AIB Statement on New Report, “In Search of a Level Playing Field”

Graphic: Report finding.In a report released today by Good Jobs First, leaders of small business organizations from around the country overwhelmingly agree that despite pro-small business talk, states’ economic development incentives favor big businesses at the expense of small firms looking to grow.

Good Jobs First surveyed 41 small business leaders representing 24,000 member businesses in 25 states,  and found:

  • 92 percent believe that state economic development spending is biased toward big business
  • 79 percent believe that their state is overspending on big incentive deals, hurting state finances
  • 72 percent do not believe that their state’s incentive policies promote economic growth

“These findings echo what we’ve been hearing from small business owners in our annual Independent Business Survey,” said Stacy Mitchell, coordinator of the Advocates for Independent Business, a coalition of 15 national small business organizations representing about 150,000 businesses.  “State economic development incentives overwhelmingly favor big companies at the expense of small businesses, especially those new and growing firms best poised to create jobs. It’s high time that we reconsider how best to spend these public dollars.”

The study cites AIB’s 2014 Independent Business Survey, which found that local business owners ranked “eliminating public subsidies for big companies” as their top public policy concern.

The small business leaders surveyed note that traditional incentives, such as tax breaks, are less impactful for small businesses than other forms of incentives. Instead, they highlight investment in public goods like transportation, job training, and education. They also flag another of AIB’s central concerns, access to capital, as an ongoing issue for small enterprises.

This report is the first in a series of three that Good Jobs First will release this fall. The next one will analyze economic development spending in more than a dozen states, and determine what share is awarded to big corporations and to small businesses.

See the full report, “In Search of a Level Playing Field: What Leaders of Small Business Organizations Think About Economic Development Incentives.”

AIB Hails New Requirement for Subsidy Transparency

Photo: Accounting.Advocates for Independent Business (AIB) today hailed a newly issued accounting rule that will require local and state governments to annually disclose the amount of tax breaks they give to corporations in the name of economic development.

The rule change was proposed earlier this year by the Governmental Accounting Standards Board (GASB). In February, AIB submitted a public comment letter strongly supporting the proposal and urging the board to go further by mandating that governments not only report the aggregate amount they spend on corporate tax breaks, but also disclose the details of individual deals.

“This issue is of significant interest to our member organizations, because when cities and states use tax breaks, as they often do, to subsidize the growth of large companies like Walmart and Amazon, it directly affects the competitive landscape for independent businesses,” said Stacy Mitchell, coordinator of AIB. “We commend GASB for issuing this new rule, which will make the total cost of these tax breaks transparent for the first time and open the way for meaningful public debate about whether they are warranted.”

Cities and states currently spend an estimated $70 billion a year on tax breaks for economic development. Studies indicate that subsidizing big retailers does more harm to the local economy than good by causing job and revenue losses at competing small businesses.

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AIB Submits Comments Supporting Greater Flexibility for Credit Unions in Small Business Lending

Image: AIB letter to NCUA.Driven by concern over the limited availability of credit for independent businesses, AIB has submitted comments largely in support of a proposal to give credit unions more flexibility to meet the needs of small business borrowers.

The National Credit Union Administration, the federal body that regulates credit unions, has proposed regulation that would lift existing prescriptive rules that set hard-and-fast standards on issues like personal guarantees and collateral. Instead, credit unions would be allowed to develop their own business lending underwriting policies, which would be reviewed yearly by their regulator. This is more akin to how banks operate.

AIB expressed support for the proposed regulation, with a modest caveat about how participation loans that are commercial in nature are regulated.

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How Washington Punishes Small Business

AshevilleDowntownby Stacy Mitchell and Fred Clements

This article was first published as an op-ed in the Wall Street Journal.

Small business looms large in American political rhetoric. From the campaign trail to the floor of the U.S. House and Senate, members of Congress love to evoke the diner and dry cleaner, the neighborhood grocer and local hardware store. Ensuring the well-being of Main Street, we might easily assume, is one of their central policy aims.

The legislative track record tells another story. It is one in which the interests of big corporations are dominant, and many laws and regulations seem designed to bend the marketplace in their favor and put small, independent businesses at a competitive disadvantage.

Since the late 1990s, the overall market share of firms with fewer than 100 employees has fallen from 33% to 28%, according to U.S. Census data. There are nearly 80,000 fewer small retailers today than in 1999. Starting a new business also appears to have become harder. Despite their prominence in our tech-fueled imagination, the number of startups created annually fell by about 20% between the 1970s and the 2000s, Census data shows.

Dismissing these trends as merely the product of market forces misses the powerful way that government policy has tilted the playing field.

A report last month by the research organization Good Jobs First, for example, found that two-thirds of the $68 billion in business grants and special tax credits awarded by the federal government over the past 15 years went to big corporations. State and local economic development incentives are similarly skewed. While the members our business associations—mostly independent retailers—must finance their own growth, one of their biggest competitors, Amazon, has received $330 million in tax breaks and other subsidies to fund its new warehouses. Indiana, for example, gave the company a $5 million tax credit to open a distribution center in 2009. Continue reading

AIB Hosts Roundtable on Engaging Suppliers in Supporting Indies

For suppliers and manufacturers, independent retailers deliver an essential value. There’s clear evidence that it’s independents that introduce new products, induce customer demand, and maintain competition in the marketplace.

