eTt(aTImxaxpact AnalysiEsEfffefofcertcivtPievleaTnaTnxainxRgRa)ta.e1t4e IMPLAN

calcuSlaoStuoetsuhtthhCrCaeraeorlkoinilniandas of mul1ti1pliers: $1$,18,6846,49,090 0 3.37.37%3%

1. OMuMtpisuisstis:isTsisphipisipmi easures th4e4total economic$a1$c,1t2i,v92i19t,y10,5t0h05a0t takes place w2.i25t.h85i%8n%the economy.
2co. mInpTceTeonxemsaxasetai:sonTahnisd pisropcorimetmor6o’s6nliyncoremfeer.1r5ed to$1$,a12s,6246p,4e3,r53s8o5n8al income a2n.25d.35%3in%cludes employee

3. JTobTesne:nTensoestseaseleejobs measure1d010as full time equ$i1$v,1a0,l30e3n,3t5s,4.544 2.20.70%7%

WWeIsnets2Vt0Vi0rgi8rig,niainasiatudy con1d41u4cted by Hefner e$x8$a38m3i,3n2,e32d434the economic1i.m16.7p6%a7c%t of nine film and
tperloevviLidsLoieoudoniusbipsyairnaotanhdaeucStioountsh mCaardo1el71iin7na South CCoamromliins$as7i$oi87nn38.,13t46h,04eS70oy7uetahrsC2a0ro0l6inaan,1dl.1i5k.275e0%70m%7a. nTyhoethdeartastwateerse,
Film

paysGcGeaosehrogrtigoaiafilm producer2s.02I0n fact, the Sout$h7$C6706a,r03o,83li18n1a Film Comm1i.1s5s.25io%2n%advertises on its
web FsilFotelroitrdhiadaat South Carolin2a424Pays Cash.17 At$6t$h76e7,7t6i,m8638e3these films w1e.13r.e63%6b%eing made, South
CspaernodAliiAnlnaaglba.awbSmaalmsaigaphatlyyinmgoare20thap3ne53r5$c8enmt ‘ilrleiobnatew’aosnp$w5a$i35ad3g,t3e7os,7S6a7on6udtha C30aropleirncae1nr.1te1s.1‘ird%1ee%bnattse’byonthqeusaelinfiinede
produNcNotirootrhnthsC(Cafraiolrmloinliannad telev3is73io7n). Salary rebat$e4$s94t19o,1t0a,70li17n1g $8.4 million0.09w.89e%8re%given to support

the $K8Kenemtnuitlculkicoykny in direct lo4c74a7l salary. In term$3s$23o72f,71,d01i0r0ect salary, th0is.06.m56%5e%ans that the state

gCoavroeVrlinVnimragireirgnneiistnaigidaaevnetst.h18e Tfihlme fiinl4md94us9sstrpyen$t1$i1n4r,e4b0a7t,e5$s62$t34o214ign,14e,S9n48oe9ru8atthe $0.95 in ifn0oc.r04r.se84ua%8ps%epdliessalaanryd to South
Carolina services

proviDdDeeldealwabwyaraelroecal firms. T5h0e5s0e productions r$ec2$e32i83v,8e8d,4804$07,385,342 in 0r.e04b.84a%8te%s for supplies. In

effecSt,oStuohrucerecs:et:NataNetaiootniofanSlaAol sAusstohscoiCactiaiaotrnioonolifonMfaMapnauanfiuadfcataucbtrueorreusrt(s2a(0205090)9p) ercent subsidy for the in-state spending.
* T* aTIxnaexsoemsrdmeeaersautsoruerdpedirnointvhitehdesetastthaetsee’slma’ rlaogresgstetsfcatitcvyiotoyrnoalynb.llye. treatment possible to justify these subsidies, a

multiplier analysis was also conducted. Total expenditures (salary, supplies and services) in
GSwoGeauosetroehgsriCgtaiIim’aamsIr’maopsttalopetixanrdo,txaraat,tnowanatndlnbeytdrela,eyl$a,mS$l3m2oSo82usoo,8t,tus5h14tt4h546tC,i0,mtC2ai4rm1ae5o1rs.elo1.isg9nlUirgaTnes’raaosie’nttaseagetrlefeItrfcMhfeatfachsePtnhaciLvtnNsiAevuNoebNrtosta,rhitxtdathhCxieerCaasrrttaaooperttaloeaiinilldsianies’aacasm’ol.asmnTol.moouThmnsoihsttsiiecstp2dupi.2m5ttuo.s5tpsSt$aiom1Stciu5tomet,wus8het1ishCtg5hrCag,ie0rnraao2erttal8oehitn.rleeiaTnrstaoahttattaahatnateal na
seecsroeinroiouomsusdicidsiiamsdavpdaavncattnaitgnaecg,leui,ndientsetregmromsodsosfosfitusictsahbaaiblsitllyiutymtotboaetratrtftaorcartcsatenatdnddkeeskieegpenpi,nsidneudrvsutisrctyer.sy,S. siSnuiccnehceSaosSuolotuhdthgCiCanrgaorlaoinnlidana
hcaahrsalstehatehseihnighg,ihgaehnsedtstiantxcaoximnineth,tehsueccochuoanustnrtsyrayloanorynintiodnudesuxtsrtrtiarailsa.lpOrpofrpotehprietsryt,tyo,ittaitsl hesohcuoolnudoldmbebicenionmospusarucprtr,pirslaiesbetohrtahitantictoithmahesas
onoeneofotfhtehelolwowesetspt eprercacpaiptaitainicnocmomesesanadndeceocnoonmomicicgrgorwowththrartaetsesininthtehecocuonutnrtyr.y.

