Advancing a Free Society

In California: Amazonian Taxation, Herculean Reform

Tuesday, July 12, 2011

Minerva, the Roman goddess of wisdom, may stand guard over the Sacramento River on California’s state seal. But come next year, there might be an Amazon on the ballot.

Ok, not an Amazon, as in the fabled she-warrior, but for you Kindle geeks the Amazon – as in Amazon.com, which is threatening a statewide referendum to undo a new California law that forces out-of-state online retailers like Amazon to collect sales tax from e-commerce in the Golden State.

Long story short: cash-strapped California, on the prowl for additional revenue, simply redefined the definition of a business’s in-state “physical presence” to include companies and individuals that contribute to the Amazon’s success (marketing, product-development) or earn commissions by referring visitors to the Internet giant from their e-ventures.

Nine other states have gone down this path. In return, Amazon has severed ties. The same idea was nixed by then-Gov. Arnold Schwarzenegger back in 2009, keeping Amazon and Overstock.com from bailing on the Golden State.

You’ll hear plenty more about this referendum if it moves ahead (and Amazon, if indeed it means war, has until September to collect 500,000 signatures).

But for now, there are at least two compelling story lines.

For one, it’s another chapter in the saga of companies willing to slug it out at the ballot box in states nationwide.

Second, it creates the potential for a very expensive “air” versus “land” struggle, if you think of Amazon as the former (plying its trade in cyberspace) and let’s-drive-to-the-mall giants like Target and Wal-Mart, who think Amazon has an unfair tax advantage, in the latter category.

I think there’s one other story to report: and that’s the emergence of 2012 as potentially a very big year in California initiative politics – and the nation-state’s future path of governance.

Besides Amazon, chances are Republican-friendly groups will mount at least three separate but similarly provocative initiative fights during the two 2012 elections (June primary/November general): changing state workers’ pensions, imposing a spending cap on the state budget; giving unions workers an opportunity to opt out of mandatory political dues.

Not that the left is taking this lying down . . .

Los Angeles Mayor Antonio Villaraigosa, a Democrat, has talked about revisiting Proposition 13 – specifically, the part of the law (approved by voters in 1978) pertaining to business property taxes. Moreover, the California Federation of Teachers is looking at an initiative to raise income taxes on the wealthiest Californians.

It’s a familiar path. Taxation brought state budget negotiations to a halt this year. Seven years ago, the all-powerful California Teachers Association (at 340,000 members, nearly triple the size of the CFT union) and Hollywood activist Rob Reiner flirted with the idea of a “split roll” initiative back in 2004, but abandoned the push (they claimed the ballot was too crowded; rumor has it the initiative polled terribly).

Here’s the significance of these various ballot props: fiddling with how Sacramento spends taxpayers’ money and how unions raise their own money strikes at the heart of the Democratic power structure in the State Capitol. Raising taxes in the former of higher brackets and an altered Prop 13 is pure venom to the right.

Think of it as California’s predominate political philosophies each going to “DEFCON 1” – a very expensive, very public battle over expanded versus lessened government.

The timing seems right, as California’s a nation-state that cries for all kinds of reform governmental and political. The Golden State has endured a decade-long budget “crisis” (politicians abusing that term). The same lawmakers who carelessly toss around dire prophecies in enjoy abysmal approval ratings (the State Legislature reaching a half-century nadir last year). Meanwhile, the state’s bureaucracy’s bloated; an economic comeback is years, not months down the road.

Even the Golden State’s raison d’etre reason needs updating: the California State Constitution now droning on for 80,000 words and 500-plus amendments, as opposed to the 4,400 words and 27 amendments that make up the U.S. Constitution.

Call it a mess of mythological dimensions. Defeating a lone tax law in 2012? That’s merely an “Amazonian” proposition. But fixing the greater flaws that plague California? That would be downright Herculean.

(photo credit: Manuel Alarcón)