Better use for Amazon’s incentive dollars

The opinion editorial below by Frank Knapp ran today in The State.
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Better use for Amazon’s incentive dollars

By FRANK KNAPP JR.

When the S.C. House voted to support our state’s small retailers by not giving in to Amazon.com’s incentive demands to build a distribution center, predictions of doom erupted. One Lexington County councilman said of the House vote not to give Amazon an exemption from collecting sales tax on in-state sales, “it’s like no one will even look at coming here for 10 years.”

Giving the retail giant an unfair competitive advantage over every other retailer was the price that Amazon supporters wanted the entire state to pay for their new local jobs. They warned that our Commerce Department would never be trusted again if the state didn’t keep a promise that was not actually part of the written agreement with Amazon. They even blamed the Amazon vote for two other potential businesses crossing Lexington County off their consideration list.

But instead of impotence, Commerce reeled off impressive announcements of new manufacturing jobs starting the day of the House vote: 100 in Union County, 150 in Marlboro County, 270 in Lexington County and 700 in Greenville County. These investments totaled nearly $267 million (more than twice as much as Amazon promised) and, unlike the Amzon.com sales tax deal, not one of them threatened the profitability of locally owned businesses.

Now Amazon.com’s team of lobbyists will try one more time in the House to secure the sales tax deal. That vote could happen today or next week and, just as before, without a public hearing that is required on most bills.

Amazon supporters will argue that Wal-Mart’s announcement last week to open, relocate and expand stores in South Carolina creating 4,000 new jobs will do more damage to locally owned small retailers than the Amazon distribution center. But there are some clear differences.

There is no indication that any state incentives have been offered to Wal-Mart — only local government incentives, and nothing involving the sales tax. If that were the case with Amazon, this would not have been so controversial.

While small retailers would prefer that Wal-Mart and other big-box stores not come to their communities, that train left the station a long time ago. Some small retailers do not survive, but most learn to compete with big-box stores by improving their marketing and offering customers more personal service, convenient locations and parking, niche products and services and a friendlier buying experience.

Small businesses are also learning to educate their communities on the economic power of buying locally. Studies have found that every consumer dollar spent with a locally owned business yields three times the economic benefit to the community of spending it in a big-box store.

The larger issue with state and local incentives to entice big businesses to our state is that the same money might be better used to help locally owned small businesses start or expand. Eighty-seven percent of South Carolina’s businesses and 88 percent of the nation’s businesses have fewer than five employees and were started with less than $35,000 in capital. According to the Association for Enterprise Opportunity, if just one in three of these microbusinesses hired a single employee, the country would be at full employment.

Yet we in South Carolina and the nation fail to invest sufficiently in technical assistance and lending to these microenterprises, even though they are the essence of sustainable local economies, offer the best opportunity for economic growth and are the farm team for future larger employers. We allow the S.C. Women’s Business Center to go under, we cut back state appropriations to our Small Business Development Centers, forcing them to forgo services for start-ups, and there are only very rare loans to microbusinesses.

The General Assembly should continue to say “no” to Amazon’s sales tax deal, as other states are beginning to do. And it should take the same amount of incentive money and put it to better use helping to grow our locally owned small businesses.

Mr. Knapp is the president and CEO of the S.C. Small Business Chamber of Commerce. Reach him at sbchamber@scsbc.org.

Amazon’s tantrum

Last week legislation was introduced in both the South Carolina House and Senate to exempt Amazon.com from collecting sales tax on sales to South Carolina residents from its proposed distribution center in Lexington County. The bills have an uphill fight.

My earlier blogs lay out the arguments against the Amazon deal:
April 5th--Selling Small Businesses down the Amazon
April 7th--Amazon.com: The bigger picture
April 8th--Amazon.com’s business plan revealed

Business organizations like The S. C. Small Business Chamber, the S.C. Chamber and the newly formed S.C. Alliance for Main Street Fairness are opposing the Amazon.com sales tax exemption for its obvious unfairness to all brick-and-mortar and on-line stores in the state. Tea Party groups across the state have registered their opposition to the deal directly to Governor Nikki Haley in a private meeting encouraging her to veto a bill if it reaches her desk (something she has said that she won’t do). Competing TV and radio commercials are airing statewide encouraging the public to contact legislators to support and oppose the Amazon sales tax deal.

Realizing that South Carolina was not going to be a pushover like all the other state’s it has bullied into getting its way over sales tax, Amazon.com threw a tantrum announcing it had stopped the hiring of 11 management positions for the Lexington County center.

Obviously this is a childish ploy to influence the legislative process. But if it should somehow be successful, Amazon.com will have shown small businesses a new lobbying tactic—stop hiring any new employees until we get what we want from the General Assembly. With over 100,000 small businesses in South Carolina can you imagine how effective this collective “holding our breath” can be?

But back to Amazon’s media effort. Their latest postcard to Lexington County residents (from the company’s new front group—Save Our Lexington Jobs) plays off the Wal-Mart advertising campaign by saying “building the economy in Lexington County has fallen victim to a Wal-Mart ROLLBACK.”

However, the word “rollback” is not what most small businesses across the state are interested in. They want to know if Amazon.com will blackmail our Legislature to ROLLOVER.