AAlthltohuoguhghititisisprporboabbalbylynontotcrcitrictiaclatlhtahtatSoSuotuhthCCaraorloinlianasestetitsitstatxaxrartaetetotothtehelolwowesetstinin

t14htIehMePcLocAuonNutnrwtyra,ys,iint itisahlslohyuodluedvldedloedpfeeidnfiibntyeitlteyhleyUm.mSak.aDekeepitairttamtaetnlteloaefsatAstgcroicmoulmtpuepreteiFt iovtrievset fSoferorvritchteehaenSdoSisuontuhotewhaemsatsa. tin.StaiSinnicneedce
GanGedoemrogarrigkaie’atse’dsrabrtyaetaeipsirsievfeaftfeefcefticrivtmiev(leMylyi1n.n15e.2s5o2tpaepIrMecrePcnLetnAtaNnadGndrNouNopro,tIrhnthcC.)Ca. raorloinlian’as’sisisjujsutstunudnedrer11peprecrecnetn,ta, arartaete
a15taEtamraoprluoonyudened1co1mpeppreecnrescanettinotnmmiingcihgluthdtebsebwesaugsfeufsfifcaiincedinestnatltaortioeastatartstarcwatceltml amosrobereenienifdnitudssustusrtcyrh.y.aWsWhoeroakrltikhnignagntdotloifreerdeinudscuuercaentchteeh, e
vr1e6ahvtirtartieprom:iu/o/ewsunwsttaawtxna.dexsscencsoaonpma-pcmalpiseelhridcecedot.comotopminei/nddnsoudacsutditosrirtnyer.cywItMoworPyuo/LlRudAeldNsseesarreericfroehiuroFssuotllsoydletyihrm/iiFsmpiclmrapotr%evog2eov0retyChtoaehssetsl%atsab2ttoa0ertB’eisen’ncsceoocfmimote%m.p2ep0teAitnivtaielvyneseinsse%ss.2s0.2008%
20by%20SFuSracunhckh%a2as0isHginegfinnfiecfri,ac%na2tn0trCerodeluldecugteci%otino20nionfin%ta2txa0eCxsehsaornloensitnoidnn.udpsudtfsrtiarilapl rporpoepretrytywwouoludldobovbivoiuosulsylylelaedadtotoa a
r17erhdetudtpcu:t/c/iwotinwonwi.nsicnftialtmxaoxfrfeircveeev.cneounmeusesononinidnudsutsrtirailalprporpoepretryt,y,atatlelaesatstiniintiatilalyll.y.HHowoweveevre,r,thteheovoevrearlalll
r18erTveehveneurneeubeamtemsaywayeirneinafpafpcalticetidnitcnorcesraaelsaaersyeopnaoicndecteothnteohneg-SrgooruwothwthCtharraortlaeitneainrientshidtehenesttssa.ttIaenteabdebdgietignoinsn,stroetboaptiepcsikcwkeurpue paalsnaodnadpmpmolieroedre
it1on9idTsnpuodetsunatlsdrtiyenrcygomnomoonmvoseuvicspepisimlniieptnsoatctohtthaittsehwenseotsratetttaehpt.euerF.scauhFmarusterehtdtehhroeimnurgtmosiardoseer,setthi,afetieftshtitanehtceeoo.mfofefi.cfiTicahilaetltaotxataxlrairmtaeptseascatraeirneclolulwodweesreearldel,dpt,uhrtechhneanstehtseh, edsitrsaettcaette

and ripple, and all employee compensation, direct and ripple.

Chapter C7:HSAPoTuEtRh5C:aSCrPHoEAlCPiInTFaEI’CRsT7TAaXxRIEnFcOenRtMiSves 114353

amountPedretsoum$1a4b,l5y34t,h9e08o. rHigoinwaelveinr,tethnet mofositmreploevsianngt maeatasuxreraatned spcehrehdauplsethwe ibthestgmraedturiacteidn

mthaersgeincasletsaixs rtoatceosmwpaasretotaxmdakoellatrhsespinecnot mtoetataxxdoplrloagrsrersescieviev.eHd.oTwheivsecra,lcwuhlatiopnroisgrbeostshivtihtye

emxoistsdiinfftihcuelst teasttei’ms ainticoonmaendtatxhestoruncetuthreatishadsuethteomthoestzeprrooftoauxnodnptuhbelifcirfsitn$an2c,6e3i0mopfliicnactoiomnes.,

aMnodrebeimcapuosretaonftlythiet egnrsaudrueasteadn mapaprgleisnatlo taapxplreastecso. mHpoawriesovner,,wshiniche itshenomt arlgwianyasl thaex craste

iwnictrheamseusltiopvlieerrseufcfehcstsm. aTlhl estSeopustihnCinacrolminea, TasaxshImowpnacitn/TFoitgaul rRee5b.a5t,emiso$s0t .o1f9.thTehpisromgeraensssivthitayt

ofocrcueraschat tlaoxwedrolilnacrogmiveelnevienls,renboatehs,igthheer rletvuerlns otof itnhceomgeen.eAratl hreigvheenrueincfuonmde flreovmelst,hethse

aevxepreangdeittuarxesraisteohnalyrd$ly0.i1n9c.reases at all. This nature of the current tax is directly contradictory

to the gTohaul soaffpterrotghresfsilivmitrye.bSaote,atlhtheosuegrvhicoens theatstuhrefafcilemitinadpupsetrayrsptrhoadtucthees gtaexnesraattiessfileesssthine

vtaexrtriceavleneuqeuitthyancothnedittaioxnd,oiltlarresaslplyendtoteosatthriasctotnhley failtmthinedluoswtreyr. Tinhciosmcreealetevsealsnreetdluocsisntgo the

wgeenaeltrhalorfetvheensueelofuwnedstoifnc$o0m.8e1tfaoxrpeaaycehrs,tanxotdothlleairnstpenednet.dTchounss,etqhueentacxe.subsidies as they were

structured at the time of Hefner’s 2008 study generated a net loss to the general revenue fund.

