Amazon and Mitt

Amazon and Mitt

Below are two must-read editorials from this weekend. The first by Cindi Scoppe, Associate Editor of The State, accurately analyzes the meaning of the recent House vote to give Amazon.com an exemption from collecting sales tax.

But most legislators acknowledge that there was a serious question of fairness in this case. So what’s the cost of fairness? Where, between 1,249 and 2,000 jobs, does unfairness become a reasonable price to pay? Would we sacrifice fairness for 1,800 jobs? For 1,500? And where will the line be drawn next time? If Amazon decides to hold up its end of the bargain, what will legislators do if it threatens to leave in five years unless it gets another five-year exemption? What about the next company that comes looking for extra incentives, whether they involve unfair competitive subsidies or just bigger tax breaks?

She concludes in her editorial, as I did in last Friday’s blog, that at least the state now has a better deal with Amazon because of the political fight and she was kind enough to recognize the South Carolina Small Business Chamber’s efforts.

Even the head of the state small business chamber of commerce — who has been nearly as outspoken in his opposition as the people on WalMart’s payroll — acknowledged that “the principled opposition has at least translated to a better deal.”

The second editorial below is in honor of Mitt Romney’s visit to the Midlands this weekend. Mitt is still trying to explain why his “RomneyCare” in Massachusetts is not the same thing as “ObamaCare” for the rest of us. It is and if he weren’t ready to announce his candidacy for President, Mitt would probably be very happy with this New York Times editorial.

Despite all of the bashing by conservative commentators and politicians — and the predictions of doom for national health care reform — the program he signed into law as governor has been a success. The real lesson from Massachusetts is that health care reform can work, and the national law should work as well or even better.

Enjoy!

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May 22, 2011
The State

The Amazon turn-around

By CINDI ROSS SCOPPE
Associate Editor

ON A spreadsheet, with nothing to consider but dollars and cents, the Amazon sales tax exemption always made sense: Give the online retail giant a pass on collecting sales taxes that it’s not currently collecting from S.C. residents, and the state gets $10 million in annual payroll taxes, and Lexington County gets $1 million a year in property taxes. Refuse, and we get no payroll taxes, no property taxes, no sales taxes, nothing.

Throw in 1,249 jobs — now bid up to 2,000 — and all the income, sales and other taxes the newly employed would be paying and the unemployment checks they wouldn’t be drawing, and it looked like a no-brainer.

It would be nice to think that the reason the deal initially ran into trouble was the almost embarrassingly wonkish concern about the degradation of our state tax policy. The fundamental problem with the Amazon exemption is the same as the problem with all tax breaks: It gets piled on top of hundreds of other tax incentives that already have pushed our tax system to the breaking point, making it a Swiss cheese monument to special-interest influence that is more holes than cheese.

This new hole is more worrisome than most because e-commerce is the big problem facing state tax systems — particularly those that are as obscenely reliant on sales tax collections as ours. And by exempting the rare company that actually meets the Supreme Court requirement that businesses have a physical presence in a state in order to be required to collect sales taxes, the Amazon incentive gives away what tiny bit of leverage our state has.

Unfortunately, that wasn’t the hang-up. What made those pretty numbers insufficient on first glance was a very human complication: local merchants who had the moral high ground when they argued that it was unfair for their state to subsidize a competitor intent on running them out of business.

Last month, the House said overwhelmingly that giving an unfair advantage to their competition was not a reasonable price to pay for 1,249 jobs. On Wednesday, representatives said even more overwhelmingly that it is a reasonable price to pay for 2,000 jobs. I realize that the decision wasn’t nearly so rational. It also turned on belatedly smart lobbying by Amazon backers, and resentment among House Republicans over what they saw as Gov. Nikki Haley putting them in a no-win position and then belittling their concerns. But we should be able to assume that it involved some degree of rationality.

Even those of us who worry about tax policy understand that big corporations are highly skilled at playing the incentives game — pitting state against state in a race to the bottom — and so sometimes we just have to give in and let them have their way with us. The question is where to draw the line. How much is a job worth?

That’s not a terribly difficult question when the job-purchasing currency is only money — or at least it wouldn’t be if recruiters were required to give the public more details about the deals they cut: Just pull out your spreadsheet, and you’ve got an answer. Of course when you accept the idea that there’s no cost to the state because a company won’t pay any taxes anyway if we can’t entice it to come here, you run the risk of the eventual spiral down to the elimination of all taxes — or even paying companies to move here. But that just gets us back to bad tax policy, and not enough money to pay for the services that those companies require, which most legislators don’t lose any sleep over.

