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Revenue

Revenue Higher Than Expected

by: Brian Leubitz

Tue Apr 23, 2013 at 08:42:04 AM PDT

State may end April $3B ahead of schedule

by Brian Leubitz

The news that April revenues are higher than expected is unambiguous good news. However, this being budget news, there are always caveats. First, the bottom line:

California's tax revenues began 2013 stronger than expected and will end the all-important month of April some $3.5 billion ahead of Gov. Jerry Brown's assumptions.(John Myers / News10)

Given the past decade, you can't help but smile upon those numbers. However, Gov. Brown has already said that he isn't keen to spend any of the excess quite yet. First of all, much of that money will be automatically diverted to make up for funds cut out of Prop 98 K12 education guarantees. And there is still speculation that a lot of the money was one-time bonuses given out by businesses before the Prop 30 tax increases took hold.

There are sure to be debates in the Legislature about providing additional funding for some of the very worthy programs that were slashed over the last few years. However, don't expect Gov. Brown to go along with most of that additional spending, as he has already indicated that he'd prefer to save any excess revenue.

All that being said, it is certainly refreshing to be in the situation of discussing excess revenue than our tired budget slashing debates of past years.

Discuss :: (0 Comments)

On "Reagan Day", Perhaps Remember the Real Reagan?

by: Brian Leubitz

Mon Feb 06, 2012 at 09:44:45 AM PST

As Conservatives play games with the former President's legacy, what would Ronald Reagan do in today's California?

I probably wouldn't have known it was "Reagan Day" but for the helpful tweets of @GeorgeRunner. The former legislator and current member of the Board of Equalization isn't really much of a tweeter, but on occasion he gives us such helpful words as "Happy Reagan Day!" after a few weeks of silence other than an announcement of his "e-newsletter." (By the way, if you call it an "e-newsletter," you are doing it wrong.)

Anyway, I thought I would take a moment to remind Mr. Runner and his #tcot friends about a few facts of the Gipper's tenure here in California. In a blog post, Bruce Bartlett, a Reagan domestic policy adviser, points out some of the false tax mythology:

Reagan's record on raising taxes began almost the moment he entered politics. Elected governor of California in 1966, he inherited a large budget deficit from his predecessor, Pat Brown. Although a conservative, dedicated to shrinking government, Reagan nevertheless found the magnitude of spending cuts that would have been necessary in 1967 to be beyond reach. This led him to endorse a $1 billion per year tax increase, equivalent to a $17 billion tax increase today - an enormous sum equal to a third of state revenues at that time. Journalist Lou Cannon recounts the circumstances:

"No amount of budget reductions, even if they had been politically palatable, could have balanced California's budget in 1967. The cornerstone of Governor Reagan's economic program was not the ballyhooed budget reductions but a sweeping tax package four times larger than the previous record California tax increase obtained by Governor Brown in 1959. Reagan's proposal had the distinction of being the largest tax hike ever proposed by any governor in the history of the United States."1] ([CG&G Feb 2011)

Let's stop with all the beatification and think about what really happened 45 years ago, and what is happening now.  Like Reagan, Gov. Brown inherited a big deficit from his predecessor. Schwarzenegger's mish-mash of policies left the state without direction and with a huge deficit to show for it. Brown the Younger in his third time has a similarly daunting challenge as he did in 1978 after Prop 13 and as Reagan did in 1978. And like Reagan, he understands the impracticality of a cuts-only budget solution.  And the tax increases that Brown is proposing today is less than half of the Reagan 1967 tax increases.

Runner and his fellow Republicans need to really take a deep look about their presidential saint and how he was able to objectively look at a situation and be more than ideologically dogmatic.  Perhaps then we could really govern the state, and the GOP could return to relevance.

If you'd like to see more debunking of the religion rapidly building around Reagan, read the entire post. Think Progress also has a great post about Reagan's real legacy last year for his centennial.  Let's

Discuss :: (0 Comments)

Think Long Says They Won't Pursue Their Ballot Measure

by: Brian Leubitz

Tue Jan 17, 2012 at 16:42:03 PM PST

Decision of Nicholas Berggruen's good government committee means one less possible revenue measure

This morning, CalBuzz released polling data showing the revenue measure of the Think Long committee to be trailing two other measures.  CalBuzz posited that they would probably just go along with Brown's when push comes to shove. And, well, I guess the push came quickly, as this afternoon they just announced that they won't be pursuing their measure for the time being.

