Mr. Montgomery reports that Governor Dennis Daugaard is trying to get Amazon to move a warehouse to South Dakota. The main motivation discussed in the article is sales tax revenue. According to Montgomery's numbers, South Dakota misses out on about $48 million in state and local sales tax revenue each year from unreported online purchases by South Dakotans. Amazon does about 20% of online commerce, so conceivably, getting Amazon to move a warehouse here and start collecting sales tax from South Dakota purchasers (as it does or plans to do for eleven other states), South Dakota could see over $9 million more in state and local sales tax revenue.
Unfortunately, Amazon hasn't returned the Governor's calls yet. One possible reason: Governor Daugaard is barking up the wrong business model. According to this Slate article by Farhad Manjoo, putting warehouses in "faraway, low-cost states" was Amazon's old business plan. Amazon is shifting now toward placing warehouses right next to big metro areas in order to maximize the number of customers it can reach with same-day delivery. A warehouse at the I-29/I-90 nexus would place Minneapolis, Omaha, and Des Moines within a one-day delivery circle... but placing that warehouse in Albert Lea would do the same thing and put a big chunk of deliveries closer to the concentrated customer base in the Twin Cities.
Plop a warehouse in Sioux Falls or Brookings, and you're within six hours of over 800,000 South Dakotans. Plop a warehouse in Wayzata or Northfield, and you're within two hours of almost 3 million Twin Cities metro residents with more disposable income.
Even if the Governor proves me wrong, the benefits of landing an Amazon warehouse may be overstated. Bring Amazon to South Dakota, and same-day delivery knocks down one of the lingering advantages that local retailers offer over online retailers, the ability to put that new toy in your hands right now. Leveling the sales-tax playing field won't matter if Amazon continues to crush brick-and-mortar sellers on price and finishes them off by competing on delivery time. Losing more local retail to Amazon eats into the projected gains in sales tax. And working in an Amazon warehouse is no picnic (but then neither is milking cows).
When we add in the cost of the inevitable corporate welfare we would hand to Amazon for giving us the privilege of working in their warehouse, we must wonder if we wouldn't gain just as much by distributing those same handouts to existing local retailers. How about instead of subsidizing a giant international corporation that already has South Dakota businesses on the ropes, we subsidize local retailers? Give them a kickback as Madison does with Custom Touch Homes. Rebate them half of the sales tax they collect, on the condition that they use the money to renovate their Main Street storefront, raise wages, or even provide price-matching discounts to counter online out-of-state competition.
Landing an Amazon warehouse might be better than a kick in the head. But investing in local business might be better than pursuing another big corporate pipe dream that won't produce all the promised benefits.