TFhiisguharsep5ro.f5o:unSdoiumtphlicCataiornoslidnuarinigncbuodmgeetartyaxh:arCd utimrreesnats thaaxs breaetnesexcpoermienpcaerdebdy ttohe
ssteactteori,nitthsehoruecldenbterescpeesnstiooninn. fGwlaihvateitnocntahp-aiittnatldhiseimsxmecdoonnrseiaydteiersssb,teh2ien0gl0egt9aixtiemdataewfauyncfrtioomnsthoef private
limited

government (e.g. property rights enforcement, infrastructure development, education), and not

ittanorCgfeahtvaeopdrteinrad2up, sattarrtxyicintuhgleamrreoilnnadetCiuyvuseaRtrrwrtayaeat.xneytsWb/fIBurnhorrcedmaonecmnkogeentotoeTsvaiaenxrrdeniamvoiedfnuttahIlnesspcSpaoecrnnmhidvdeeasdbtTueutalasesxixenwpRceaatasoysstreeeIrsos2n/n0fBwdll0aryoi9atlliltlcooaiknrnegscAtisrvtdeoieajfusi1ssteu9t.teob5Ads9asitdnTonioazotxehteedar
gsweoiglvTlmeanrexnonamttbleloeenaftdI’tnshtceoboumpgdrregieveaatte,tAercmoTesrecoaeocuxtngnoootrmviesirAcnnvmgoertreoancwgtatepsheiT.traavFlxiiucsrRemtsha.etteaTr,xhpwiasAhyepmeTnoroasltuxihceneyxtpsmeucbetrsetiodlyyrAergvceeeednriivaesetrgraeimtbeTuasatyeaxsbdRewraacetiueantl.tohn and
the

$T5h,e00c0onclusion t$h7a1t subsidies 1to.4t2h%e film ‘clus$te1r2’ 5are a net loss to2s.5ta%te revenues has

also be$e1n0c,0o0n0firmed in$m29u0ltiple state2s..9T0h%e Rhode Isl$a2n5d0Department of 2R.e5v%enue estimated
tchoamt pthane$i1es5st,.a02t0e00TohfeRChoondn$ee6cI0tsi4lcauntdDgeeptasrtb4m.a0ec3nk%t $o0f.2E8cofnoorme$iv3ce7ra7ynddoClolamr mitunpirtoyv2iD.d5ee1vs%etlooppmroednut,catfitoenr

analyzi$n2g0,10300projects b$e9t5w4een July 14,.7270%06, and Sep$t5. 2370, 2007, determ2.i6n3ed%that the state

receive$d3$00,0.0080 in tax $re1v,6e5n4ue for eve5r.y51d%ollar spent.2$18I3n4Michigan, the 2S.7ta8t%e Senate Fiscal
Aesgtiemncayt$e5dr0et,po0o0gr0tesnethraatteion$n32l,y0050$4810thmeilalinotni6c.ii1pn0at%taexd rceocestipttos.$tI1hn,e6W9s5tiastceonwsains b$e1f2o7re3m.t3hi9lel%iironincwehnitcivhewbailsl

was pro$p7o5s,0e0d0, their D$e4p,a8r0tm4ent of Re6v.4e1n%ue determin$e3d,1t2h7at the state wo4u.l1d7%likely see a net

loss in$r1e0v0e,n0u0e0.22 Lou$is6ia,5n5a4’s chief ec6o.5n6o%mist in 200$54,e8s7ti7mated that the4s.t8a8te%revenue gains
from tta$hx1e5ct0roe,t0adl0it0eccoosntos.m23$i1c0a,c0t5iv4ity of fil6m.7p0r%oduction w$o8u,l3d7b7e about 16 per5c.e5n8t%- 18 percent of
state

$2T0h0e,r0e0a0re mul$ti1p3l,e55st4udies tha6t.7d7em%onstrate t$h1a1t,8th7e7 kinds of ince5n.9ti4v%es given to the

film industry are a drain on the general revenues of the states pursuing this industry. This

leads mFaingyures5e.a5rcahlesros sthooawsks twhheavt etrhyeraevleevragnet qtuaxestriaotnesoafrwe hfoetrhvear rtihoeusstiantceos mtheast agnivdetsauxcehs

ugnenderotuhsescuubrsriednitestatxo sthyestfeimlmininSduosuttrhy Ccoauroldlinhaa.vIenbtehteterigsphetnctotlhuomsensfuitndaslsion sohtohwerswwahyasttthhaet

twaoxeusldanhdavaeveprraogdeuctaexd rsattreosnwgeoruladndbemiof rtehesu1s9t5ai9natabxletaebcloensowmeirees.inTdoexaendswfoerr itnhfilsatiqoune.stTiohne

friegquurierecsleaanrluynsdheorswtasntdhiantgthoef 1th9e59mionsdterxeeldevtaanxt rcaotnecsetprut cetcuorenoismmicos rheausntiofoormffelyr: porpopgorertsusnivitey,

ecsopset.cTiahlleycaotnhciegphteor fleovpeplsorotfuninitcyomcoesst. eIxt akmeeipnsestawxhraatteis ethxetrehmigehleystlovwalufoerdthaletelronwaetisvteinthcoatmies

ifnodreivgiodnuealswinhetnhe ostnaete.activity is chosen over another. Markusen (2007) observes that