Therefore, we have decided to proceed as follows:

1)      Continue communicating the necessity and benefits of the Tax and Revenue Reform Plan and engage a diverse range of stakeholders, with the goal of releasing draft ballot-measure language for comprehensive public and fiscal review during 2012, for the purpose of filing the strongest-possible measure for the November 2014 ballot.
2)      In the meantime, a high-turnout election is a terrible thing to waste.  California voters deserve the opportunity in 2012 to begin the long process of reforming state government.  Therefore, in the coming days, we will be announcing our intention to partner with other organizations by generously supporting one or more reform measures that have already been filed for the 2012 elections, consistent with our Blueprint.

My guess would be that Berggruen will write a check to Brown's campaign and then participate in the gentle nudging of the other measures to the side.

Full release over the flip

There's More... :: (1 Comments, 632 words in story)

Revenue Measure Drama

by: Brian Leubitz

Tue Jan 17, 2012 at 08:24:02 AM PST

New Poll shows Millionaire tax fares best, while Brown is forced to re-file initiative

by Brian Leubitz

Not an entirely good news day for Jerry Brown's attempt to get some revenue in the system.  First, he is forced to refile his measure because of drafting errors:

Gov. Jerry Brown is taking a mulligan, tripped up by a typographical error and forced to re-file his ballot initiative to raise taxes.

The Democratic governor on Friday filed paperwork with the state for "The Schools and Local Public Safety Protection Act of 2012- ver. 2." The measure is identical to one Brown filed in December, the governor said in a filing with the attorney general's office, "except that we have corrected a typographical error that resulted in two numbers being transposed."(SacBee)

While this is a bit of annoyance for his efforts to get the measure onto the signature gathering process, his team has allowed plenty of time.  I can't imagine there will be any major issues caused by the re-filing.

The other big news comes from a leaked poll from the center-right Think Long Committee (funded by rich dude Nicholas Berggruen). The results of a seemingly well-considered scientific poll, just published by CalBuzz, show that the CFT/Courage Campaign "Millionaire's Tax" leads the pack at a 70/30 split.  Brown's package is ahead by 62-37, and Molly Munger's taxes for education just above water at 51-45.  Think Long's own proposal to extend the sales tax to service was ahead 57-30.

I would have to agree with the Buzzers sentiment that Think Long would probably defer to Brown eventually, especially armed with these numbers.  As I mentioned before about Molly Munger, she is a bit of a wild card. Whether she intends to move forward on her income tax increase for education will play an important role in the fall campaign for these measures.

The CFT/Courage Campaign measure has some broad grassroots support, and has received some positive media attention. However, whether the progressive coalition can come up with enough money to get it on the ballot is an open question.

The revised Brown measure appears over the flip.

There's More... :: (2 Comments, 33 words in story)

Future of Revenue Measures Still Murky

by: Brian Leubitz

Mon Jan 09, 2012 at 18:03:23 PM PST

Valuation of tax measure adds to uncertainty

by Brian Leubitz

In case you were asleep for the past few years, we have a revenue problem with our budget.  Namely, we don't have enough cash coming in to pay for our state's priorities.  Gov. Brown is hoping to clear the field for his own measure, but it seems he has a lot of work to do on that front judging from the news of the day.

First, Molly Munger dropped half a million dollars on her own measure that aims to raise $10 billion for schools. Her measure raises the entire tax structure in a progressive fashion.  You can read more here, but this is the type of measure that progressives would ordinarily support. However, given the need for budget flexibility, there will be substantial pressure on this measure to get out of the way.

However, Molly Munger is no lightweight. She's a veteran civil rights litigator who also happens to be the daughter of Warren Buffet's longtime business partner, Charles Munger.  Her brother, Charles Munger, Jr, spent a bunch of money ($12mil) on Prop 20 to get Congressional redistricting into the commission. Molly Munger has not indicated how deep her pockets on this one will go, but if she's willing to put up $500K, will she drop the other million or two to get it on the ballot?  As Peter Schrag has said, shepherding this thing through the whole process will be quite the challenge for Ms. Munger.

The other big news today was the joint LAO/Dept. of Finance estimation of the Governor's proposed revenue measure.  Suffice it to say there are a few problems:

The Democratic governor is counting on a voter-approved tax increase on sales and the wealthy to generate $6.9 billion for the 2012-13 budget. But the nonpartisan Legislative Analyst's Office says Brown's plan would raise only $4.8 billion in the first budget cycle.

The Analyst's Office and Department of Finance included their separate projections in a joint letter to Attorney General Kamala Harris that is required for ballot preparation. (SacBee)

In other words, more uncertainty for a Capitol building that is rife with it now.  Of course, trying to project the economy right now is somewhere between ridiculously hard and impossible right now, but the $2.1 billion gap is larger than the Gov. would have liked to see right now.  We'll have to see what kind of contingency plans the governor makes for this extra whole that he now will have to make up.  

