State's incentive dollars should support little guys

May 16, 2011 

By Frank Knapp Jr.

Special to The Island Packet

and The Beaufort Gazette

(Frank Knapp Jr. is president and CEO of the S.C. Small Business Chamber of Commerce in Columbia)

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 state 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 jobs 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 we expect that Amazon.com's team of lobbyists will try one more time in the legislature to secure the sales tax deal. That vote could happen at any time during these last few weeks of the session and, just as before, without a public hearing that is required on most bills.

NOT LIKE WAL-MART

Amazon supporters will argue that Wal-Mart's recent announcement 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 Walmart -- 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.

SMALLER IS BIGGER

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.

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