By Mike Fitts
mfitts@scbiznews.com
Published March 5, 2010

The S.C. House has passed a broad bill to boost economic development that includes a phasing out of the state's corporate income tax.

The House voted 105-9 on Thursday to pass the bill, which also changes how one-third of the state's money for endowed chairs is allocated. About $10 million of the $30 million endowed chairs funding would be no longer allocated by the review board that oversees the program, but instead by the Coordinating Council for Economic Development, a panel chaired by the Commerce secretary and featuring other state agency heads.

Corporate income tax would be phased out beginning in 2011 and end entirely by 2020 under the measure.

“Our state’s future hinges on the strength of our economy and the private sector’s ability to grow and create jobs,” said House Speaker Bobby Harrell, who backed the measure. "Our economy is the biggest issue facing our state for the next two decades, and the job creation strategy we passed today addresses the heart of securing our economic future," Harrell said in a statement.

The legislation was the product of work done by a team of six private sector leaders, including George Wolfe, chairman of the economic development practice group at the Nelson Mullins law firm. Harrell’s mandate, Wolfe said, was simple: Craft some legislation that can help get the state out of its economic morass.

Elimination of the corporate income tax is necessary for competitive reasons, Wolfe said. Doing so “sends a strong signal” about South Carolina’s interest in being pro-growth and pro-business, Wolfe said.

State Chamber of Commerce CEO Otis Rawl, another member of the drafting panel, cited more direct competition. Georgia is among states taking similar action, and South Carolina needs to stay competitive, Rawl said.

The corporate income tax now falls mostly on small to mid-sized businesses, Rawl said. The largest businesses often get tax exemptions as part of their expansion plans, while many small businesses organize as limited-liability corporations and don’t pay it, he said.

Part of the business concern over the current endowed chairs system, Rawl said, is the perception that chairs have been over-concentrated in the health care field. A wider distribution, coordinated with the Commerce Department, would “let the endowed chairs reflect what our economy looks like,” Rawl said.

The idea, Wolfe and Rawl said, is to make for a more direct linkage between the endowed chairs and South Carolina businesses. The change, Rawl said, even would allow the Commerce Department to involve endowed chairs in its deal-making.

Health sciences has come to be a major part of the endowed chairs program for a simple reason, MUSC President Ray Greenberg said: It has been attracting strong corporate support and matching dollars, he said.

Health sciences research is likely to pay off for South Carolina, but it takes years to do so, Greenberg said. It takes time, he said, for the right candidates to be found to fill new professorships, then for their ideas to be spun out of the lab and to boost new companies.