Small Business & the Next Governor

The South Carolina Small Business Chamber of Commerce (SCSBCC) today released an assessment of the three candidates running for Governor—Rep. Nikki Haley, Sen. Vincent Sheheen and Dr. Morgan Reeves. The assessment was based both on specific critical legislative votes and a questionnaire sent to each candidate on July 7, 2010. The questionnaire can be found at http://www.scsbc.org/issues.aspx?article_id=883.

While the SCSBCC does not endorse candidates for any office, it is educating the small business owners in the state as to how small business-friendly each candidate has been to date and might be in the future if elected.

“It is important that small businesses have a good understanding of how the election of the next Governor might affect them,” said Frank Knapp, Jr, president and CEO of the SCSBCC. “In 2002 we were in our infancy as an organization and thus not in a good position to evaluate Gubernatorial candidates. As a result, what many small business owners thought they were getting with Mark Sanford did not pan out.” Mr. Knapp’s blog on this issue can be read at http://www.unconflictedsc.com/2010/06/sheheen-haley-sanford-endorsement.html.

Summary and Assessment

Below are the detailed results of our questionnaire and review of critical legislative votes.

Because both Rep. Haley and Dr. Reeves failed to respond to our questionnaire, they have deprived small businesses the opportunity to compare the candidate’s positions on extremely important small business issues. Dr. Reeves, the candidate of the Green and United Citizens Parties, might receive a pass on this matter due to lack of resources. However, there is no excuse for Rep. Haley’s unresponsiveness to a questionnaire from a statewide small business advocacy organization with thousands of members that has successfully represented the interests of small business in the Legislature and in regulatory matters for over 10 years.

Sheheen @ Wateree River Sweep

Sen. Sheheen should be applauded not only for responding but also because his comments reflected an appreciation for not increasing health care costs to small business, projecting leadership in creating alternative energy jobs, and promoting comprehensive tax reform and reducing small business property taxes. Most importantly, Sen. Sheheen recognizes the importance of small business growth and development and proposes a Division of Small Business and Entrepreneurship within the Department of Commerce.

A review of critical small business votes indicates that both Rep. Haley and Sen. Sheheen have casts numerous votes in support of matters strongly favored by the SCSBCC.

However, Rep. Haley has demonstrated that she has been willing to forgo supporting small business in the case of affordable health care insurance when it was tied to a tax increase on cigarettes. Since 2006 she has voted multiple times against such legislation that was specifically targeted to help small businesses. Confusing the understanding of her votes is Rep. Haley’s apparent recent endorsement of increasing the sales tax on groceries thus indicating that she is not universally opposed to raising taxes.

One of the most important questions Rep. Haley did not respond to was our inquiry of her support for establishing a small business division within the Department of Commerce not only to give Commerce a small business development focus it has never had but also to provide assistance to local communities to help make them more small business friendly.

Sen. Sheheen strongly endorsed such an initiative. Rep. Haley’s silence causes great concern given her public statements about economic development. These statements appear to completely ignore the important role of small business and possibly demonstrate a lack of knowledge about small business.

Rep. Haley’s primary economic development campaign promise is to eliminate the corporate income tax. She no longer talks about her earlier promise to reduce small business income taxes.

Image: Haley's Facebook page

Growing our small businesses and encouraging entrepreneurship apparently are no longer an important part of Rep. Haley’s economic development plan, even though over 60% of all new jobs come from small businesses. Instead, she promises only more of the traditional, and not very successful, economic development strategy of recruiting big business.

That is the essence of her “elimination of corporate income tax” pledge. For the uniformed, and possibly this might apply to Rep. Haley, very few small businesses pay corporate income taxes because they are not C-corporations. The elimination of corporate income taxes will not help our small businesses. Instead, it would create an unlevel playing field between big and small businesses on income taxes.

In 2005, after a major legislative battle with Governor Sanford, the SCSBCC scored one of its most significant victories in having the income tax paid by small businesses reduced from 7% to 5% primarily to achieve parity with big business C-corporations.

There is an underlying problem with Rep. Haley’s unresponsiveness to the questionnaire and her campaign’s lack of courtesy in failing to even notify the SCSBCC that they would not be responding. In the past, Rep. Haley has demonstrated this same lack of respect for the SCSBCC in her refusal to meet with the SCSBCC to discuss legislation. This is the same path Mark Sanford took with the SCSBCC, refusing every request for a personal meeting.

It is possible that Governor Sanford and Rep. Haley both believed that they already had the answers to all the state’s problems and didn’t need to listen to alternative opinions. Unfortunately, we know that this gubernatorial attitude failed our state over and over during the last 8 years.

Questionnaire Response

Haley: Unfortunately, Rep. Haley did not return the questionnaire. To insure that her campaign received it, the questionnaire was hand delivered to her campaign communication director, Mr. Rob Godfrey, on July 27, 2010. The SCSBCC did not receive a response by the due date of August 2, 2010, or a request for an extension. No contact from the Haley campaign has been received by the date of this release.

