The thing I like most about the State Journal is its spotlight on small business. No other West Virginia publication dedicates itself to celebrating successful entrepreneurs quite like this newspaper does. I wish we had more of these stories to read.
In American society, small businesses play an important role in two critical areas-the creation of wealth and preservation of democracy. Yet the political class in our state has ignored these distinctions ever since New Deal theology became their official religion. For seven decades now, the New Dealers have been the uncontested ruling party and it is not surprising that small businesses are a small part of our economy. In West Virginia, growing an ever-bigger government (and increasingly, enshrining monopolies or oligopolies) has been promoted as our only opportunity to achieve prosperity.
West Virginia has gone out of its way to stifle small business development. To illustrate this point, let me relate that I know of two area businesses that closed their shops for the same reason-Wal-Mart was selling these shops’ most popular items at prices less than the shops could buy them at wholesale.
Ordinarily, one could fall back on the argument that Wal-Mart is an efficient behemoth that understands retail better than anyone else to explain the demise of their small competitors. But that argument fails in this case, at least in part, because the City of Clarksburg reportedly offered Wal-Mart $6-8 million in tax abatements to locate there. For a period of time, the city also stationed a police detachment inside of the Super Wal-Mart store. To my knowledge, the actual total cost of these subsidies has not been made public.
As Marlin asks in "Finding Nemo": With friends like these, who needs anemones?
As surprising as this may sound, the City of Clarksburg is not at fault in this instance. West Virginia’s antiquated tax code is. Clarksburg had no choice but to enter a bidding war for the Super Wal-Mart lest one of four neighboring incorporated towns reel it in. And if it’s not Wal-Mart, it’s another big project. For the past three decades, Clarksburg has survived financially only because of the business and occupation taxes collected on construction of new stores and government buildings.
A perfect example of this frenzy is the F. B. I. facility, better known in these parts as the Fingerprint Factory because it was touted as an economic development project. Clarksburg fought hard to ‘shoestring’ annex the faraway Fingerprint Factory because of the revenue that the construction taxes would bring in. In the long run, the federal facility is a tax-loser for the city. Its annexation has increased sprawl. And sprawl all but guarantees that dead zones, such as the old business district, stay dead. Clarksburg, however, has no choice but to live for the short term and find the quick tax fix.
Until such time as state government allows cities the right to draft a modern tax code, we will continue on this destructive path. Our cities and counties also need to merge governments. If for no other reason, it will prevent them from cannibalizing one another in order to tax the next Wal-Mart or Fingerprint Factory.
In looking forward, small business development should be the state’s top priority when making any of these changes. A good example of what to do and what not to do can be learned from the Cabela’s case.
In 1961, Dick Cabela started selling fishing flies by mail order. For a time, Mr. Cabela ran the business from his kitchen table. Cabela’s has grown steadily ever since and the company went public last year. Coincidental with the IPO was a financial gift from West Virginia taxpayers to Cabela’s estimated to be $85 million. While June 25, 2004 was a grand payday for Cabela’s shareholders, we didn’t even get a share of stock!
The next Dick Cabela, that aspiring young man with a bankable idea, is presently living in West Virginia. But he’s not planning on staying here any longer than he has to. He’s headed to a territory where entrepreneurship is prized, not penalized. Should we blame him?
I have a hard time faulting either Wal-Mart or Cabela’s for running sting operations. First of all, both of these giants started out with one man (Sam Walton and Dick Cabela, respectively) mapping strategy at his kitchen table-the epitome of entrepreneurial spirit. And second, if fools want to game each other for the right to stuff cash into corporate pockets, then why should we expect Wal-Mart or Cabela’s to refuse it?
West Virginia needs to go back to the (kitchen) table.