Might we see "Return of the Triggers"?  If the Governor thinks that the $6.9 estimate is worth gambling on, the situation ends up being remarkably similar to where we found ourselves last year, waiting on cash to come in.  One would hope that the triggers don't become a regular feature of our budget cycle, but it might be, once again, the easiest way out of a box.

Or, you know, some other random number will pop out of the sky in a few days and the whole scenario will change.  Heisenberg pretty much rules Sacramento these days.

Discuss :: (5 Comments)

Amazon Reopens Affilliate Program After Brown Signs Deal

by: Brian Leubitz

Mon Sep 26, 2011 at 10:15:00 AM PDT

Internet retailer ends long stalemate with California

by Brian Leubitz

You may have noticed that in the article below, I have an Amazon.com link to a book about a horse.  Which, mostly I just found kind of cute,  but tangentially related to the story.  But, why Amazon, you ask?  Well, remember that deal I mentioned a few weeks back, well, it's official and Amazon has reopened their affiliate program to Californians.

Gov. Jerry Brown signed legislation Friday that postpones new sales taxes rules that would have affected online purchases in California, granting more time for traditional and online retailers to lobby Congress for a national standard on the high-stakes issue.
The bill, crafted as a compromise among Amazon.com, traditional retailers and California lawmakers searching for ways to raise revenue, delays until at least September 2012 online tax rules that were implemented as part of this year's state budget package.
*** **** ***
Under the deal, the retailing giant will rekindle its relationship with its California affiliates and has promised to create at least 10,000 full-time jobs and hire 25,000 seasonal employees in the state by the end of 2015.(AP)

So, you can now go back to wondering whether the Amazon tablet will be the iPad killer and getting free shipping.  That being said, buying in local, independent stores is still your best choice for economic development in your own community.

Discuss :: (16 Comments)

The Amazon Deal

by: Brian Leubitz

Thu Sep 08, 2011 at 09:26:06 AM PDT

To avoid ballot fight, State to agree to deal with the online giant

by Brian Leubitz

Amazon had put up over $5 million in a show of force for a potential referendum.  But, they never really wanted to go to the ballot.  And it looks like both parties avoid an expensive ballot fight with an agreement scheduled to be finalized before the end of session:

Under the handshake deal, Amazon won a delay until at least September 2012 but will eventually collect state sales taxes.

The arrangement could lay the groundwork for a national online sales tax law. Amazon and major brick-and-mortar retailers like Wal-Mart and Barnes & Noble agreed to lobby Washington over the next 11 months for an Internet sales tax law that applies across 50 states. ...

If no federal deal emerges by July 31, 2012, Amazon would have to begin collecting California sales taxes starting on Sept. 15, 2012.

State lawmakers intend to pass a new bill in the next two days that would delay implementation of the online sales tax law until that date, according to Calderon and several sources. If Congress strikes a deal by July 31, 2012, online retailers would begin collecting taxes starting on Jan. 1, 2013, under whatever federal requirements are approved.(SacBee)

While the governor has previously said that he's not really all that excited about a deal with Amazon, given that this was negotiated by the Senate leaders, it would seem hard to block.  

The bigger issue is how are we going to deal with the $200 million hole this blows in the budget.  And the fact that we basically only get a promise to lobby for a sales tax measure?  Well, that and a quarter might be able to get you a gumball.

But the reality is that Amazon wasn't going to collect any sales tax anytime soon.  And were they to collect and submit the signatures, the law wouldn't go into reality until approved (if approved).  So we are essentially dealing with a bunch of posturing.  Amazon knows that they are going to have to collect sales tax at some point and are hoping to delay it as long as possible. And oh, sure, it wouldn't hurt to have one national standard.

With Amazon and the big retail giants on board, there is likely to be significant movement on the bill.  We'll end up getting money into the system at some point by 2013, and we can stop messing with this fight.  Covering another $200 million, well, that won't be so easy.

Discuss :: (0 Comments)

An Amazon Deal?

by: Brian Leubitz

Wed Aug 31, 2011 at 17:14:18 PM PDT

Online Giant Looks to Avoid Sales Taxes

by Brian Leubitz

Amazon has been publicly piling money into a campaign fund to halt the new legislation that would force them to collect sales taxes.  But, if they could avoid a big fight with California's brick and mortar retailers by pulling a quick deal, they'd prefer it.  One of the ways they've done that in a few other states is to promise some jobs in the state as long as they aren't taxed.  Queue the rumors of a deal here:

While discussions are still preliminary, sources said legislative leaders have received an Amazon-inspired plan that would give the online retailer a two-year moratorium on the new tax. In return, Amazon would bring 7,000 jobs to the state, these sources said.(SacBee)

Obviously, the retailers are none too pleased, with good justification.  They are facing an uphill battle against a company that has a 8-9% price advantage right off the top.  Whether this actually amounts to a) any new jobs or b)

The problem with this is that Amazon is just shifting jobs from state to state for these deals.  It is a race to the bottom, while brick and mortar retailers continue to lose out, and our main streets continue to look bleaker and bleaker.

