California’s proposed "Amazon tax" - a destructive solution
venturebeat.com
venturebeat.com
No, it really doesn't sound reasonable when you look at it on any medium. This is incredibly unreasonable.
Even if we accept that California should be allowed to force companies to collect tax that operate physically within its border, to attempt to force that status upon unwilling or unknowing companies that aren't anywhere near its jurisdiction is ridiculous.
California is not losing money due to this practice. That's like saying a mobster is losing money because he's not collecting "protection money" from people who live a thousand miles outside his territory.
And let me also say they should call this a buying tax, not a sales tax. That much is evident based on who the collector is.
Does Amazon really fall into that category? It has more than one subsidiary based in California, with "an Amazon.com company" on their websites. (A9 and Alexa are two.)
It's odd that California even has to resort to the 'affiliates count as operations' trick, until you consider the game-theoretic aspects -- Amazon has a credible threat of withdrawing its subsidiaries to avoid the tax, but perhaps not dismantling its affiliates' program.
Really, this needs a national solution -- perhaps a standard sales tax that applies when a sale straddles exactly two states, with the revenue split 50/50 between source and destination. Otherwise distant online retailers like Amazon have an unfair advantage over nearby terrestrial retailers (like my bookstore down the street) or same-state online retailers (like NewEgg).
I was under the impression Amazon had warehouses that end up delivering in most states, since I (thought I) pay tax on purchases in my state. The point is, it's not just Amazon. Amazon is a minor part of it. They're talking about causing anyone who advertises on a California website to be a California taxpayer.
That's ridiculous. I'm sure I must be considered as one of the top few percent of people who pay attention to news. What happens with advertisers who are less in-tune with intra-state events? What happens with people who buy ads through an ad agency who puts their ads on California websites? What happens to direct buyers who don't know any better?
Do you see what I mean now by unwilling and unknowing?
And let's forget about the US Constitution. One comment here put it as "clear." It's not quite as clear as saying "the US govt has power to tax interstate commerce," but anyone I've known as a constitutional "scholar" agrees with that:
The original constitution- article 1, section 8, says the US Congress has the duty and right:
"To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; "
Then later they mention that "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."
Most people forget about that 10th amendment (and the 9th as well!)
You see, the power of regulating commerce among the several states was delegated by the Constitution to the United States. It's not up to California.
"Really, this needs a national solution..."
No, it doesn't. California charges an income AND sales tax. Plenty of states do fine without an income tax. Plenty of states do fine without a sales tax that over-reaches authority.
This is absurdity asked by a government who has no apparent concept of reality with the rest of the world.
I wish the 9th and 10th amendments were relevant; they were effectively nullified by the courts and congress long ago.
The problem is an unforeseen development -- massive cross-border retailing -- has created revenue holes for states and distorted incentives for consumers and businesses, advantaging out-of-state retailers and long shipments over local businesses. It's hard for individual states to fix, because there's an incentive for some states to defect, become islands of online/catalog retailers, and use the tax discontinuity to gain jobs by legal arbitrage -- not any true business-friendliness. (It's a bit like the competition for sports stadiums in that dimension -- it'd better if no jurisdictions offered giant subsidies, but once the bidding starts, it's hard not to match others' offers.)
Congress could solve using its power to regulate interstate congress; otherwise inefficiencies and unproductive gaming between the states will continue.
And that's just comparing online retailers; there's no reason Amazon should have such a tax-based price advantage over the bookstore a block from me, driving the local supplier closer to bankruptcy and making it cheaper for me to have a book shipped hundreds of miles rather than walking a few minutes to pick it up myself.
I like low taxes. I like no taxes even better. But taxes that create arbitrary opportunities for gaming/avoidance aren't really in anyone's interest.
I don't believe you.
Evidence: "California /is/ losing money..."
I'm glad you pointed out that NewEgg "has to collect sales tax. At the margin people choose Amazon..." and everything else you said.