Figure 5.5 also shows that the current tax system charges all income groups more in

tt210aa2bxP, ee2leo0s.p0tl8eAhsa,snStSeavoneu,it“nhRdeeCvxiaeerwdoslrifnaotarestisanctceh’oesmdfiuelmlet.taaxxTehcsreedcoiotnnalryteinne’utxegcoetopodt,i”ocTnlihmeisbPtrhowevihd$iel5ne,c0et0hJ0eouirtnnacaxol (mbprreoajceoka.cerontmse)r,rAeinmugatuhisnet
s21taCghnriastnotp,hetrhseon satnadteRigbhetcoor.m(Feosrthacomreinlagti2v0e1l0y). high-tax state. This has a negative impact on

22 Cobb (2006).
23 Albrecht (2005).

11486148 UNLEASHING CAPITALISM UUNLNELAESAHSIHNIGNGCCAPAIPTIATLAILSIMSM

mopmapnaounrfutaufcnatciuttyruirncignogsptrsporpaoreperetrytaytraetxlayxincinothntehsiecdoceuorenudtnrtyirn.yI.tnhIneFiFginiugcrueerne5ti.5v8.e8ws wegaepmrpeerse.esnKetnrtuhgteheeer fe(ffe1fc9et9civt0ie)vepinrporhpoepretryatpyttaltxyax
rtiatrtlaetsdesdpadatpaateafro,fro“GrSoSouovtuehrtehnaemsatesentrentrFnsatsaitltauetrsee,ssf,oifnrorcDocemovmpealporapirsmiosnoe.nTt.,”Thehrermarnaiknsdksguigvsievtnehnafotfraocrthttiehoenstsbattyaetsgeosavraeerreonuomtueot nfotafilaslll
5n0o5t0stasattacetose.sstT.leThsehse‘an‘centtievtaitxya’x. ’aTnahdnids‘e‘sfeifmfefceptcilvteievbetuatxaxirmartapeto’er’ataraenrtecapclaocliucnlutaltasethdeodbualbdsaesdceadounosenprpSoropoueptrhetrytCyvaavrlaouleuidneidatnas$t 2$t5o25
msemirlilioiloluinoslny($(1c$o21n.25s.i5dmemirlliilwolinohenitnhinemr matchahecishneienretyyrypaenasdndoefqeuqpiuopilmpicmeienestn,ta,$r1e$21.t25h.e5mbmilelisilotlinounsineinionfivnevthneetnotrositeraiset,ess,a’nadnscd$a2r$c.25e.5
mremisloliiluolrinocenisn.inCfioxfituxultdruertseh)s.e)s.NeNottaoixctiecdeothltlahatarstSobSeuotubhtehCtteCaraosrlpoinelinan’tas’osenfefwfefhcetacitvticevaetpaitxtaaxlriasrtmaeteorenognianridnusdsuatsrtirathilaelplrpeorgpoietpiremtrytaytiesis
ofuvonevcretri7o.7n8.s8tiomtfimegseoshviehgrihgnemhreertnhttah?naMnthtoehremmiomsotpsotinridtnaudnsuttlsrytyr-ywf-refireisnehdnoldyullysdtsabttaet,ea,DskDeilnealgwawahraoerw.e.(Dm(Dealreaklwaewtarfaeorericsieslsislwitseotdeudlindin
thhatehvefigfaiulglruoercebatebecedacuathsuesseietiitrseisthotehuerloclewoswewsetsi-th-atixanxstshatteaet.pe)r.)ivate sector had they not been taxed away in the
first place.

SUFMFigiMguurAerRe5Y5.8.A8:N:InDIndPduOustsLrtiIraCialYlPPRrorEopCpereOtryMtyTMTaEaxNxeseDsAiniTnSIOSoNouutShtheaeastsetrenrnstsatatetse*s*, ,2200077

StSattaete RRanaknk(o(fo5f 05)0) NNeteTt aTxax EEffeffcetcivtieveTaTxaxRRataete
favorS,oSnuIootturhitsdhConCaortatohreltoihynleianhpaarvoepethrefu1unn1ciqtiuoen aobfilgiotyvetorn$im1$d,1e8e,nn68tt46if,t4y9o,09wd0eh0ciicdhe owfhtihcehsebub3su.3i7sn.3i7en%3ses%sessesshwoiullldsureccceeievde.

ThisMisMitshisseisirssoispliepipofi the private4s4ector and the p$r1o$,f12i,t92a19n,10d,50l05o0ss system. 2.25.85%8%

