Best-Selling Author Cancels California Affiliates | Hacker News Reader

Best-Selling Author Cancels California Affiliates

entrepreneurbootcamp.blogspot.com

25 pointsbond33 comments

As someone who is living in Las Vegas NV (no state income tax) I am struggling with where I should move. I just checked and the CA state income tax is 10% for my earning bracket. That's a 10% premium (>$10k per year) when compared to Texas, Nevada and Washington. It's also 1% greater than Oregon. It's 5% greater than CO or NM. Add to that the high cost of living in the valley (particularly housing) and it's difficult to justify moving to California vs. getting a remote job working for a company in California at the same salary.

I see the economic value of working the valley and that the salaries are higher, but they would have to be 30% higher than what I'm earning in Nevada just to offset the increase in costs. Imagine if I actually wanted a raise.

If you tell me that not only is the CA legislature requiring these funds from me, but also requiring corporations with operations in the state to collect sales tax (putting them at a competitive disadvantage to companies that don't have operations there) I'm going to start to wonder about what other anti-business measures might get passed. Anti-business measures are going to cause businesses to move if they can. Less businesses means less chance for jobs which is obviously a negative for someone looking to move to economic opportunity.

For that remote job, just be careful to check the law first. Some states tax telecommuters. I do not believe California is one of them, but I also do not believe that will last forever since lord knows they need revenue.

All CA has to do is redefine "source" and poof, free money. http://www.ftb.ca.gov/aboutFTB/manuals/audit/rstm/3000.pdf section 3420 "The critical factor in determining the source of income from personal services is not the residence of the taxpayer, the place where the contract for services is entered into, or the place of payment. It is the place where the services are actually performed" - change that definition, and there goes your sweet telecommuting tax break.

http://www.nytimes.com/2008/02/20/business/businessspecial2/... is an interesting article about the New York telecommuting tax.

lord knows they need revenue

Or they need to cut spending.

Thanks for the info, I'll check into it. I agree there are lots of complexities here and finding the "lowest resting state" economically is difficult.

Maybe someone should write a program that does this ...

Sounds like someone who is looking to generate PR by coasting on other news and slamming California. As someone who has started a company in CA, I don't find the business climate "repressive".

As an outsider dealing with CA taxes... due to a previous CA employee, I find CA intrusive and expensive to deal with. More paperwork and fees, and hassles than anything in my own business tax state of Colorado. And, like I've said in other posts, I'm still dealing with CA... 2 years after I let my CA employee go. Don't believe me? Try calling up the Franchise Tax Board... 2 hours of waiting, if you can get thru their automated phone system that is. Yes, there are much better business friendly states... CA is at the bottom of the barrel.

Im curious - why does California's 'anti-business' culture not interfere with silicon valley startup activity?

As a Silicon Valley entrepreneur, none of what this guy says rings true for me.

I'm here because I think California's climate for business is great. What I need is smart, well-educated, creative workers. I need reliable infrastructure. I need great universities. I need a broad-minded culture, so creative oddballs feel comfortable, and talent from overseas feels like they could make a life here.

Personally, I'm happy to pay taxes to support education, infrastructure, and a fair bit of regulation, because it directly benefits me and my business. As far as I'm concerned, This guy's whole anti-tax-means-patriotism stuff is just another way of saying "I Got Mine, Fuck You". And since affiliate marketing funds an awful lot of web spam, I am not going to shed too many tears about the end of his affiliate program.

Strangely, the author's example of a more business friendly state (Texas) seems to beat California on a number of your government-related metrics.

Texas schools are better than California schools for all racial categories at grade 4 and 8 (the grades in which comprehensive data is collected).

http://nationsreportcard.gov/science_2009/g4_state.asp?subta...

http://nationsreportcard.gov/science_2009/g8_state.asp?tab_i...

According to the only ranking I could find, Texas has better infrastructure as well:

http://www.cnbc.com/id/41666598

So maybe this guy's attitude isn't so much "I got mine, fuck you" as it is "if Texas can do more with less, California should as well."

As an engineer, I'm naturally fond of doing more with less. And California obviously has substantial problems. But the "tax cuts = patriotism = awesome" meme has nothing to do with efficiency. Indeed, I think it's a big cause of inefficiency. California's biggest structural problem is the insane mess created by Proposition 13, the result of a previous wave of anti-tax fervor.

There's also no discernment about what to cut, or how. Every hacker knows that optimization always requires a firm grasp of the details, and that a well-optimized system requires long-term thinking and investment.

If this guy were proposing particular fixes, I'd be totally in favor of that. But his only proposed fix is "please allow me to continue taking advantage of a quirky sales tax loophole". While, of course, running his business via a medium created by government-funded research. So no, I'm pretty sure he's in the IGMFY camp.

California spends 70% more (per capita) than Texas and achieves poorer results.

http://www.taxfoundation.org/research/show/287.html

I can't see how California's inability to raise taxes further is the problem.

The author is proposing a fix: move to Texas and avoid creating a nexus in California.