Discuss :: (2 Comments)

Can Hancock get 2/3 for Amazon Measure?

by: Brian Leubitz

Thu Aug 25, 2011 at 13:29:19 PM PDT

Sen. hopes to avoid referendum

by Brian Leubitz

Sen. Hancock (D-Berkeley) has refiled her "Amazon" sales tax measure. Why, you ask? Well, the thing about the referendum process is that you can't use it against a bill passed by 2/3 of the Legislature.  So, can she get the two votes?

Getting this passed will take the votes of two Republicans in each chamber -- votes that weren't there when the bill passed as part of the budget earlier this year.

Asked if she had secured the needed votes, Hancock said, "We're talking to people. We have a week and a half left so we're putting it out there and talking to people."(SF Gate)

As we've mentioned here a few times, the Amazon tax measure raises some really interesting questions that don't always line up perfectly with the R-vs-D divide.  Specifically, the Big Box stores are quite interested in seeing Amazon's built-in government subsidy cut.

The question is how much influence do Wal-Mart and Best Buy have over the Republican caucuses in each house?  We'll see over the next few weeks.

Discuss :: (1 Comments)

Amazon Ponies Up $3 Million to Qualify Sales Tax Measure

by: Brian Leubitz

Fri Aug 05, 2011 at 09:18:42 AM PDT

Investment makes it extremely likely to qualify

by Brian Leubitz

There was some thought rumbling around that Amazon was just going to use their measure to overturn the online sales tax measure as a stick to beat politicians with.  But it now seems they are intent on getting it on the ballot:

In a filing Friday with the Secretary of State, {Amazon} revealed it had already contributed $3 million to the More Jobs Not Taxes Committee, which was established less than a month after a state law taxing online purchases took effect.

The committee bills itself as a "growing coalition of taxpayer groups, consumers, small businesses, and online companies," but so far it has only one funder: Amazon.

The company's contribution will go toward gathering signatures to put an initiative repealing the tax on the June 2012 ballot, committee spokesman Ned Wigglesworth said. The committee must submit 504,760 valid signatures to the Secretary of State by Sept. 27. (The Bay Citizen)

I think it is at least interesting to note that Wigglesworth is a former staffer for Common Cause, who, you know, advocates for openness and is generally against large corporations buying electoral votes.  But since he also managed the campaign for Prop 26 and the expansion of the 2/3 rule, I guess that Common Cause stint is more the anomaly than the current gigs.  

Returning to the issue of speculation, there is one more side benefit for qualification for Amazon.  As soon as the referendum is qualified for the ballot, the law isn't valid until it is approved by voters.  Of course, Amazon isn't obeying the law now, as they aren't gathering taxes for their California sales, but the referendum puts the legal question off for a while.  Even if they lose on the ballot measure, they likely earn back that $3 million bucks.

Of course, they'll need to spend more than $3 million to win when this gets to the ballot, but they certainly have the easier side of the argument.

Discuss :: (3 Comments)

Amazon's Long War on Sales Taxes

by: Brian Leubitz

Wed Aug 03, 2011 at 11:00:00 AM PDT

Amazon has avoided sales taxes since its inception

by Brian Leubitz

Amazon is a product of the 90s internet boom, you know that part of the story already.  But unlike many of their contemporaries, they saw not only the mere presence of the internet being the next step forward, but also a nice little legal loophole:  Quill v North Dakota.

Quill was a case from 1992 that essentially said that retailers who sent across state lines through the mail did not need to collect sales taxes for states that they had no physical connection to.  Jeff Bezos, CEO of Amazon, was keenly aware of this fact.  An article in the Wall Street Journal looks back at Amazon's use of this natural advantage against brick and mortar stores:

Amazon's Mr. Bezos has said he established the company in Washington partly because it has a tech-savvy but relatively small population, so state taxes wouldn't affect many potential customers.

"It had to be in a small state," he said in a 1996 interview with Fast Company magazine. He even mulled basing Amazon on a California Indian reservation because he thought it would allow his company to avoid collecting sales taxes in the state, he added. (WSJ)

Over the years, Amazon has gone to great lengths to ensure that they didn't cross the very murky line into "nexus" with states that they were targeting for their sales tax schemes.  Along with California, this list included Texas and Illinois.  Just how far did they go? Well, how about this:

For travel to California, some former employees recall being instructed by lawyers and managers to use special business cards. Rather than distributing typical "Amazon.com" cards, they used ones from "Amazon Digital Services," a wholly owned subsidiary that sells digital content such as books and music. Representing a subsidiary, rather than core retail operations, would help prevent state authorities from going after Amazon, the people said.