TTexGeaxisvasen the vast literat6u6re on the ineffe$c1$t,i12v,6e2n46e,43s,5s385o8f incentives, o2n.25e.35m%3a%y ask why policy
mthaakt eTtrhTesenerpneeenrcsseslisesestaeerielny aisskiangpofolir1ti0lc1ea0gl isbleantieofnit totopor$of1fv$e,i10rd,i3e0n3gm,35to,4h5r4ees4iencinecnetinvteivs.esT2he.e2v0.e7l0ni%t7e%irfattuhreerealsiso argues
not an

econWomWeisectsVtoVniregirigfnoiinraiathe state1.41C4alcagno and H$ef8$n38e3r,32(,32403047) find that 1o.1f6f.76e%r7i%ng incentives can

increLasLoeuoiausissatinaatanea’s corporate 1ta71x7revenue, which$m7$8i7g38h,34t,0p47r0o7vide political1m.15.o75t%7iv%ation. Whether or
not tpaGoxGeliroeceroyvgreimganiaaukeserisncarreeadsoe,inpg2ro02svo0imdientghisnegleccotnivcerei$tne7$c6te7o0n6,tg03iev,83ne18es1rgaitveeesctohneoampipc1ed.a15re.2a5vn%2ecl%oeptmhaetnlteganisdlastoulrvees
and

the pFrolFoblrolierdmiadas of the state. I2n42a4ddition, Buss (2$06$07617),76n,86o38te3s that politici1a.n13s.63%f6a%ce little risk from

offerAinAlgalbatahbmeasmaeatypes of ince3n5t3i5ves. If the firm f$a5$il35s3t,3h7,e7y676can blame it o1n.11.e1c%1o%nomic conditions,
apnodlitiNicfNioaironttrhstihsCarCaseruaocrolocifneltieasnsnafuslhothrte-3ysi73gc7hatnedtaikne all thpeo$l4ic$c9r4ye19d,1j0iut,70.d17gP1mubelnicts,chnooitcelo0oe.0k9c.oi89nn%8go%mbeicysonadrgtuhees that
their next

electKioKennectnuytccuklceyk(ysee Chapter 41724)7. $3$2372,71,010 0 0.06.56%5%

VVirSgiroignuiitnahiaCarolina offer4s94a9wide variety of$s2e$4l2e14c,1t4i,v94e898tax incentives0t.0h4.a84t%8c%reate distortions
iinnctehneDtiDeevcleeaolswnasowaimmraerypelayncdreliamteitutnhn5ee05ac0beislsiatyryofcothmeppertiivti$aot2$ne32bs83ee,8c8t,wt48o0e4re0tno sgteanteesraintecreec0ao.s04ni.n8o4g%m8%tihcegirnocwetnht.ivTehsese
offer*SeoTdS*uaoTfrxuacoerexrsce:elmsi:NtmetaNalteeaisoatunibsoraueenlrdnaeAledisnAfsiisntoths.cteohiSacestoitaiaosuttniaoethtnsoe’fsoClMa’fralMaagrrneaogusnelftiuasncftcaiattcyucittnroyueernroeeslynrd(s.l2ys(.02t00o90)r9e)form its property tax laws so they can stop
using it as an excuse to offer these incentives. A lower tax rate for business and property

across tIhmeImpboporoatrradtnatwnlytil,lyl,SdoSouomtuhothrCeCatoraorgloienlniane’arsa’steefeeffecfcoetncivtoiemveitcatxgaxrorawrtaettheiisnisaSloamlumothsotCst2ar.25o.l5itnimtaimtehseasngrgaenraeytaetrerthtahnan
GseGeleoecrotgirivgaei’asi’nstactxea,nxta,invaden.dalamlmosots4t 4timtimesesgrgeraetaetretrhtahnanNNorotrhthCCaraorloinlian’as’.sT. ThihsispuptustsSoSuotuhthCCaraorloinlianaataat a

sesreiroiuosusdidsiasdavdavnatnatgaeg,ei,nintetremrms sofofitsitsabaiblitlyitytotoatatrttarcatcat nadndkekeepepinidnudsutsrtyr.yS. iSnicneceSoSuotuhthCCaraorloinliana

hahsasthtehehihgihgehsetst atxaxininthtehecocuonutnrtyryononinidnudsutsrtiarilalprporpoepretryt,y,it itshsohuoludldbebenonosusruprrpirsiesethtahtatit ithahsas

onoeneofotfhtehelolwowesetspt eprercacpaiptaitainicnocmomesesanadndeceocnoonmomicicgrgorwowththrartaetsesininthtehecocuonutnrtyr.y.

AAlthltohuoguhghititisisprporboabbalbylynontotcrcitrictiaclatlhtahtatSoSuotuhthCCaraorloinlianasestetitsitstatxaxrartaetetotothtehelolwowesetstinin

thtehecocuonutnrtyr,y,ititshsohuoludlddedfeinfiinteitleylymmakaekeititatatlelaesatstcocmompepteitivtievefofrorthteheSoSuotuhtehaesats.t.SiSnicnece

GGeoerogrigai’as’srartaeteisisefeffefcetcivtievleyly1.15.252peprecrecnetntanadndNNorotrhthCCaraorloinlian’as’sisisjujsutstunudnedrer11peprecrecnetn,ta, arartaete

atataraoruonudnd1 1peprecrecnetntmmigihgthtbebesusfuffifciiceinetnttotoatatrttarcatctmmoroereinidnudsutsrtyr.y.WWorokriknigngtotorerdeudcuecethtehe

vavrairoiuosustatxaexsesapaplpielidedtotoinidnudsutsrtyrywwouoludldsesreiroiuosulsylyimimprporvoevethtehestsattaet’es’scocmompepteitivtievneensess.s.

