Caucus Report 17 – Amazon

As a reminder, I voted in favor of Amazon both times.

Amazon.com is one of our nation’s biggest success stories in business in the past two decades. It was founded at the beginning of the Internet age, survived and thrived during the 1990s tech bubble, and this year jumped from No. 100 to No. 78 on the list of the Forbes 500.

Amazon.com wants to create 2,000 jobs in our state, and the deal brokered by former Governor Mark Sanford has created a stir among South Carolina residents.

The Sanford Administration negotiated a deal with Amazon that included giving the company a “safe harbor” from collecting sales tax on sales to our residents – the same deal we extended to QVC several years ago. The House voted the measure down in April and Amazon announced it was leaving before it created a single job here.

Extending the safe harbor means there is no cost to the state budget.

It is not uncommon for the General Assembly to make some mistakes.  What is even more uncommon is for us to fix them.  This week the House reversed course and overwhelmingly approved the extension to the safe harbor provision; giving the safe harbor to Amazon.

Some estimates are that Amazon will not have to collect as much as $2 million in sales taxes. In return, South Carolina will gain at least 2,000 jobs – jobs that pay $33,000 with health benefits and retirement. In return, the company will invest at least $125 million in our state. In return, economists believe at least 1,500 other jobs will be created in the Midlands from workers at the Columbia airport, to UPS, to your local grocery store. In return, the state will end up collecting at least $3 million in new income taxes each year.

Before we reversed course this week, many House members did not have all of the facts. This is partly because of the way the deal was negotiated, and because of the fact that most of the General Assembly didn’t know about the deal until ground had already been broken on the facility in Lexington County. Promises were made to Amazon to pass significant legislation with very little contact with the General Assembly beforehand. Most of my Republican colleagues seriously object to the way the deal was brokered, and current Governor Nikki Haley has said such deals will not be made in the future.

But promises were made by the State of South Carolina to Amazon, and if we are to continue to compete for jobs in the future, we must keep our word. CEOs of companies across the world are watching how we deal with this issue. It put the entire House in a difficult spot.

It is obvious that without the safe harbor sales tax protection Amazon will not invest in South Carolina because they have options. The free market was in full swing when state after state began to pick on South Carolina’s carcass hoping to attract Amazon jobs and investment. Other states are waiting in the wings, eager to attack us on a variety of potential economic development deals. They understand full well that Amazon jobs, payroll, and infrastructure investment would have promising reverberations throughout their fragile state economies. 

More important, it was evident to them that Amazon will sell tax free into their states, and throughout the country, until Congress seizes the initiative to make uniform changes in Internet tax policy.  This is the lesson of three weeks ago.

To be clear, Amazon will continue selling its products to South Carolinians sales tax free because the U.S. Supreme Court gives them that protection. They sell to us now from distribution centers in states around the country and are not required to collect the sales tax. The only question we have to answer today is whether or not Amazon will bring 2,000 jobs and $125 million.

South Carolina’s General Assembly had a rare opportunity to fix our mistake and learn from this lesson.  The mistake was to assume Amazon was bluffing and that they would invest in South Carolina even if we denied them what we as a state promised and the U.S. Supreme Court guarantees them. 

The House made good on those promises this week, and the legislation now goes back to the Senate, where senators will have to concur or reject the Amazon deal.

There will be a time and a place to reject potentially unfair tax incentive deals. It was not proper to draw a line in the sand when promises had already been made. Our good word was at stake.

As our state works to recover from the recession, we are not in a position to reject more than 2,000 jobs when there is ZERO direct cost to the state budget.

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