Sunday, October 10, 2010




In many of her ubiquitous television spots and in almost every campaign appearance, Republican Meg Whitman hammers at the theme that Democratic challenger Jerry Brown is a fox who shouldn’t be let loose in the state government henhouse.

That’s the dominant theme among all her constant complaints about Brown, who signed off on expanding the negotiating rights of public employee labor unions during his previous stint as governor. She argues that Brown has been “bought and paid for” by unions which financed television ads on his behalf last summer, while he carefully husbanded his campaign cash.

Anyone who remembers the refusal of the state AFL-CIO labor federation to endorse Brown for reelection in 1978 or to let Brown speak at its picnic that year might wonder whether he really is a slavish stooge of organized labor. So might those who remember him imposing furloughs and pay cuts on Oakland city employees while mayor there in the early 2000s.

That, of course, doesn’t give pause to the Whitman advertising blitz, which also relies heavily on her record as CEO of the giant Internet auction house eBay. Whitman created tens of thousands of jobs there, her ads remind us. She took a small company and grew it into a very large one.

But some of what she did along the way raises fox-in-henhouse questions of her own.

It’s not merely that a woman who employed an illegal immigrant for nine years advocates sending state officers to check on others' employment of illegals.

Take the issue of sales taxes and the state budget. Whitman says she will solve state budget problems for good by firing 40,000 state workers and cutting other, unspecified state spending.

Never mind whether she could actually do these things, which many doubt.

It also turns out her company has been a major contributor to the state’s budget crunch. Which makes giving Whitman control of the state’s finances one of the ultimate fox-in-henhouse situations.

It has been law for many years that any business with a physical presence in California must collect sales taxes and pass them along for use by both state and local governments. Every store in the state does this. So do the Internet versions of multi-state businesses like Home Depot, Target and Costco.

But not eBay, headquartered in the Silicon Valley. And also not many of the independent California-based sellers who peddle goods from books to cars and collectibles via the eBay platform.

One reader of this column provided a list of more than 200 California-based eBay sellers he has patronized without being assessed a penny in sales tax. A random check of 20 sellers on that list proved the claim correct. And neither Whitman nor eBay’s current management denies that many sellers don’t pay.

Since no one outside eBay knows how many California-based sellers the firm has or how many of them are high-volume businesses, it’s hard to be precise about how much money California loses from this tax cheating each year. The state Board of Equalization, which collects sales taxes, has known about this form of tax evasion for more than 10 years. Some staffers there maintain the total lost to the state probably amounts to several billion dollars, enough to put a significant dent in the state’s budget shortfall.

But Whitman refused – and so does current management – to provide a list of eBay’s California sellers when the tax collectors requested it several times. This was not technically illegal, since the tax board had no way to force disclosure.

Still, there’s no doubt that Whitman’s action deprived the state of significant revenue to which it is entitled. Plus, her action put tens of thousands of brick-and-mortar store owners who do charge sales taxes at a major competitive disadvantage compared to their virtual-store competitors.

The fact that another major Internet selling conduit – – also refuses disclosure does not excuse eBay and Whitman.

Asked about this when the information emerged, Whitman’s deputy campaign manager for communications, Tucker Bounds, responded that “Tax collectors have a job to do that shouldn’t require sniffing through the private records of…eBay users.” But that’s obviously just what they need to do in order to collect what’s owed the state. And if Whitman can advocate sniffing through the employment records of businesses, why not their sales ledgers, too?

Whitman’s camp has never denied that she cooperated in and abetted this form of tax evasion. At the same time, she steadily challenges voters to “evaluate my entire record,” especially her time at eBay. This is part of that record.

In a way, it would be the ultimate fox-in-henhouse situation to put someone who prevented the state from collecting what it’s owed in charge of California’s finances.

Neither Whitman'shousekeeper problem nor the sales tax issue negates her charge that Brown might have conflicts of interests with the unions that are helping finance his campaign. But it does make her a person throwing stones from within her own glass house.

Elias is author of the current book "The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign to Squelch It," now available in an updated fourth edition. His email address is

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