Diary

State Governments Sabotage Federal Efforts to Help Small Business

(AP Photo/John Minchillo, File)

Sometimes it just boggles the mind. As the nation struggles to deal with the worst public health crisis of our generation, some policymakers are rightly focused on the most pressing issues like opening our economy and getting critical funding to our suffering small businesses. Yet, at the same time, there are still legislators at the state level who seem to be living in some dream world detached from reality, apparently unaware of the dire problems facing their state and constituents. While the federal government pumps literally trillions into our economy, these lawmakers are pushing policies that will send needed revenue away.

Take Kentucky as one example of this “Twilight Zone” government. The deep red state with a Republican majority in its legislature, but led by a Democrat governor, just passed a new tax that will hurt small retailers, and send money out of state. The new tax, which will go into effect in August of this year, levies an additional $1.50 on vapor cartridges. Not only is this tax greater than any state bordering Kentucky it’s one of the biggest taxes of its kind in the nation – even exceeding the bluest of progressive states. The tax will increase the cost by 50% on consumers who may be using e-cigarettes to help them quit smoking. As a result, vapor will now cost more than cigarettes, creating an economic disincentive for smokers to quit.

Setting aside the impact on consumers, this tax will cut deep into the profits of small businesses and mom-and-pop shops who need every penny of revenue now that COVID-19 restrictions have kept customers away. While the Small Business Administration and representatives in Congress try to drive more financial support to address these needs, the Kentucky legislature is kicking them while they are down. It will also create risk to public health that defies Kentucky’s stay at home order since consumers will travel to Indiana, Tennessee, and Ohio to purchase lower cost alternatives. When times are tight, driving across the border to save 50% on anything is going to encourage travel at a time when policymakers should be creating incentives to stay put.

Another “Twilight Zone” is Massachusetts, which is the opposite of Kentucky in that it has a Democrat controlled legislature with a Republican Governor. The coronavirus is turning Massachusetts into one of the nation’s new hotspots for infections. Massachusetts ranks third in the nation for positive cases and is one of only four states to record over 2,000 deaths. On April 22, the state sadly reported a record high 221 deaths from the virus overnight. The long-term fiscal impact on the state is difficult to calculate at this point as the virus continues to grow. Yet at the same time, the state continues to move forward on a misguided measure that will cost the state more than a quarter of a billion dollars.

On June 1, Massachusetts will become the first state in the country to ban all flavored tobacco, including menthol cigarettes. This will not stop smokers from consuming their preferred product. It will send $250,000,000.00 to surrounding states like Rhode Island, New Hampshire, and New York. In one fell swoop, Massachusetts will deal a crushing blow to small businesses like retailers, gas stations, and others who rely on these sales, while creating a windfall for violent criminals who already make hundreds of millions selling cigarettes on the Massachusetts blackmarket. How can Republican Governor Baker hurt small businesses, send money to surrounding states, and give a gift to organized crime when he knows the virus will force catastrophic cuts to public safety, schools, and other critical services?

We are all experiencing one of the most difficult times in our lives. Unprecedented new jobless claims are being filed every week as layoffs and furloughs impact workers. Small businesses who are the lifeblood of our economy are shuttering – many never to return. Federal efforts to support businesses and workers with stimulus funding have already hit obstacles as the money dries up instantly. Many are still trying to figure out how to access these critical lifelines.

The last thing we need is viral stupidity in our state legislatures, spread by myopic policymakers in the Twilight Zone who are still moving forward with laws designed for a pre-COVID reality. We all need to be rowing in the same direction to help our neighbors and our community.

Katlyn Batts is the Chairwoman of the Wingate University College Republicans and an employee of the Jesse Helms Center.