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Bredesen Busy Traveling, Lecturing, Promoting Health Policy Book

Former Gov. Phil Bredesen remains zip-lippped about what’s in the state’s deal with Amazon.com, although he has plenty to say about what he’s been doing since leaving office, which is traveling the country making speeches, mostly about health care.

“I’m not retired. I’m not vegetating,” Bredesen said. “I’m very active and trying to figure out how I can best use the next few years.”

Bredesen was at a campaign event Saturday in support of Nashville Mayor Karl Dean, who is running for re-election.

Nashville is still home base for Bredesen, but since leaving office in January he has traveled to various locations, from Chicago to Florida to the West Coast, to speak. He has primarily talked about health care, including one joint appearance with former Florida Gov. Jeb Bush, but he has also spoken on the state’s experience recruiting international businesses like Volkswagen and Wacker Chemie.

One domestic business recruitment with Bredesen’s brand on it, however, remains a point of controversy in the state. Amazon is building two large distribution centers in and near Chattanooga. The Internet sales giant is making a $139 billion investment, offering 1,400 jobs and comes in with the agreement that it will operate without collecting sales taxes as a retail outlet would.

A couple of key lawmakers have cried foul, presenting legislation to force Amazon to collect the tax, but that effort has met resistance and even a threat from Amazon that it might pull out if forced to collect. Lawmakers have even asked the state’s attorney general to weigh in on their effort. The bill has been deferred to 2012.

Among lawmakers’ questions have been to what degree the agreement with Amazon has even been in writing.

“I’m just not commenting on stuff that’s going on like that right now,” Bredesen said. “We had an understanding with Amazon, and it was really Matt Kisber (former commissioner of Economic and Community Development) who did all the detail work on the thing.

“I think it was the right decision. I think the current governor thinks it was the right decision to get them here. I think they will be an important piece of the economy.”

The Bredesen administration made the deal after Bill Haslam was elected governor in November but before Bredesen left office. The most widely reported explanation for the arrangement has been that Bredesen told Haslam the state could either grant Amazon the ability to avoid collecting the tax or see the company go a few miles down the road and build its facility in Georgia. The same issue has played out in other states. Bredesen wanted the jobs in Tennessee, and Haslam has publicly said the state will honor the commitment.

Bredesen said there were compelling reasons for striking such a deal.

“Part of what appealed to me about Amazon was I worked real hard to get some of the knowledge-based jobs that require a college education, where you’ve got good salaries and so on,” Bredesen said. “A lot of the Amazon jobs are a little different from that. They’re working in a warehouse. We need those jobs, too.

“There are a lot of people in this state who just need a job with a good company with good benefits, and they’re not going to go back to college to do it.”

When asked last week where the attorney general is on the Amazon issue, Sharon Curtis-Flair, spokeswoman for Attorney General Robert Cooper, said, “We’re working on it,” but she offered no elaboration on a potential opinion or when it might come.

Bredesen said getting a well-respected company like Amazon to build in Tennessee at a time when jobs are hard to come by seemed like the right deal to make. He was asked about the precedent, however, of setting up that arrangement, since Amazon is already making overtures of building even more distribution centers in Nashville or Knoxville.

“I think the governor has got to figure that out,” Bredesen said. “But in the scheme of things, if an Amazon were to be located here, ultimately these tax issues are going to be solved by the Congress.”

Haslam has also said no single state should have to work out the issue of collecting sales taxes on online sales. The issue is complex. Amazon is based in Seattle. Company officials point to the commerce clause of the U.S. Constitution and say the existence of a “fulfillment center,” as Amazon is building, does not create substantial presence, known as nexus, to qualify as a point of sale.

“The two facilities happened on my watch, I think we made the right decision, I think the governor has backed that up, and how he treats the next two or three is up to Gov. Haslam,” Bredesen said.

As for the former governor’s travels, they’re the kind of speaking engagements one would normally expect after the publication last year of Bredesen’s book, Fresh Medicine — How to Fix Reform and Build a Sustainable Health Care System.

“I had a lot of requests to do that after the book came out in the fall, and you really can’t do it as a sitting governor,” Bredesen said. “You can’t take off and go to California for a few days and give speeches.”

He said the topic in such settings is beginning to move more toward the future of the health care system, rather than just reaction to the health care reform law. Bredesen’s book is due for a paperback version this fall.

