By Mike Fitts
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COLUMBIA -- A broad economic development bill passed Thursday by the S.C. House would phase out the state's corporate income tax.

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

Corporate income taxes would be phased out beginning in 2011, and would be eliminated 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.

Previous coverage:
Economic Development Competitiveness legislation introduced

The legislation was produced by a team of six private-sector leaders, including George Wolfe, chairman of the economic development practice group at the Nelson Mullins Riley & Scarborough 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. Such a move “sends a strong signal” about South Carolina’s interest in being pro-growth and pro-business.

State Chamber of Commerce CEO Otis Rawl, another member of the drafting panel, said that Georgia is taking similar action and that South Carolina needs to stay competitive.

The corporate tax now falls mostly on small to midsized businesses, he said.

The largest businesses often get tax exemptions as part of their expansion plans, and many small businesses organize as limited liability corporations and avoid the tax, he said.

Part of the business concern over the current endowed chairs system, Rawl said, is a 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,” he said.

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

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.

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

Published March 8, 2010