"It's a very unscrupulous practice," said Ms. Yee of the California tax board. She said Amazon employees visiting the state on business should present themselves clearly. If they don't, she added, "I think it's a conscious attempt to evade California's tax laws." She declined to comment on whether the practice was illegal. It couldn't be determined to what extent Amazon currently uses the method.

But Amazon's connections to California aren't limited to the affiliates that they unceremoniously dumped after the budget bill passed, A9.com, an Amazon search subsidiary, is based in Palo Alto, and the company has many employees in the state.  However, they claim that as they do not sell within the state, most of the employees are engineers or engineering support, that these employees should not count as the nexus required by Quill.

Ultimately, something has to give, as American taxpayers really don't need to subsidize Amazon.com anymore.  Sen. Durbin (D-IL) is now pushing the Main Street Fairness Act, a measure that would create a single national sales tax with one reporting mechanism for sell by mail retailers.  Interesting, Amazon has chosen to support the measure as an easing of reporting deadlines.  The bill is unlikely to pass in current governing climate in DC, and Amazon has to know that.  For a multi-billion company, the costs of reporting the taxes would be essentially negligible.  Whether they are using their support cynically to fight the taxes in the states is up for debate.  

Discuss :: (3 Comments)

Voters Split on Amazon Referndum

by: Brian Leubitz

Fri Jul 22, 2011 at 14:43:11 PM PDT

Referendum could get expensive

by Brian Leubitz

A new poll by the LA Times and USC shows that voters are split on the "Amazon" referendum.

The poll found 46 percent of voters favor the tax and 49 percent oppose it.

Gov. Jerry Brown (D) signed the bill last month, but opponents are collecting signatures to put a measure on the ballot to overturn it.

"At this point, Californians are evenly divided on whether online purchases should be taxed. This could be one of the most expensive campaigns in California history, and neither side starts with a clear advantage," Dan Schnur, director of the USC Dornsife/Los Angeles Times poll, said in a statement. (Hill)

With some brick and mortar retailers looking set to join the battle against Amazon, there is going to be a lot of money flowing back and forth when this one appears on the primary ballot.

From a strategy standpoint, Amazon just gets to bash legislators, always an easy target.  On the other hand, supporters of the online sales tax will have to do some explaining.  There are a lot of reasons to support the tax, but actually getting the votes? Well, the old saying goes, when you are explaining, you are losing.

One more point was that there were more "Strongly" opposed to the sales tax collection than those "Strongly in favor" of the collection.  So, Amazon has a higher ceiling and a broader audience to attempt to move.

Discuss :: (26 Comments)

Is Amazon's Referendum Constitutional?

by: Brian Leubitz

Fri Jul 15, 2011 at 12:00:00 PM PDT

Amazon wants to overturn rules requiring they collect sales taxes, but is it possible through referendum?

by Brian Leubitz

The following provision of the California Constitution will get much scrutiny over the next few weeks (and months) as Amazon seeks to overturn the requirement that they collect sales taxes:

SEC. 9.  (a) The referendum is the power of the electors to approve
or reject statutes or parts of statutes except urgency statutes,
statutes calling elections, and statutes providing for tax levies or
appropriations for usual current expenses of the State.

That's from Article II of the California Constitution.  While a quick reading would indicate that Amazon could not, in fact, put the tax statute to a referendum, quick readings don't always win the day.  And while Amazon's attorney, Steve Merksamer, spouts off about how the right to referendum is "sacrosanct," it isn't quite that simple either.

The measure is now in the capable hands of Attorney General Kamala Harris, who will determine whether it can proceed to the signature gathering phase.  If she determines that it is not a valid referendum, then Amazon will likely sue.  If she finds it is valid, well, expect a suit in the opposite direction, after all these are some high stakes:

Whichever way she rules, the losing side could end up suing.

"I'm sure there will be litigation on this," said Assembly Majority Leader Charles Calderon, D-Whittier.

Calderon, Assemblywoman Nancy Skinner and several area retailers crowded into Swanberg's on J, a small midtown clothier that specializes in Hawaiian shirts, to blast Amazon's sales tax stance. By not collecting the tax, Amazon is harming brick-and-mortar retailers, they said.

"It's a fairly big issue," said Swanberg's owner Lauren Lundsten, wearing shorts and a Hawaiian shirt.(SacBee)

The automatic 9% discount that Amazon gets is made any more fair through all of their machinations.  They've blocked other avenues to charge sales tax on their products, so what choice is left?

