Amazon deal passes the Senate at 1am

At 1:00 am on Friday morning 05.27.11 the Senate passed s. 36, also known as the “Amazon Deal”. Proponents of the bill wanted to bring jobs to South Carolina, opponents of the bill felt like the offer was choosing winners and losers and was a damage to free market forces. As both sides had genuinely good intentions, this was one of the few times I can appreciate the work of the “deliberative upper chamber”. The filibuster was finally broken with a compromise: Amazon will not collect and submit sales taxes for 5 years. Even though some online retailers aren’t collecting sales taxes, SC residents are obligated to pay those taxes. Between now and then, Amazon has agreed to notify all SC residents of their tax obligation, provide a link to the Department of Revenue for payment purposes, and provide a year end statement to all SC customers. As I was required to recuse my vote on the bill because of a tax-exemption for medical equipment (here’s why), I think this was a good move on the Senate. As you know, it is a delicate balance between offering incentives to new companies, while maintaining an even playing field for the free market to work effectively.

Below is an op/ed by Sen. Greg Ryberg (R-Aiken) explaining his opposition
I and many senators have received over the preceding week many requests to follow the House of Representatives and approve a special deal for Amazon. The legislation in question would exempt Amazon from collecting sales tax from its customers despite maintaining a physical presence (a nexus) in South Carolina. Senators have been told that this deal and the supposed jobs that it would bring are good for South Carolina. I disagree.

The first problem with this deal is just how much is enough? I understand that Lexington County provided free land, property tax exemptions on equipment and even repealed their Sunday-sales laws to lure the facility. Lexington County voters are free to support such massive giveaways, but I disagree that the rest of the state must ante up in addition.

The second problem concerns the promises made by Amazon. Amazon originally promised a $90 million capital investment and 1,249 jobs. The company then, following the initial defeat of the legislation, promised $125 million in investment and 2,000 jobs. The Amazon business grew overnight by more than 33 percent. This simply fails the smell test. It reminds me of another retailer who promised nothing but high-end shops in their taxpayer-funded shopping mall. Perhaps if we hold out a little longer, then Amazon will promise a $200 million investment and 2500 jobs.

The third, and frankly most important, problem with this deal is the extreme disadvantage that it puts upon our businesses in our towns – the ones who are competing on the same, level playing field.

All South Carolina retailers collect sales tax from their internet sales to South Carolinians. Internet sales are the new retail. Why should Amazon get a special deal?

This deal immediately would put Amazon 7 percent ahead on the cost sheet of each and every one of those retailers in Aiken, and further ahead in other places with more local sales taxes.

I ran a retail business for over 25 years, and I can assure you that a 7 percent loss in margin would be a death knell for nearly every retailer.

I made this same argument last year when some wanted to give taxpayer dollars to a mall in Beaufort County. Tax policy should not be used to pick winners and losers.

I believed then as I believe now that special exemptions for a retail operation amount to taxpayer-subsidized piracy. If building a distribution center in Lexington County were such a good idea, then Amazon would just do it. Normal marketplace competition clearly will not work, however, and so Amazon wants your tax dollars to make their profits.

Tax incentives for retail do not create new sales and they do not create new jobs. They simply shift them from one location to another, thereby destroying existing sales and the jobs that support them.

Aiken County was home to over 2,800 retailers in fiscal year 2010, and they collected tax on more than $1 billion in sales. Aiken County retailers, moreover, employed last year approximately 7,250 people. Aiken County commercial property owners paid nearly $34 million in property taxes and more than $21 million of that went to Aiken County public schools.

The Amazon special deal would amount to a 7 percent advantage over those retailers and would, without question, harm their businesses and jobs and the tax revenue that they create. What about those businesses? What about those jobs? What about those tax receipts? What about Aiken schools? Who is looking out for them?

Finally, I oppose special tax breaks for those who simply can afford the high price of lobbyists. This is not a story about economic development and new jobs. It is a story about power politics, insider deals and economic piracy, all at taxpayer expense.

Manufacturing jobs, like those created by Boeing and Bridgestone and BMW and Kimberly Clark, most often are full-time jobs with solid pay and benefits. The average manufacturing job in South Carolina creates more than five others that deal with supply, legal services, logistics services, etc. Manufacturing facilities, moreover, make a permanent investment in unique plant and equipment.

The Amazon business model is to make retail sales out of a warehouse. More than 115,000 businesses in South Carolina make retail sales. Nearly all of them warehouse their product, even if on a shelf. They create thousands of jobs. They have a right to a level playing field.

I will not support, and indeed I will fight, any piece of legislation that threatens existing businesses and jobs. I cannot support the Amazon special deal.

Senator Greg Ryberg (R-Aiken) represents District 24 in the South Carolina Senate.