“I’m up to my eyebrows in health care,” Bredesen said.

The event with Jeb Bush was a health care discussion held by the venture capital group Health Evolution Partners, where they had a “D” and “R” program, with Bredesen the “D” as a Democrat and Bush the “R” as a Republican.

Bredesen said he has put the notion of trying to serve at the federal level on health care policy on the shelf, adding that when it came up it was probably given more attention than it deserved. He also said Saturday he has no intention of running for the Senate. Bredesen was at one time considered a candidate to be President Barack Obama’s secretary of Health and Human Services, which ultimately went to Kathleen Sebelius, a former governor of Kansas.

So for now, Bredesen is doing the speech-making tour and deciding what’s next. Bredesen was mayor of Nashville for two terms from 1991-99 and governor for two terms from 2003-2011.

“When I left the mayor’s office, after I left on Saturday, on Monday morning I was setting up my desk in a new office,” he said. “I’ve said this time, don’t do that, when you’ve got one more good career in you. Get a little space. Get some of these speeches done you wanted to do. Do a little writing, and let things gel a little bit.”

Bredesen said former first lady Andrea Conte now “enjoys being out of the line of fire,” and she’s doing a lot of the same things as her husband is.

“She’s been out and active and around doing different things, giving talks to different groups. She is spending serious time in the garden, and we’re having a great time right now,” said former governor Bredesen.

Mike Morrow is a correspondent for TNReport.com, a not-for-profit news organization supported by donors like you.

Amazon Sales-Tax Waiver ‘a Sell-Out of TN Businesses’: TFT

Press Release from Tennesseans for Fair Taxation, May 7, 2011:

Legislators move to reverse Administration’s Amazon exemption from sales tax collection.

Senate Finance Committee chair Randy McNally and House Finance Committee chair Charles Sargent will amend their bills SB 529 / HB 136 to clarify that sales tax be collected by businesses that have any physical presence in the State. These bills will be heard in Senate Finance Committee at 8:30 AM on May 10, 2011 and in House Finance Subcommittee at 10:00 AM the same day.

Gov. Haslam’s administration has secretly ruled that Amazon, the giant Internet retailer, need not collect Tennessee sales tax from sales through its “drop shipping” warehouse operations being built in Hamilton and Bradley Counties. McNally’s amendment explicitly requires that “drop shippers” and other dealers who operate physically in Tennessee must collect sales tax on Tennessee sales.

At a time of deep budget cuts, the special exemption would forego several million dollars annually in state revenue. The amended bills would raise at least $11.6 million according to a preliminary fiscal note.

“The Administration waiver of sales tax collection by Amazon is especially outrageous, as well as unfair, because it was made in secret behind closed doors without any public comment or action by the State legislature,” said John G. Stewart, former chair of Tennesseans for Fair Taxation. “This is a sell-out of Tennessee businesses, as well as a denial of legitimate tax revenue at a time of serious budget shortfalls and program cuts. In our democracy the Governor should propose but the Legislature should decide and that is what is proposed here.”

Amazon has agreed to locate two distribution centers in Bradley County and Chattanooga, and has already received more than $30 million in tax incentives from the State of Tennessee as part of the deal. But Amazon.com also demanded an exemption on collecting the Tennessee sales tax and remitting these tax revenues to the state, as is required of all Tennessee businesses. This exemption is in addition to the significant subsidies and incentives it received from the Bredesen administration.

Gov. Haslam acknowledged last week that Amazon’s demands for an exemption had been accepted. An article in the Chattanooga Times Free Press stated: ‘Asked directly whether Amazon would not be required to collect sales taxes on purchases made by Tennessee customers, Haslam said, “That’s exactly right.”’

The sales tax exemption was initially proposed by the out-going Bredesen Administration in a public notice posted in the last days of December 2010. The notice scheduled a public hearing in February to consider a change to the Department of Revenue rule governing the taxation of drop shipments.

At the last minute, after Tennesseans for Fair Taxation had requested an opportunity to comment, the hearing was cancelled. Governor Haslam’s 45-day moratorium on rule-makings was cited as the reason for the cancellation. Rather than reschedule the hearing and receive public testimony, the Haslam Administration secretly granted the exemption without any public notice or involvement.

If the Administration’s decision is not reversed it will hurt local businesses that must follow the law and already struggle to compete with the online giant.