We should hear sometime soon from the AG's office, and then shortly thereafter in the courts.  But this is not a battle that should have to be fought for the sake of an unfair advantage for an out-of-state corporation.

Discuss :: (10 Comments)

Amazon Wants to Ask You if You Want A Pony

by: Brian Leubitz

Mon Jul 11, 2011 at 16:51:08 PM PDT

In New York, Amazon.com is collecting taxes from sales there, but not submitting them to the state while they are suing to block the legislation that requires them to collect sales tax.  In California, there is a tried and true way that major corporations fix policy by throwing cash at it: the referendum process.

Amazon.com Inc. wants California voters to decide whether to overturn a new law that forces online retailers to collect sales taxes there.

A petition for a referendum was filed Friday with the state Attorney General's Office so that voters can decide on the requirement, which was included in a state budget signed into law in late June. (SacBee)

This really should come as no surprise to anybody, as it only costs them a few million bucks to get it on the ballot.  And the basic question is one that they will do their best to boil down to something along the lines of "Do you like free shipping? So do we? We also like not charging tax. Yay for no taxes!"

Beating back such a referendum will be a very tough fight on some uphill terrain.  That isn't to say that there won't be those who will try.  Some of the biggest backers of the Amazon legislation in the first place have some pretty big pockets, like, um, Walmart, Barnes & Noble, and Best Buy.  And it is true that the legislation benefits big box stores, but it also benefits the few remaining small retailers. And while the big box stores are (very, very) far (extremely far) from perfect, at least they do provide jobs to local communities.

On what grounds is it good policy to give a sales tax exemption to a company that ships jobs out of the state?  It is a happenstance of our jurisprudence that mail-order and online companies don't have to charge sales tax, I get that.  But from any way you look at it, it just doesn't make policy sense.

There are a number of ways to go about defeating this Amazon referendum, depending on how much money comes into opposing it. But by the time this hits the ballot in the primary next year, expect lots of ink, pixels, and TV bandwidth to be spilled (ads and coverage).  Depending on when the election is next year, it will be a very difficult time to fight back.  Yet, I imagine there will be a pretty good fight on this.

And, for the record, no, Amazon.com, I do not want a pony.

Discuss :: (17 Comments)

Amazon.com Ditches California

by: Brian Leubitz

Thu Jun 30, 2011 at 10:00:00 AM PDT

You may have heard something about the tax situation in the budget.  There aren't any real increases, as you know, no Republicans voted for it.  But there are a few things that do attempt to increase revenue.  Most publicly, there is the so-called "Amazon tax", which isn't really a tax at all.  All it does is instead of depending on Californians to keep track of their purchasers from major online retailers and then pay use tax, and puts it on said major online retailers.

You've been paying your use tax dutifully every year, right? Right?  Well, if that was the case, then Amazon wouldn't be going to lengths that it has gone to avoid charging sales taxes to California residents.  Because here's the news on that front, they've decided to terminate their affiliate program in California due to the new requirement to collect sales taxes:

For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers - including but not limited to those referred by California-based marketing affiliates like you - even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective. We will send a follow-up notice to you confirming the termination date if the California law is enacted. In the event that the California law does not become effective before September 30, 2011, we withdraw this notice. As of the termination date, California residents will no longer receive advertising fees for sales referred to Amazon.com , Endless.com , MYHABIT.COM or SmallParts.com . Please be assured that all qualifying advertising fees earned on or before the termination date will be processed and paid in full in accordance with the regular payment schedule.

Of course, they have no proof that job losses are arising from anything but their own obsitancy from paying their fair share.  They use government services heavily, after all, their packages go across interstate highways and city roads maintained by the government, and that whole internet thing? Yeah, that was originally a project of the government.  But they don't give a crap about any of that.  They are about one entity and one entity alone, and that's Amazon.com.  

They like that they get this unfair advantage on price.  Sure, big box retailers aren't exactly notorious good actors, but at least they pay their freaking taxes.  Amazon complains that it is just too hard for them, or they can't process it.  Frankly, that's BS.  They manage to maintain a catalog of millions of products, I'm pretty sure they can handle the few lines of code and a few checks for sales tax.

So, with that, as a former "affiliate" of Amazon, I have now switched to Barnes & Noble, who pay their taxes.  You can find that link in the upper right corner.  Furthermore, there are these other institutions.  You can walk in to them, and actually see the products IRL.  Crazy, but true.  Please, consider supporting your local businesses first before you give the money to an unsupportive partner like Amazon.  