But most legislators acknowledge that there was a serious question of fairness in this case. So what’s the cost of fairness? Where, between 1,249 and 2,000 jobs, does unfairness become a reasonable price to pay? Would we sacrifice fairness for 1,800 jobs? For 1,500? And where will the line be drawn next time? If Amazon decides to hold up its end of the bargain, what will legislators do if it threatens to leave in five years unless it gets another five-year exemption? What about the next company that comes looking for extra incentives, whether they involve unfair competitive subsidies or just bigger tax breaks?

What’s surprising isn’t that the House agreed to the deal — the Legislature signs off on almost any tax give-away that’s labeled economic development; and the bar gets lower every time. What’s surprising is that it didn’t swallow automatically, but instead held out for a better deal than the Commerce Department negotiated.

The bill the House passed Wednesday is clearly an improvement over the original proposal and over most incentives legislation: It expires in five years. The specific time and job requirements make it unlikely that any other company could use it. And it requires Amazon to stick to its latest oral promises in order to cash in: If it doesn’t employ 2,000 full-time workers with “a comprehensive health plan” and spend $125 million by the end of 2013, it loses the exemption; if employment drops below 1,000 before the 2016 expiration date, it loses the exemption. Even the head of the state small business chamber of commerce — who has been nearly as outspoken in his opposition as the people on WalMart’s payroll — acknowledged that “the principled opposition has at least translated to a better deal.”

And maybe, given the complete disinterest that most legislators have in smart, or even fair, tax policy, that’s the best we can hope for.

Ms. Scoppe can be reached at cscoppe@thestate.com or at (803) 771-8571.

http://www.thestate.com/2011/05/22/1827231/scoppe-the-amazon-turn-around.html

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May 21, 2011
The New York Times
Editorial

Health Reform in Massachusetts

Mitt Romney’s defense of the Massachusetts health care reforms was politically self-serving. It was also true.

Despite all of the bashing by conservative commentators and politicians — and the predictions of doom for national health care reform — the program he signed into law as governor has been a success. The real lesson from Massachusetts is that health care reform can work, and the national law should work as well or even better.

Like the federal reform law, Massachusetts’s plan required people to buy insurance and employers to offer it or pay a fee. It expanded Medicaid for the poor and set up insurance exchanges where people could buy individual policies, with subsidies for those with modest incomes.

Since reform was enacted, the state has achieved its goal of providing near-universal coverage: 98 percent of all residents were insured last year. That has come with minimal fiscal strain. The Massachusetts Taxpayers Foundation, a nonpartisan fiscal monitoring group, estimated that the reforms cost the state $350 million in fiscal year 2010, a little more than 1 percent of the state budget.

Other significant accomplishments:

The percentage of employers offering insurance has increased, probably because more workers are demanding coverage and businesses are required to offer it.

The state has used managed-care plans to hold down the costs of subsidies: per capita payments for low-income enrollees rose an average of 5 percent a year over the first four years, well below recent 7 percent annual increases in per capita health care spending in Massachusetts. The payments are unlikely to rise at all in the current year, in large part because of a competitive bidding process and pressure from the officials supervising it.

The average premiums paid by individuals who purchase unsubsidized insurance have dropped substantially, 20 percent to 40 percent by some estimates, mostly because reform has brought in younger and healthier people to offset the cost of covering the older and sicker.

Residents of Massachusetts have clearly chosen to tune out the national chatter and look at their own experience. Most polls show that the state reforms are strongly supported by the public, business leaders and doctors, often by 60 percent or more.

There are still real problems that need to be solved. Small businesses are complaining that their premiums are rising faster than before, although how much of that is because of the reform law is not clear.

Insuring more people was expected to reduce the use of emergency rooms for routine care but has not done so to any significant degree. There is no evidence to support critics’ claims that the addition of 400,000 people to the insurance rolls is the cause of long waits to see a doctor.

What reform has not done is slow the rise in health care costs. Massachusetts put off addressing that until it had achieved universal coverage. No one should minimize the challenge, but serious efforts are now being weighed.

Gov. Deval Patrick has submitted a bill to the Legislature that would enhance the state’s powers to reject premium increases, allow the state to limit what hospitals and other providers can be paid by insurers, and promote alternatives to costly fee-for-service medicine. The governor’s goal is to make efficient integrated care organizations the predominant health care provider by 2015.

The national reform law has provisions designed to reduce spending in Medicare and Medicaid and, through force of example, the rest of the health care system. Those efforts will barely get started by the time Massachusetts hopes to have transformed its entire system. Washington and other states will need to keep a close watch.

http://www.nytimes.com/2011/05/21/opinion/21sat1.html?_r=1&nl=todaysheadlines&emc=tha211