Attorney Brian Paddock, a TFT volunteer noted: “When I asked a Retail industry representative about the Amazon exemption he wrote me a note saying:

The retail community in Tennessee believes that any deal to exempt Amazon.com or any other online-only retailer from collecting state sales taxes is a bad deal.  We are working with the Governor and the state Legislature to convince them that all retailers deserve equal tax treatment.  We support new jobs in Tennessee but not at the expense of the existing businesses.

All Tennessee retailers want is a level playing field.  We want competition to be fair.  Tennessee’s consideration of a plan to exempt Amazon from collecting state sales tax does the exact opposite and retailers across the state are justifiably upset.

Why should Amazon be exempt from collecting state sales tax?  Why should the state government, which in Tennessee operates primarily off sales taxes collected by existing merchants, put those same merchants at a disadvantage?  Why does a Tennessean running a business in these challenging economic times have to include state sales tax on each purchase, collect it, track it and pay it to the state when the state says a competitor selling the same product does not?

Amazon.com wants to open distribution centers here and avoid collecting state sales taxes.  It’s wrong and it’s a bad deal. Tennessee’s retailers, big and small, deserve fair treatment and a level playing field.

“TennCare, higher education, and pre-K funding, among many other programs, are slashed in Gov. Haslam’s proposed budget, but revenue that could soften those cuts is not being collected by Amazon,” says Lorri Mabry of Antioch, Tenn. “It’s blatantly unfair and unwise. We need to collect all the revenue that is owed to the state – Tennesseans are hurting.”

Last week Gov. Haslam released his Jobs4TN plan with a focus on “assisting existing Tennessee businesses in expansions and remaining competitive.”

“The Amazon exemption flies in the face of the Administration’s professed objective of assisting Tennessee businesses,” said Katie Findley, a University of Tennessee (Knoxville) student. “All Tennessee businesses want is a level playing field and this decision gives a huge price advantage to Amazon.” Because of Tennessee’s high sales tax, small businesses already lose out to online and out-of-state competitors, and many retailers struggle to compete with Amazon, in particular.

Mabry and Findley also are members of Tennesseans for Fair Taxation, a statewide coalition of people and groups that support revenue with justice for all Tennesseans. TFT also supports the Out-of-State Sales Tax Act, sponsored by Sen. Beverly Marrero and Rep. Mike Stewart, which would require any out-of-state vendor selling more than $4,800 of goods annually to Tennesseans and using in-state affiliates to solicit those sales to collect the sales tax due on items sold.

The bill would override the administration’s backroom deal for Amazon, and would raise more than $100 million in additional revenue by requiring Amazon and any online or out-of-state vendor doing significant business with affiliate presence in Tennessee to collect sales tax.

Sen. Bo Watson has introduced a bill that would require “letter rulings” and “revenue rulings” like the one apparently made in the Amazon case to be open to the public. “Amazon can afford to collect the sales tax from its customers,” said Elizabeth Wright, executive director of TFT. “Tennessee can’t afford to exempt them from doing so. Any time one business doesn’t collect the taxes that are legitimately owed, other taxpayers must take up the slack, either in higher taxes or reduced government services.”

Lt. Gov. Ron Ramsey spoke out last week against the exemption, telling the Chattanooga Times Free Press, “It’s the one where you make an outright gift or do a sales tax exemption that no other business in the state has, those are the type of things that bother me,” Ramsey said. “This whole Amazon tax issue, that they’re not paying sales tax, I just don’t think that’s something that should ever have been agreed to.”

Appliance Maker Electrolux Wins Tax Break

Cooking appliance maker Electrolux has been approved for a 15-year tax freeze – or a $38.7 million savings for the company – in exchange for building a manufacturing center in Memphis, various Memphis news outlets have reported.

The Commercial Appeal says that the tax break is part of a $137 million incentive package from the city, county and state:

The (Memphis-Shelby County Industrial Development Board) ratified a site location and development agreement under which the governments will assist Electrolux in developing a 700,000-square-foot factory in Frank C. Pidgeon Industrial Park in southwest Memphis.

The vote was the first in a fast-track approval process designed to meet Electrolux’s deadline for a done deal by Jan. 31. The City Council and County Commission will vote later on a pair of $20 million contributions to go along with a $97 million state grant.

The company has said it will build ranges, ovens and cooktops at the new plant, which will reportedly employ 1,240 people in jobs with an average salary of about $30,500.