COLUMBIA -- South Carolina is losing revenue because of a tax break the state promises to corporations who locate or expand here, state revenue director Burnet R. Maybank III said.
Corporate income taxes paid by South Carolina companies dropped 5.8 percent in 1996-97 to $220 million, Mr. Maybank told the state Board of Economic Advisors on Thursday. In 1995-96, the figure was $234 million.
He says the decline could almost triple to 16 percent this year.
"That credit needs to be scaled back," he said.
The credit comes from the Rural Development Act passed in 1996. It gives a tax credit equal to 5 percent of the total amount a company invests in a new or existing plant.
The factory must be in one of South Carolina's 27 counties that are Economic Impact Zones.
South Carolina officials are continually attracting big businesses, such as Nucor's $1 billion steel plant in Berkeley County and a $619 million Bridgestone-Firestone tire factory being built in Aiken County.
Despite the new plants, "you will see some more dramatic reductions in corporate income tax revenues," Mr. Maybank said.
The state Revenue Department has asked legislators to rethink the tax credit. But Mr. Maybank said corporate tax revenues are generally less than 5 percent of the state's $4.9 billion general fund.
Mr. Maybank said several investment tax credits are about to be processed by the state, including one for $10 million.
No one's sure if a change in the tax credit will mean companies will turn a cold shoulder to South Carolina.
Paul Grossman of the Orangeburg County Development Commission says the credit itself wasn't a deal-maker or deal-breaker.
But "any time you start limiting something companies have become accustomed to, you're going to have some negative reaction," he said.
The Rural Development Act helped South Carolina compete with other states for new businesses. The act also lets companies who invest more than $400 million get a property tax rate as low as 4 percent.
Harry Miller, the board's chairman, said he supports incentives to bring in companies, but he's concerned about falling tax revenues.
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