Discuss :: (11 Comments)

Internet Tax Bill Clears Senate

by: Brian Leubitz

Wed Jun 15, 2011 at 15:40:27 PM PDT

I've mentioned the so-called "Amazon tax" a couple of times recently, and now it looks like it has passed the second big hurdle by clearing the Senate.  It was actually packaged up into a bill by Sen. Hancock with two other bills:

Hancock added, "Out-of-state online merchants are able to underprice local stores and California-based online businesses by as much as 10% by simply refusing to collect state sales tax.  We're finally on our way to changing that in a way that will help small business and brings in more revenue.  It's only fair."

The three bills that are part of today's legislative package include:

* Senator Hancock's SB 234, which insures that the state tax board (Board of Equalization) has the authority to enforce collection of state sales tax by out-of-state retailers.

* Assemblyman Calderon's AB 158, which specifies that retailers have a business "nexus" or connection with the state if any member of their corporate family is located in the state.

* Assemblyman Skinner's AB 153, which obligates Amazon and others that use in-state affiliates to promote their sales to collect state sales tax immediately.

The measure incorporating the three bills now goes to the State Assembly, where a vote is also expected later today.

Hancock's bill should pass the Assembly on a majority vote basis today, and head to the Governor's desk.

Discuss :: (1 Comments)

"Amazon" Bill Waits In the Senate

by: Brian Leubitz

Wed Jun 08, 2011 at 11:45:00 AM PDT

Back in January, I wrote up a little ditty about Asm. Nancy Skinner's AB 153 bill to require sales taxes collection for major retailers who mostly exist online, but have sizable presences in California.  Of course, this is really directed at Amazon.com, the world's biggest internet retailer.

The good news is that the bill passed the Assembly, after a modification requiring affiliate payments of over $500,000 rather than $10,000.  The change is relatively minor, irrelevant to Amazon, but actually could end up making a difference for some growing e-businesses.

You'll not be surprised that I'm mostly interested in this for the revenue purposes.  Sure, I pay my use tax (or guess at it anyway), but to be honest, few people do this.  To get that revenue, it really has to be done at the seller's side.

And that is where this bill comes in, requiring online retailers who use so-called "affiliates" to drive them business.  Basically, these are California folks (um, like me) who drive traffic to Amazon who then get a cut of sales.  New York has already used this legislation, and it is now pending in court.  We are breaking no new ground other than in a quantitative aspect.

But there is still the other argument, which is really more compelling to a wider swath of people that the lack of taxation on internet retailers is just a blow to small businesses in the state who do have to collect their local sales taxes.  Scott Hauge, the president of Small Business California, made this point quite well in an op-ed that originally appeared in the San Jose Merc back in March:

Unfortunately, a tax loophole being exploited in our state hurts small businesses and creates a competitive disadvantage in the marketplace. Out-of-state, online-only vendors don't collect state sales taxes like brick-and-mortar stores are required to do. This loophole has given out-of-state, online-only retailers an unfair competitive advantage over retailers in our own community.  As a result, the brick-and-mortar small businesses that employ our family members, participate in our communities and are critical to our economy's recovery are operating at a loss, and jobs are at risk.

At its core, this is an issue of basic fairness. California businesses are being priced out of the marketplace because they are following the law and collecting the sales tax as required by law. All the while, online-only retail giants like Amazon.com are refusing to collect the sales tax by exploiting a loophole and passing on the liability to remit the sales tax to their consumers, many of whom have no idea the compliance burden falls on them to track and issue payment.

The result has meant that online-only retailers abusing an outdated system to get around collecting the sales tax can offer an artificially lower price. That's not fair, not right and not the way the marketplace should work. It is no way to do business in a 21st century economy.

Fortunately, our state has an opportunity to close the loophole, modernize the system and ensure small businesses are able to compete. Lawmakers can support Assembly Bill 153 by Assemblywoman Nancy Skinner that will require out-of-state, online-only retailers to comply with the same requirements to collect sales taxes that California businesses must follow. (SBCal)

In the end, I think what should ultimately happen with the internet is that there should be some sort of federal sales tax which then gets divided down to the states.  Or...you know, totally overhaul the taxation system that would allow us to rely more on progressive taxation and less on the more regressive sales taxes.  But that last hope seems rather distant at this point.

In the short-term, the Senate should quickly pass AB 153 and get it to the Governor's desk.  Amazon has threatened to cut off their California affiliates, but as they showed in New York (but not Colorado) they are a bit more cautious on the big states.  Lets get this done, both for the revenue as well as the simple fairness of requiring the same taxation for all businesses.

