Like a diet or an addiction treatment, the debate in South Carolina over tax incentives for Internet mega-retailer Amazon is an introspective struggle between gratification and the greater good.
The contention is whether the state should relieve Amazon of collecting sales taxes on online purchases as an incentive for building a facility in the state and creating between 1,500 and 3,000 jobs.
In a previous post “Why Not Amazon?” I wrote:
The building of an Amazon warehouse/distribution center in South Carolina is a good thing. If relieving the company of collecting sales taxes on items shipped from (but not sold at) the facility is the only issue, it’s not a valid reason to hold up the benefit to the area and the state.
That was not a popular position with many of my conservative, libertarian and taxpayer-rights friends and readers. I was subjected to evangelical sermons and head-shaking “tsk-tsks” as if mine was an irrevocably lost soul whose place in the dark underworld of the hereafter had been guaranteed.
The interventions had no effect. Like the fertile deltas of its namesake, Amazon was going to nurture much-needed growth in a barren economic landscape.
Well, maybe not.
After watching the press conference held by the South Carolina Policy Council last week, I’m revising my opinion of the value of the Amazon deal as currently proposed. The Policy Council’s statistics (see below) were critical to my change of heart, but moreso was the endorsement of these findings by State Senator Tom Davis (R-Beaufort). Davis is one of the most respected members of the South Carolina General Assembly and his passionate rejection of the Amazon deal was persuasive.
From 1995 to 2008, South Carolina gave away roughly $2 billion in incentives.
- In 1995 lawmakers spent $32 million on incentives. By 2008 that number jumped to $525 million. That’s a 1,541 percent increase.
- In 2009 South Carolina gave half a billion dollars to Boeing in exchange for 3,800 promised jobs. That comes out to about $131,000 per job.
- Over the last several years, politicians have spent $40 million trying to jump start the hydrogen economy in the Midlands.
- From 1995 to 2008, the state’s Department of Commerce saw its budget increase from $12 million to $145 million.
- In 2008, the state handed out more corporate tax credits than it collected – $374 million in credits versus $269 million in collections.
- Similarly, the state now exempts more sales tax than it collects – $2.7 billion in exemptions versus $2.19 billion in collections.
Over the last 15 years, politicians have spent billions to drive the economy – and here’s where it’s gotten us:
- In the 1980s South Carolina was ranked the 15th fastest growing economy. Now we have the 12th slowest growing economy.
- From 1994 to 2008, our unemployment rate has gone from 5.2 percent to 9.4 percent.
- The state experienced its worst job losses after years when spending on incentives was highest.
- Today we have the 44th lowest per capita income in the nation.
- From 2008 to 2010 South Carolina lost 118,000 jobs – more than twice the number of jobs state officials say they “recruited” during that period.
These are pretty compelling reasons for getting the state legislature out of the business of business.
Governor Nikki Haley has her own dilemma. Though not personally in favor of providing these tax incentives, as the state’s chief executive, it’s her responsibility to maintain South Carolina’s integrity. A deal was made with Amazon and South Carolina may have to renege on it.
Nonetheless, it gets down to who is to be represented in and by state government. Amazon may have bought some of South Carolina’s politicians, but it didn’t elect them. The Palmetto State is no fiefdom in which the ruling class maintain their status at the expense of the citizenry.
Clearly, the history of tax incentives as bait is a murky one. If the proposal to Amazon is changed and a requirement enacted to require the collection of state taxes is included, then the future of business recruitment in South Carolina is as muddy as river water.