For the Advocates for Independent Business’s fourth roundtable discussion, coalition members exchanged experiences and tips across their industries on how to talk with suppliers about this value. During the one-hour conversation, members discussed the ways that suppliers already recognize it, ideas for further education, and other strategies trade associations can use to recruit suppliers as allies in supporting indies and preserving a diverse marketplace.

Some of the highlights from the discussion were:

  • Oren Teicher discussed how a Federal Trade Commission advisory opinion opened the door for the American Booksellers Association to negotiate with publishers on behalf of its members.
  • Fred Clements shared strategies that the National Bicycle Dealers Association uses to educate suppliers. These include a widely-distributed white paper on why specialty brands need specialty retailers, and a supplier scorecard that allows retailers to both influence the marketplace and see what their peers think about different brands when making their buying decisions.
  • Michael Morris covered how TriMega Purchasing Association negotiates with suppliers on terms like minimum order sizes, and works with them to create differentiation for independent retailers in the marketplace, such as by developing a national private label brand that’s only found at indies.
  • Parker Karnan talked about how the Independent Running Retailers Association is working with vendors to create programs that provide more value for them, such as drop-shipping from the vendor to the retailer, or omni-channel options that allow the customer to shop online from the brand, and pick-up the purchase in-store. “The vendors do see the value in having specialty stores,” Karnan said, “and know that the only way they can get product trial is through the running retail stores.”
  • Justin Koranda discussed how Fat Brain Toys, which is both a retailer and a manufacturer, has adopted policies that make a commitment to specialty toy retailers. As a manufacturer, Fat Brain Toys has a MAP pricing policy, and as a retailer, the company looks for manufacturers that employ wholesale policies that are similar to its own.

After brief presentations from these speakers, coalition members asked and answered questions about the details of these ideas, and talked about suppliers’ growing awareness of the importance of the independent retailers in their sectors.

At U.S. Supreme Court, an Invitation to Reconsider Internet Sales Tax Ruling

Photo: U.S. Supreme Court.

Photo of the U.S. Supreme Court by Pete Jordan, via Flickr.

After years of fighting for a federal fix for the online sales tax loophole, this week, advocates for e-fairness gained a new ally: U.S. Supreme Court Justice Anthony M. Kennedy.

On Tuesday, the Supreme Court decided a question over which court—state or federal—has the jurisdiction to hear a case about Colorado’s internet sales tax law. The issue was minor, and without weighing in on the legal challenge to the law, the Court decided it unanimously.

At the same time, it signaled a readiness to review a much more important case about how we tax internet sales.

In 1992, the Court ruled, in Quill Corporation v. North Dakota, that unless Congress passed legislation granting them the authority to do so, states could not require out-of-state companies (e.g., mail order and online retailers) to collect sales taxes. In the 22 years since, internet commerce has boomed, and states have had to bend over backwards to try to create a more fair tax system on their own.

On Tuesday, in a solo concurrence to the court’s opinion, Justice Kennedy wrote that the Quill decision inflicts “extreme harm,” and is long past due for review.

“It is unwise to delay any longer a reconsideration of the court’s holding in Quill,” Kennedy wrote. “A case questionable even when decided, Quill now harms states to a degree far greater than could have been anticipated earlier.”

“When the court decided Quill, mail-order sales in the United States totaled $180 billion,” Kennedy continued. “But in 1992, the Internet was in its infancy. By 2008, e-commerce sales alone totaled $3.16 trillion per year in the United States.”

“The result,” Kennedy wrote, “has been a startling revenue shortfall in many states, with concomitant unfairness to local retailers and their customers who do pay taxes at the register.”

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2015 Independent Business Survey: Buoyed by Public Support, Independent Businesses Report Strong Sales Growth

Cover: 2015 Independent Business Survey reportLocal businesses beat the holiday performance of many national chains, but continue to experience difficulties with policies tilted in favor of large companies


MINNEAPOLIS, MN (Feb. 11, 2015) – Independent businesses saw strong sales growth in 2014 as more consumers embraced the “buy local” movement and ditched big companies in favor of supporting local retailers and small-scale producers, according to a large national survey released today.

The survey, which is now in its 8th year and was conducted by the Institute for Local Self-Reliance in partnership with the Advocates for Independent Business, gathered data from over 3,000 locally owned businesses. The respondents reported brisk sales in 2014, with revenue growing 8.1% on average in 2014, up from 5.3% the previous year. Among independent retailers, which comprised about half the sample, revenue increased 5.1% in 2014, versus 2.3% in 2013. Holiday sales at local stores grew too, by an average of 4.8%, beating the performance of many national chains and coming in well ahead of the 0.9% decline in December retail sales reported by the U.S. Department of Commerce.

The survey results suggest that the strength of the independent sector is owed partly to an improving economy and partly to the spread of the “buy local” movement. Businesses located in cities with active Local First campaigns reported sales growth of 9.3%, compared to 4.9% for those elsewhere. They cited a wide range of direct benefits from these campaigns, with half saying the initiatives had generated new customers and 45% saying they had resulted in more awareness and support among city officials.

Despite these gains, independent businesses reported that they still face a decidedly uneven playing field. Nearly three-quarters of the local retailers surveyed said that the fact that many online retailers are not required to collect sales tax had negatively impacted their sales, with 39% describing the level of impact as significant. “As a local business owner with a brick-and-mortar location, we are automatically at a 8.1 percent price disparity because we are required to collect local sales tax,” commented a business owner in Arizona. With Congress failing to pass an e-fairness bill last year, the survey found that a large majority of independent retailers are now backing state legislation to level the playing field.

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