A Grass Roots Movement for Change – First Hand

· by Herb Dew

Herb is the CEO of HTI. He founded HTI in 1999 along with John Knight and David Sewell, and remains heavily involved in the organization today.
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A Grass Roots Movement for Change – First Hand

Well by now everyone is aware (that listens to me) that our company, Human Technologies, Inc.,  was hit hard by an unexpected tax hike announced innocently enough by a form letter written by the SC Department of Employment Workforce (SC DEW). The tax was retroactive to the first of this year and payable at the end of the first quarter.

The state has dug itself into debt, due to a combination of ineptness on the part of the state agency over the years that manages claims for unemployment as well as the worse economy since the Great Depression. South Carolina owes a billion dollars.

So January 31st every employer in SC received the infamous “letter”. Fifteen percent of the companies got good news. A tax cut predominantly targeted at small employers. About 45% of employers got news that was mixed, a small cut or a small increase. The rest, almost 40% of employers found out that they had increases of 100% or more. Many in the 300, 400, or 500% range.

No one knew until that day how much they would pay. The state had employers with two tiers of tax increases: a capped wages increase that went from $7000 to $10,000 in 2011 (43% increase) and continues rising over the next 3 years to level off at $14,000 (100% increase) as well as a change to an “array system” that places employers into “20 tiers” based on a formula looking back at wages and usage over the last 7 years.

Tiers 1-12 ranged from 0% to 2.67%. Tier 13 jumped from 2.67% to 5.11%. A single tier increase of 91%. It was bad luck if you missed tier 12 and fell into tier 13. Tiers 13-20 range from 5.11% to 10.67%. Clearly the tiers 13-20 are paying draconian increases.

But what no one seems to have done is modeled the impact of this on the state’s economy. As companies discovered their individual impact it’s becoming clear that manufacturing is taking the brunt of the hit. To date a majority of companies that did ANY layoffs at all during the recession, regardless of how long they have existed in the state are falling into tiers 13-20. In the Southern part of the state tourism is finding that they too have been hit hard. Banks as well in many cases. But manufacturing in particular is taking a drubbing.

A number of larger companies from the upstate met on Valentine’s Day at Senator David Thomas’ office to convey their concern and frustration over the increase they received and the impact that this would have on their businesses. The companies present were some of our largest upstate employers. They made clear their concerns: this tax was unannounced, unplanned and is inappropriately high. Several companies from that meeting are on the record.

This week more and more companies are finding their “letter” and responding with one voice. A group of manufacturers in Pickens met and discussed their concerns. The Oconee Industrial Group met Feb 18th with state officials present and cited their concerns as well. The South Carolina Manufacturers Association noted that they had received many calls with concerns. All around the state wheels are turning.

Senators are being called. Representatives. The State Chamber (which haplessly supported the bill). Industry Associations. Lobbyists.

And yet many companies are still trying to understand the impact on them. Yesterday I received a call from a MAJOR high tech manufacturing company. They had found their letter at their corporate office after searching. They fell into Tier 19. A base rate of 9.61%. This is a company that has operated in SC for decades. They have had one layoff since their inception. Tier 19.

Something is wrong. And the word is getting out. People are asking the right questions. People are learning. We are educating them. Not asking them to convey our way of thinking. The issue doesn’t require that. The letter itself does what it needs to. It “feels” wrong. A Grass Roots effort is always effective when the effort doesn’t need to be sold to people. Just look at your letter. Look at the tiers. Listen to the names of companies affected.

The senate needs to listen to the senators who are taking the time to understand the impact of this tax increase. It’s not a sound bite anymore. It’s real. And it affects manufacturing severely.