It doesn't tell a complete picture to compare the absolute per capita costs without adjusting for buying power. For instance, looking up the cost of living between e.g. Houston and LA shows that cost of living is 60% higher in LA. Without some statewide adjustment added into the mix - I don't how one might conclude one state gov't is more efficient than another.

This would be more interesting if you addressed the things I actually said, rather than the straw men you find most convenient to argue against.

He isn't hiring 8th graders. What is the Texas equivalent of UC Berkeley, Stanford, CalTech, and UCLA?

I don't think it makes sense to compare small, well funded tech startups in Silicon Valley to more generalized businesses in other areas of the state.

Try to start a manufacturing plant, a machine shop, an automotive repair facility, a farm, any business that employs more than 50 people, and compare the regulatory hassles imposed to almost any other state.

This guy's business is online, and I was responding to the previous poster's question about Silicon Valley, so the relevance of auto shops isn't entirely clear to me.

However, if you have direct experience starting a business like that in two different states, I'd love to hear the details.

Interesting, those sound like all the same reasons the NYC startup scene is growing like crazy these days.

There isn't anything on this list you can't find in Texas. Those workers will move where the jobs are, especially if the cost of living is lower. Even the oddballs. California's infrastructure (including universities) is getting creaky and decrepit after years of underfunding; I'm amused you listed it in the plus column.

We have one big remaining advantage over Texas: weather.

The issue as I see it is they're pushing the burden of collecting taxes onto out-of-state companies. California, like most (all?) other states with sales tax, has a use tax that is to be paid by the constituent if sales tax is not collected by the merchant. Use tax requires honesty on the part of the constituent, or tax audits, and I'm guessing they're not having much luck with either. So, CA wants to push that on out-of-state merchants to reduce their own burden.

Having inadvertently formed nexus in other states before, I can assure it's an absolute pain in the neck to deal with. The author here muddies the issue with his anti-tax stance, but I can wholly empathize with anyone that doesn't want to become a CA tax collector due to some rewrite of what constitutes nexus.

Momentum, I suspect.

At some point, increasing demands from local government are destined to provide a competitive advantage to businesses in other locales. The interesting question is how much of an advantage being located in Silicon Valley is, as compared to the cost. By their nature, bureaucracies tend to ratchet themselves larger and larger. At some point, the balance has to tip.

Startups do well because non competes are not enforceable, so experienced employees can jump ship to a startup at any time.

Actually, in my case, it is interfering. The affiliate tax thing cuts off an important source of revenue for my business. I only recently moved to CA specifically because of the valley's reputation for startups. Now I am doubting that decision.

For the record I should state that I am not opposed to taxes at all. But this affiliate tax completely blocks an entire class of income. It is disheartening to think that here in Silicon Valley I am actually disadvantaged in a big way compared to competitors. Still, the real advantage is the talent pool. But you know, the talent pool is around only as long as business can afford to exist.

There is no "affiliate tax".

When people buy things in the US, they are generally supposed to pay sales tax. To make it easy on purchasers, states require businesses to collect the tax. Because of quirks of American law, states can't force out-of-state companies to participate. The tax is still owed; purchasers are just supposed to pay it themselves.

The law recently changed so that having affiliates in California means that you have to collect the CA sales tax like any other CA business.

Although not a tax in the traditional sense this added burden to affiliates and out-of-state business is a real additional expense, the effect is the same.

It might be. We won't know for another decade when we can look back and see where dynamism was.

Its amazing how california with all its advantages (climate, tech industry, hollywood etc) can be in such a financial mess...Think how great the state would if its atleast 10% as business friendly as Texas

You do know that california gives more to the federal government than it receives, to keep shit states such as alabama and the like propped up? You do know that if california did not have to pay out to the federal government there would be no financial issues of any kind?

Of course you didn't.

Not "California", California residents. You are referring to US income tax, which is the same everywhere. Yes, it bleeds money out of our state. But I don't understand HTF you make the leap that this is the cause of all of our fiscal problems.

Some data about this - http://www.taxfoundation.org/research/show/266.html

Places like New York City and San Francisco will always have a strong startup culture regardless of how oppressive the tax culture is. Why? People want to live there. Not all people, of course, but there's a huge number of people who would still live in New York City even if the tax rate of the highest income bracket were twice what it is now. It's New Effin' York.

Incidentally, I'm kind of curious how the California/Amazon thing will play out, given that Amazon is currently collecting sales tax in New York. When New York passed their affiliate nexus tax law in 2008, Amazon went the route of collecting the taxes and suing New York to have the law repealed; they are still collecting sales tax in New York 3 years later. I'm guessing their experience in New York has lead them to try the more extreme route in California, of starving the state of more revenue in an attempt to force them to change the law. If California holds firm the way New York has, will Amazon give in?

Amazon won't give in in California because it has no reason to. California can only demand Amazon collect state sales tax if Amazon has a physical presence in California. Once there are no affiliates there isn't anything the state can do.

I suspect the reason they're collecting taxes in New York is they have a physical presence there and they don't want to give it up.

Insane entitlements?

I just don't get people.

I think this particular facet of human nature was well explained by Upton Sinclair: "It is difficult to get a man to understand something when his job depends on not understanding it."

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