Discuss :: (8 Comments)

GOP Needs to Offer More to Budget Crisis than "No"

by: California Labor Federation

Wed May 11, 2011 at 12:00:50 PM PDT

( - promoted by Brian Leubitz)

by California Labor Federation Legislative Director Angie Wei

Assembly Republican leader Connie Conway has an answer to just about any question directly relating to our budget crisis. “No.” No revenues. No vote of the people. No Republican budget proposal. No closing corporate tax loopholes. No spending cuts. No, No, No, No, No.

Conway explained her caucus’ flurry on “No’s” to the LA Times recently:

The reality of it is, if we put up a ‘budget’ of our own it will get picked apart, criticized.

That may be a good answer for a politician. But it’s the last thing we need to hear from a public servant.

There's More... :: (2 Comments, 464 words in story)

Up $2 Billion in Tax Revenues

by: Brian Leubitz

Thu May 05, 2011 at 11:30:54 AM PDT

As April was closing, we noted the big surge in tax revenues as people got their taxes in on the last few days.  Now it seems that we are even doing better than we expected then:

State officials are reporting an unexpected $2-billion surge in tax receipts that will help lawmakers close the remaining $15-billion budget deficit, and the Capitol is humming with hope that more is coming. ...

Some analysts say the surprise - the sign of a brightening economy - could be just the beginning. Revenue has crept up incrementally for months and jumped in April, when people paid their taxes. It may be time to raise projections, they say, with the potential for billions more to flow into state coffers.

"As much as a third of the deficit will probably, hopefully, disappear," said Brad Williams, an economist and former chief revenue forecaster for the Legislature.(LA Times)

Of course, in California nothing is easy.  This increased revenue has come at a time when the Governor is attempting to find some way, any way, to extend the taxes from two years ago.  It's a great thing, of course, but it sure does make the people who don't want to really address the structural imbalance want to wait it out.

But in the end, we won't close this deficit with mere hopes and prayers.  It is going to shrink, perhaps to as low as $10 billion or so, but it isn't going to close on its own.  And the next $10 Billion of cuts won't come easy.  That these increased revenues come with the higher tax rates should be a sign that extending them won't kill the economy, but those facts are fairly unlikely to sway any of the Republicans.  You see, no matter what evidence of economic realities that you give them, they all point to one thing: lower taxes.  Economy is going strong? Lower the taxes! Budget deficit? Lower the taxes! California is burning? Lower the taxes!

The tax extensions aren't what I would choose for sound policy, but they the best shot.  Now if we could just get the 2 Republican votes in the Legislature, we could get back to trying to rebuild the California Dream.

Discuss :: (4 Comments)

LAT/USC Poll: Californians Oppose Cuts Only Budget

by: Brian Leubitz

Sun Apr 24, 2011 at 09:34:43 AM PDT

Governor Brown has been making the case for a vote on extending the sales taxes since January.  It's not had much effect on the Republicans in the Legislature, but it does seem to making some headway with the people:

California voters agree with Gov. Jerry Brown that tax increases should help close the state budget deficit, and they want to vote on his plan for raising the revenue, according to a new Times/USC Dornsife poll. ...

Sixty percent of those surveyed, including majorities of both Democrats and Republicans, said they back such an election. The alternative being pushed by most GOP lawmakers - forgoing an election and balancing the budget by cutting more from state services - was supported by just 33%.

You can view the full poll here, but there is some really interesting information.  It might drive pretty much any politically interested person crazy as much of it is wildly conflicting, but that's kind of what you get when you ask questions that drop nuance in favor of simplicity.  Not that there is anything wrong with this poll, but asking questions that really focus on values is more of an art than a science.

The bold face numbers aren't so bad, with only 25% of voters preferring a cuts only budget when they find out that such a budget would require cuts to K12 education.  Later on down the line you see that when asked if they support a state budget cap at the rate of inflation, a pretty strong majority supports it.  Of course, the fact that a budget that only increased at that rate would require some pretty heavy cuts due to population growth didn't come up.  Oh...and we still have outstanding debt that has to be paid at some point.

This really does reflect the bigger problem of a system of governance with no real leader.  There isn't anything wrong with the Governor, it is just that the system is designed to fail.  The elected leaders are subject to the whim of the initiative system, a process that favors feel-good slogans over sound policy.  For now, we have to deal with it, as Republicans are increasingly recalcitrant.  But, this is really no way to run one of the world's largest economies.

After all, what it comes down to is that Californians want their cake, and they want to eat it too.  They want their two Santas, one to give them stuff, one to cut their taxes. While there are these competing visions (one of which, the Laffer-curve mania, has never been shown to work for anybody but the rich), we really can't be surprised with these type of results. After all, the Republicans have been telling everybody that they can get something for nothing for years.

If we can get it on the ballot, a focused campaign can pass revenues, of that I am confident.  My certainty doesn't extend much past that.

Discuss :: (9 Comments)
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