SuScuhcha asisginginficfiacnatntrerdeudcutciotinoninintatxaexsesononinidnudsutsrtiarilapl rporpoepretrytywwouoludldobovbivoiuosulsylylelaedadtotoa a

rerdeudcutciotinoninintatxaxrerveevneuneusesononinidnudsutsrtirailalprporpoepretryt,y,atatlelaesatstiniintiatilalyll.y.HHowoweveevre,r,thteheovoevrearlalll

rerveevneuneuemmayayininfafcatctinicnrceraesaeseonocnecethtehegrgorwowththrartaeteininthtehestsattaetebebgeignisnstotopipcikckupupanadndmmoroere

inidnudsutsrtyrymmovoevsesinitnotothtehestsattaet.eF. uFrutrhtehremrmoroer,ei,fifthteheofofficfiicailatlatxaxrartaetsesaraerelolwowereerde,dt,htehnenthtehestsattaete

Chapter C7:HSAPoTuEtRh5C:aSCrPHoEAlCPiInTFaEI’CRsT7TAaXxRIEnFcOenRtMiSves 114375

REFEPRrEesNumCaEbSly the original intent of imposing a tax rate schedule with graduated

marginal tax rates was to make the income tax progressive. However, what progressivity

eAxlibsrtescihnt,thGe rsetga.te’2s0i0n5c.omFielmtaxanstdruVctiudreeoisTdauxe Itnoctehnetivzeesro: tEasxtiomnattehde fEircsot n$o2m,6i3c0aonfdinFcoismcael,
and becIamupsaectosf, BthaetongrRaoduugatee:dStmataerogfinLaol utiasxianraatLese.giHsloawtiveeveFri,scsailncOefftihcee, Mmaarrgchin.al tax rate
iAnmcrbearosesisuos,veMr asurgcehrysmMalalrsztaehpns. in19i8n9co. mTeh,easEfsfheocwtivneinnesFsigoufreS5ta.5te, mEocsotnoofmtihce Dpreovgerleospsmiveitnyt
occurs Patolliocwieesr: AinTcoimmee-Sleevreielss,Annoatlyhsiigsh. eWr elsetveernlsPoofliitniccaolmQeu.aArtterhlyig4h2e:r28in3c-o3m00e. levels, the
aBvaerrtaikg,eTtiamxortahtey hJ.ar2d0l0y2i.nEcrveaalsueastiantgatlhl.eTImhipsancattsuoref Lofocthael Ecucorrneonmt tiacxDiesvdeilroepcmtlyenctoPntorlaicdiiecstoorny
to the gLooaclaolf EpcroongoremssiciviOtyu. tScoomaeltsh: oWughhatonhathsebseuernfacDeointeapapnedarWs thhaatt itsheDtoaxabslaet?isfUiepsjothhne
verticalInesqtuitiutytecoSntadfiftioWn,orikt inregalPlyapdeoresNtoh.is03o-n8ly9. aKt athlaemlaozwoeor: iWnc.oEm. eUlpejvoehlsn rIendsutictiuntge tfhoer
wealth oEfmthpeloseymloewnetsRt einsceoarmche.taxpayers, not the intended consequence.

Bartik, Timoty J. 1994. Jobs, Productivity, and Local Development: What Implications does

FigurEeco5n.o5m:iSc oRuesteharCchahraovleinfoar itnhecoRmoleeotfaGxo: vCerunmrreennt?t NtaaxtiornaatleTsaxcoJomurpnaarl e4d7 (t4o):

847-861. inflation-indexed rates, 2009

Bennett, James, and Thomas Dilorenzo. 1983. Underground Government: The Off-Budget

Public Sector. Washington, DC: Cato Institute.

BBeucrsstie, iZnF,seoMdlet..rLa1.l9aR9n6ed.seAHrva.Jev.eBRCaSountlRarkntriaeoectnfkeat.sAn/I1tdBnl9arcL9ano5octma.ckeaeCRltTsoeTganaixgoxrneeassslCUsohIpnondtucSraloictdbmehueEJetduenTduldyale-txtoShwReetaphaEsteteecImsS2on/o0nfBblu0oeart9rmathic9o’ikcsn(e3EWAts)cd:aioj6frun-1sAo79tm.em5d9ioctTnoRgaixsthee?

BuTssa,xTaSbetlraertyeInsF.c.Fome2d0ee0r1a.Al TRmTheoaesuxenrEtvfefeBAcatvneokrfaogSfetMaTtieanxnTeRaaaxptoeIlnisceA1n9mtT9iova4uexAsntnonnuaElcRoenApovomerrtiac9gGe(1rT)o:aw3x-tRh19aa.tend Firm
$1L55o,c0(a10t)0i:o9n0D-1e0c5is.io$n7s1: An overvi1e.w42o%f the Literat$u1r2e5. Economic Deve2l.o5p%ment Quarterly

Buss, T$e1r0ry,0F0.01999a. T$h2e9C0 ase Again2s.t9T0%argeted Indu$s2tr5y0Strategies. Econ2o.5m%ic Development

$Q1u5a,0r0te0rly 13 (4)$:630349-356. 4.03% $377 2.51%
Buss, T$Fe2ri0nry,k0lF0e.0. 1E9c9o9nbo.mT$ioc95Dta4ergveetlooprmneont4tt.oQ77tua%arrgteetr,ltyh1at3’s(4t$h)5:e23q76u5e-s3t7io0n.: A resp2o.n6s3e%to Wiewel and

Calcag$n3o0, ,P00et0er T. an$d1,H65e4nry Thom5p.5so1n%. (2004) St$a8te34Economic Ince2n.t7iv8e%s: Stimulus or

$R5e0a,0ll0o0cation? P$u3b,0li5c4Finance R6.e1v0ie%w 35 (5): 1$-11,56.95 3.39%
Calcag$nT7oa5,r,Pg0ee0tt0ienrgTI.nacnred$a4sF,e8ra0Cn4okrpHoerfanteerT6. .a(42x10%R07ev).eSnutaet?e JT$oa3ur,rg1ne2at7ilnogf oRfeBgiuosninael sA4s.n1Ian7lv%yesisstmaenndt:PDoloiceys