Sheheen: Senator Sheheen did respond to the questionnaire but requested an extension to do so. His response was received on August 17, 2010. Senator Sheheen addressed each of the areas of interest—healthcare, energy, taxation, and economic development. Although some specific questions within these areas might not have been addressed, his answers did sufficiently address the issues to allow for analysis.

Senator Sheheen’s response can be read at http://www.scsbc.org/issues.aspx?article_id=882.

Image: Reeves' website

Reeves: Dr. Reeves called our office immediately upon receiving the questionnaire promising to provide a response. A series of e-mails were received with responses but subsequently, Dr. Reeves contacted our office again to ask us to disregard those responses that were prepared by a volunteer consultant no longer with his campaign. No further communications or response to the questionnaire was received. Consequently, we must consider Dr. Reeves not to have responded.

Critical Legislative Votes

Since 2005, Rep. Haley and Sen. Sheheen haves taken votes on certain legislation of extreme importance to South Carolina small businesses. Dr. Reeves has not served in the South Carolina Legislature and thus is not included in this analysis. Below is an explanation of these critical votes and whether the candidates supported these bills.

2005—The SCSBCC supported job tax credits for small businesses so that the hiring of as few as two new employees would qualify many of the state’s small businesses for this economic development incentive. These job tax credits had never before been available to small business. Both Rep. Haley and Sen. Sheheen supported this bill that passed both chambers.

2006—The SCSBCC was the primary business organization supporting an amendment to the state budget that would have increased the cigarette tax from 7-cents per pack to 39-cents. The additional revenue would have been used as a Medicaid match to give premium assistance for small businesses providing health insurance to employees with family incomes of up to 200% of poverty. This effort to reduce the cost of small business health insurance failed. Rep. Haley voted against the budget amendment. Because the budget amendment failed in the House, it did not come up for a vote in the Senate.

2007—The SCSBCC was the primary business organization supporting the establishment of a $1000 tax credit per new employee in a Registered Apprenticeship program. Rep. Haley supported the bill. The Senate passed the bill on a voice vote.

2007—The SCSBCC proposed reform in the state’s workers’ compensation insurance law that would require the state to regulate how much an insurance company could build into the premium for profit, taxes and other expenses. The non-regulation of this Loss Cost Multiplier component of premiums had cost businesses over $200 million in excess premiums over several years. The bill that contained this reform passed with the support of both Rep. Haley and Sen. Sheheen.

2007—The SCSBCC was a strong supporter of increasing funding of the State Child Health Insurance Program to extend Medicaid to the children in families with incomes of up to 200% of poverty. This change would help make health care more affordable and reduce health insurance costs for small businesses by helping to stop health care cost shifting from the uninsured to the insured. The Legislature passed this bill but Governor Sanford vetoed it. Both Rep. Haley and Sen. Sheheen voted to override the Governor’s veto.

2007/2008—In 2007 the SCSBCC and a growing coalition of business organizations supporting an increase in the state’s cigarette tax to provide more affordable health insurance for individuals and employees. The House passed its version of the program in 2007 with Rep. Haley voting against the bill. In 2008 the Senate passed its version of the bill calling for a 50-cent increase in the cigarette tax to be used in a non-Medicaid premium assistance program for small employers offering health insurance to workers below 200% of poverty. The state’s Medicaid program would also be expanded to parents between 50% and 100% of the poverty level. Sen. Sheheen voted for this bill. Governor Sanford vetoed the bill and Rep. Haley voted not to override. The House sustained the Governor’s veto thus no Senate vote was held.

2008—The SCSBCC first identified in 2003 the problem with excessive amounts (approximately 42%) of our state procurement dollars going out of state to purchase goods, labor and services. As the primary advocate for procurement reform that would result in more procurement dollars staying in our state to benefit our small businesses, legislation was crafted for the SCSBCC by the Budget and Control Board and introduced by Republican leadership in the Senate (Leatherman) and in the House (Harrell). The Legislature passed the Senate bill but the Governor’s veto failed to be overridden in the House. Both Rep. Haley and Sen. Sheheen voted to override the Governor’s veto.

2009—The exact same procurement reform bill passed in 2008 but stopped by a gubernatorial veto was reintroduced in the Senate by Senators Knotts and McConnell and in the House by Speaker Harrell and Rep. Mac Toole. The Senate bill was passed by the Legislature and vetoed by the Governor. Both Sen. Sheheen and Rep. Haley voted to support the successful override of the veto.

2009/2010—The SCSBCC once again joined the even greater chorus of organizations supporting an increase in the cigarette tax. In 2009 the House passed a 50-cent increase in the cigarette tax with the new revenue used for a tax credit for small businesses providing health insurance to low income employees, a tax credit for low-income individuals purchasing health insurance directly and premium assistance for those wanting to enroll in the state’s high-risk health insurance pool. Rep. Haley voted against this bill. In 2010 and in recognition of the new national health care law which created a small business health insurance tax credit program, the Senate passed a 50-cent increase in the cigarette tax with most of the funds going into a Medicaid Trust Fund to make health insurance more affordable for low-income South Carolinians. Sen. Sheheen voted for the bill. Governor Sanford’s veto of the bill was overridden with Rep. Haley voting to sustain the veto and Sen. Sheheen voting to override.