I'm just disappointed that you didn't see the obvious: California is the problem, not the businesses. They can tax and tax and tax - but they'll continue to be addressing symptoms instead of problems.
So this is not a matter of low-tax-jurisdictions winning over high-tax jurisdictions; it's a loophole that exempts a certain kind of transaction, no matter the direction.
Do we prefer people buy from distant merchants, so much that we want to punish local sales? Is there a case to be made that this approach optimizes welfare for people, or causes the most economic growth?
That case hasn't been made. This is a glitch in the law from when cross-border retail was too small to worry about. But since people have become wealthy from this glitch, it now has a constituency that makes change hard. That sort of entrenched-interest paralysis is not something to celebrate.
It's also not a California-specific issue. Even Texas finds Amazon's legal machinations to get out of sales tax fishy:
http://news.cnet.com/8301-10784_3-9942692-7.html
And even Texas requires residents to pay 'use tax' on out-of-state purchases:
http://www.window.state.tx.us/taxinfo/sales/faq_use.html#use...
Companies should compete on the merits of their offerings; jurisdictions should compete on what sort of pro-business environment they offer fairly to all businesses, not just loophole-favored segments (like cross-border shippers). Otherwise productive effort is wasted in gaming legislatureslaws/borders rather than innovating and serving customers.
California tried this a few years ago with cars, imposing an illegal $350 "smog tax" on cars brought in from out of state. They had to give the money back.
The problem is that web purchases are making up a larger and larger portion of our consumption and, as such, the amount of our consumption that we're paying sales taxes on is falling. That's leaving states with sales taxes with revenue shortfalls that have to be made up somehow.
California could get rid of its sales tax in favor of a hike in the income tax, but such large changes in tax policy are hard to pull off. In the meantime, California and other states are losing revenue more and more revenue to these types of sales - and there really is little they can do about it. Let's face it, this proposal sounds like a huge stretch to claim jurisdiction - a stretch that I'd think a federal court would laugh out of its chambers.
But whether this is a good solution or not, we're left at the same place: states are desperately hurting for revenue right now and it's becoming ever easier to avoid sales taxes. In the end, one of two things is likely to happen: states will get rid of their sales taxes seeing them as unenforceable in exchange for other tax hikes, or the federal government will step it to give states such jurisdiction ala http://news.cnet.com/8301-10784_3-9919420-7.html?tag=mncol
Stop fucking spending my money on bullshit and you won't have to create new taxes.
If you look at the past decade you see George W. Bush spent money like crazy (on defense AND social programs) and President Obama is looking to keep up with him. So really there's very little difference between right and left when it comes to taking your money. The only difference is former President Bush borrowed money (which will some day increase your taxes in the future) while President Obama wants to take it outright (increasing your taxes now)
I really think we're coming into a time where people of all parties have to start looking for candidates who have fiscal responsibility as part of their platform. Because, to my eyes, Libertarianism isn't incompatible with either parties platform (it incorporates the lower taxes/private sector component of the right with the social equality goals of the left).
First Reason: To save money. But in this sense the plan obviously fails because to even get to the point of spending cuts we have to use all our Government's available financial resources.
Second Reason: To empower the Private Sector. But if the Government has gotten to the point where they've exhausted the majority of their financial resources they are going to be forced to levy high taxes to compensate. That places a burden on businesses and makes them look to incorporating in other countries (just as most look to incorporate out side of California now). So it doesn't empower the private sector it all but destroys it.
Given the two points above I don't see how your thesis makes sense. It seems that you're so focused on small government that you've forgotten the reasons you'd want it in the first place.
It is not the case that the government must raise taxes when they exhaust their resources, the other option--the desirable outcome from small government advocates--is that they slash services and oversight to an extent that is politically impossible under other circumstances.
Politics is not motivated purely by reason, but also by the different parties are motivated by philosophical ideals.