$13070(,20)0:090-102.$6,554 6.56% $4,877 4.88%

Christo$p1h5e0r,s0o0n0, Susan$1a0n,d05N4ed Right6o.7r.0F%orthcomin$g82,307170. The Creativ5e.5E8c%onomy as ‘Big
$2BE0du0us,ic0na0et0sios’n- aEnvd$aR1lu3ea,s5tei5an4rgchS,t3at0e(1S6)t..r7a7te%gies to L$u1re1,8F7il7m Makers, Jo5u.9r4n%al of Planning

Cobb, Kathy. 2006 Roll the Credits… and the Tax Incentives, Fedgazette, Minneapolis, MN:
FFiegduerreal5R.5esaelrsvoe sBhaonwksowf hMaitntnheeapaovleirsa, gSeeptatexmrbaeter.s are for various incomes and taxes

uCnudnenrinthgehacmur,rTenhtomtaxass. y1s9te9m5 DinevSeoloupthmCenatroInlicnean. tIinvetsheGoriogdhtorcoBluadm?nFs eitdearlasol RshesoewrvsewBhaantkthoef
taxes anAdtlaavnetaraRgeegtiaoxnarlatUespdwaoteulJdanbueariyf-tMhear1c9h589 (t1a)x: 8ta-9b.les were indexed for inflation. The
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especialLlyittaltehEigcohneor mleivceDlseovfelinocpommeenst.. EItckoeneopmsitcaDx eravteelospemxternetmQeluyarlotewrlyfo1r2th(e1)l:o6w8e-s8t7i.ncome
iEnddmiviisdtuoanl,s Kinetlhlye sDta.te2.004. The Net Effects of Large Plant Locations and Expansions on

FCioguunrety5E.5mapllsooymsheonwt.sJtohuartntahleocf uRreregniotntaaxl Sscyisetnecme 4c4h(a2rg):e2s8a9l-l3i1n9co. me groups more in
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table. ADsilSemoumtha: CTahreolRinoaleionfcoBmuseinteasxseCs lcimonattien.uReevtoiewcloimf Rbewgihoinleal tShteudtiaexs 3b0ra(c3k)e: t3s15re-3m3a0i.n
sEtsaignngaenrt,,Ptehteer sKta.t1e98b9ec. oTmheesRiasereolfatthiveeElynthreigphre-tnaexursiatalteS.taTteh:isStahtaes aandnLegoactailveDeivmeploapcmt eonnt

Policy in the United States. The University of Wisconsin Press, Madison.

1148168 UNLEASHING CAPITALISM UUNLNELAESAHSIHNIGNGCCAPAIPTIATLAILSIMSM

mFemalniaxun,fuaAfcatlciustruoirnignRgp.rpo2rpo0e0pr9etry.tyDtatoxaxSintiantthetehCecocuropnuotnrtyar.tyeI.nInFciFogimugrueereT5.a58x.8ewsweReperpdersueecsnetnWthteahgeeefesffe?fceFtcivteideveeprrapolrpoRepretsryetyrtavtxeax

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Incentives? Southern Economic Journal 71(1): 78-92.

Gabe, Todd M. and David S. Kraybill. 1998. Tax Incentive Re-quests and Offers in a State

FFigiguEurceoren5o5.m8.i8:c:IDnIendvdeulusoptsrmtiraeinaltlPPPrroorgoprpaemretr.ytRyeTvTaieaxwxeosefsRineingSioSonoaulutShttheudaeiasetsset2re8nr(n3s)ts:at1at-et1se4*s. *, ,2200077

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GilleTspTeixWeeax,hsaasWrtoilnliaPmapeCrs. oannUd6r6bRaonbAerfftairWs.. M$1$a,12r,t62in46.,43,532850808. Tax Inc2e.2n5.t35iv%3e%s for Economic

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HefnLerLo,uCoiuaFsirrsaoainlaniannkaa. Budget &ImCp1a7o1cn7ttroAlnBaolyasrids Bfooarr$d7$Fo87if3l8mE,34c,04oP70nr7oomduicctAiodnvisinor1sS..15o.75u%7th%
2008. Carolina, S.C.

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National Tax

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HickKs,KeMnetnuitccuhkcaykeyl J. 2007a. T47h4e7 Local Econom$i3c$23I72m,71p,01a0c0t of Wal-Mar0t..06.N56%5ew% York: Cambria
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DDeRlealewagwaioraenrael Labor Ma5rk05e0ts: The Case of$2C$32a83b,8e8,l48a0’4s0 Retail Outle0ts.04..84J%8o%urnal of Regional

SoSuoArucnreca:el:NysaNitsaiotnaioanladAl sPAssoscloiactiyaio,tnio3no7fo(Mf2Ma)n:a1unf1ua6fcat-uc1true2rr2es.r(s2(020090)9)
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Unleashing Capitalism: Why Prosperity Stops at the West Virginia Border and How
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Chapter C7:HSAPoTuEtRh5C:aSCrPHoEAlCPiInTFaEI’CRsT7TAaXxRIEnFcOenRtMiSves 114397

MarkusPenre, sAumnna.b(lyeditthoer) o2r0ig0i7n.aRl eintienngt inofthiemCpomsinpgetitaiontaxforraCteapsitcahle. dKualelamwaitzhoog, rMadIu.:atWed.

