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Do We Live In A Business Friendly Area? September 30, 2014

Posted by F. McCollum in Welcome!.
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You hear this concept discussed in political and business circles quite a bit. Cities and states realize that businesses of all sizes provide jobs to the citizens, investment opportunities to investors, increase trade opportunities, and of course, bring tax revenues to support government services. While elected representatives are frequently heard touting the business-friendly climate in South Carolina, many factors point to a much less business-friendly climate than you might expect. Governor Haley regularly touts the business-friendly climate of our state, and the mantra on her website is “We can no longer pass government-friendly legislation: we need business-friendly legislation.” But are we moving that direction?

The oft-cited Area Development Magazine ranked South Carolina as the 2nd most business friendly state, but it also receives more advertising dollars from the state’s Department of Commerce than any other publication (at least $71,833 in just 2007 and 2008 alone, according to a 2013 study by TheNerve.org[1]), a clear conflict of interest.

Within the state of South Carolina, the Upstate Region consistently ranks as one of the most business-friendly regions of the State. The Upstate Alliance website, iwasblownaway.com notes, “Upstate South Carolina offers the progressive, business-friendly, and low-cost climate that will help you succeed”. However, this website was primarily funded by a $750,000 grant from taxpayer dollars to promote the Upstate, making it extremely biased.

Perhaps a more direct measure would be to look at tax rates, which drive the cost of doing business to a large extent. According to the Tax Foundation, South Carolina’s business income tax ranks 36th in the nation, the individual income tax is the 13th highest in the nation, and the sales tax rate is the 18th highest in the nation. These don’t seem very business friendly at all.

Additional burdens on businesses come in the form of licensure requirements that are at the state and local levels. South Carolina has a uniquely complicated licensure law requiring professional licenses for a wide variety of small businesses ranging from the “Handyman License” to the “Hair Braider License”, all of which must pay fees to the State to operate here. A great example is a North Carolina domiciled wallpaper installer who came to Tega Cay last year to wallpaper a small bathroom, who quickly found that local licensure fees and taxes increased the job costs by a full 70%! He finished the job he promised to do, but vowed to stay north of the state line in the future to avoid doing business under such harsh regulations.

At the state level it is common to see large businesses awarded special tax breaks, but small business owners are rarely afforded any breaks. In fact, small cities commonly treat small businesses and large businesses by two different set of rules. One has to look no further than Tega Cay which recently forced a small Charlotte-based business to obtain a business license to drop off food at a customer’s house. The business transaction and product was produced in Charlotte, and there was no fee for this delivery service. At the same time, large food delivery companies such as Papa John’s or Domino’s, who actually exchange products for cash within the city limits and even charge an extra delivery fee, do not show up on the list of licensed businesses. Seem fair?

If you reside in Tega Cay and are a contractor for one of the large banks or healthcare companies in Charlotte – if you have a home office where you spent even a single sick day last year working through emails, you owe the city a Business/Privilege License Tax on 100% of your income – this is on top of any federal and state income taxes you will owe, and does not allow for normal business deductions. You better not even think about bringing up business on the golf course – your business could be based in Delaware, but one discussion about the a deal on the 9th hole could subject your entire company’s revenue to tax by the local tax authorities. Does your kid ever run a lemonade stand – unfortunately the license for this is probably going to exceed their total revenues even on a busy hot day. Anyone selling cookies or candy to pay for school trips or extracurricular events is also required to have a Business/Privilege License. Did your nephew come over and cut your lawn or check your mail while you were on vacation? He is required to have a Business/Privilege License.

The Libertarian Party states on its platform, “the only proper role of government in the economic realm is to protect property rights, adjudicate disputes, and provide a legal framework in which voluntary trade is protected”. Laws such as the Tega Cay Business/Privilege Tax are the antithesis of the Libertarian goal for “all members of society to have abundant opportunities to achieve economic success.”

Frank McCollum is Vice-Chairman of Libertarian Club of York County. For more info, visit our website http://www.yclp.org; Facebook: York County Libertarian Party (SC); MeetUp.com/York County LP; http://www.sclp.org or http://www.lp.org.

[1] http://thenerve.org/news/2012/03/21/Business-magazine-ads/

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