marginaEl. tUaxpjroahtnesInwstaistuteo fmoraEkempthloeyimnceonmt Reetsaexarcphrogressive. However, what progressivity

eMxaisutesyi,nJtohee, satnadteM’sairnkcoMm.eStpaixegsetrl.uc1t9u9r5e.iIssdSuteatteoatnhde LzeorcoaltaCxoomnptehteitifoirnstfo$r2F,6i3rm0 sofHianrcmofmuel?,

and becFaeudseraolfRtehseervgeraBdaunatkeodf SmaanrgFinranl ctiasxcorWatees.klyHLowetetevre:r(,9s5i-n2c6e). the marginal tax rate

iMncorresaes,eSs toever. s1u9c9h6.smGaelolrsgtieapsJoinbsinTcaoxmeC,readsistsh:owNneeidnedFigInucren5ti.v5e, smoorstNoefetdhlespsroSgurbessisdiiveisty?

occurs GateolorgwiearPiunbcloicmPeoleicvyelFs,ounnodt ahtiognh,erMlaervcehls29o.f income. At higher income levels, the

aPveearvayg,eJtoahxnrPataetrhicakrd. l2y0i0n7c.reAasCeosmatparlli.soTnhiosfnTawtuoreAoltfetrhneatciuverreMnot dtaexlsiosfdEirceocntloymciocnItmrapdaicctto:rAy

to the gCoaasleofSpturodgyresosfivtithye. SMoisaslitshsoiupgphi oNnistshaensuPrflacnet. itUanppuebarlisshtheadt tPhhe.Dta.x sdaistissefriteastitohne,

verticalUenqiuvietyrsictyonodfitMioins,sisitsirpepail.ly does this only at the lower income levels reducing the

wPeeoapltlheso,fSttheevsee. l2o0w0e8s.tRinecvoiemwestfaoxrpsatyaeters’,s nfioltmthteaxinctreenddiet darceonn’tsegqouoedn.cTeh. e Providence Journal.

12 August.

PFetiegrsu,rAel5an.,5:anSdoPuetther CFiasrhoerli2n0a04i.ncTohemFeaitluarxe:s CofuErrceonnotmtaicxDreavteelsopcmoemntpIancreendtivteos.
Poole, JKoeunrnneatlhoEf t.,heGAemoregreiicnaAfn.lPaEltraiioncknnein-cigenkAd,sesDoxoceniaadtlidornaTt7.e0Is(a1,n)2n: o20n70e-,397N. ancy McCrea, and Pofen

Salem. 1999. Evaluating Business Development Incentives. U.S. Department of

Saiz, MDCaoertmvienml.oep2rm0ce0e1nE.t cAUogsnieonCnmgcuiiRrcePrasre.tDonegtser/vIaBnemrclaoocpmAkmeettetrTsniabtxuAtedsmtoinIinMsctSreocaamhtsieoeudnrTue:alexaNnwRadataisotEenIsv2na/a0flBll0aurA9ataicstoesknoeScAtsitdaaitjftiueo1sn9tEe5dco9oftTnooaSmxtaitce
TheTaExcaoSDbnoleoeuvmtIehnliocCpoIammmroeeplnaitncSatA.tomrTfaoatBeuxgMniteWs. AEovnceoSrnaoogumethiTcCaDxaerRovaeliltnoeap.m2Ae0nm0Tt2oaQ.uxDunativrtiesirolyn 1oA5f vR(e1er)sa:eg4ae5r-cT5ha7,x.URnaitveersity of

Trogen,$5P,a0u0l0. Which E$c7o1nomic Dev1e.4lo2p%ment Polic$ie1s25Work: Determin2a.5n%ts of State Per

$C1a0p,0it0a0Income. $1299909. Internati2o.n9a0l%Journal of E$2co5n0omic Developm2e.n5t%1.3: 256-279.
Wiewe$lC,1aW5s,e0im0A0.g1a9in9s9t. TP$aor6lgi0ce4yteRd eIsnedaurcsthr4yi.0nS3at%rnatIemgipeesr.feEccto$Wn3o7om7rlidc:DReevseploonpsmeetn2ot.5TQ1eu%raryrteFr.lyB1u3ss the
(4):

$32507,-030600. $954 4.77% $527 2.63%

Woodw$a3r0d,,00D0ouglas, $H1,a6r5ry4 Miley, 5a.n5d1%Holley Ulb$ri8c3h4. 2000. Educat2i.o7n8%and Economic
$Dh5te0tpv,0:e/0l/ow0pwmwen.sttrion$m3S,.o0cu5let4hmCsoanr.oeldinu6a/t..1eaT0m%hes/cSetrdo/emdeTc$hd1ue,rv6ms9c5o/nd Institute. C3l.e3m9%son University.

$75,000 $4,804 6.41% $3,127 4.17%

$100,000 $6,554 6.56% $4,877 4.88%

$150,000 $10,054 6.70% $8,377 5.58%

$200,000 $13,554 6.77% $11,877 5.94%

Figure 5.5 also shows what the average tax rates are for various incomes and taxes
under the current tax system in South Carolina. In the right columns it also shows what the
taxes and average tax rates would be if the 1959 tax tables were indexed for inflation. The
figure clearly shows that the 1959 indexed tax rate structure is more uniformly progressive,
especially at higher levels of incomes. It keeps tax rates extremely low for the lowest income
individuals in the state.

Figure 5.5 also shows that the current tax system charges all income groups more in
taxes than an indexed rate schedule. The only exception is the $5,000 income earner in the
table. As South Carolina income taxes continue to climb while the tax brackets remain
stagnant, the state becomes a relatively high-tax state. This has a negative impact on