GREED DRIVES AMAZON ANTI-TAX INITIATIVE

CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, AUGUST 2, 2011, OR THEREAFTER

BY THOMAS D. ELIAS
“GREED DRIVES AMAZON ANTI-TAX INITIATIVE”

It’s about time someone put the correct labels on efforts by Amazon.com to avoid paying any semblance of sales tax in California or anywhere else. Those labels: Greed and fear.

The same tags can accurately be attached to the Internet auction house eBay, Overstock Inc. and other big Internet-only merchants opposed to operating on a level field with brick-and-mortar outfits that actually pay rent or property taxes and otherwise help Californians.

Meanwhile, the saps in California government who side with them – like former state Republican state Sen. George Runner, now a member of the state’s tax collecting Board of Equalization – are mere enablers of their greed. Sure, it’s the ideology of some to oppose new taxes of all kinds, while invariably calling them “job killers.”

But the so-called “Amazon tax” adopted by state legislators and signed into law by Gov. Jerry Brown as part of California’s newest budget is not a new levy. This is a tax fairness measure, seeking only to make sure that almost everyone selling in California pays the same basic share of the freight.

Amazon, of course, tries to frame its opposition differently as it begins a drive toward placing a referendum on next November’s ballot to reverse the new law requiring online merchants to collect a basic 7.25 percent sales tax on goods sold to Californians.

“This is a referendum on jobs and investment in California,” claimed Paul Misener, Amazon’s vice president of global public policy.

Actually, no, it’s a referendum on whether people who buy from Amazon, eBay and rest should continue to pay at least 7.25 percent less than folks who buy at Wal-Mart, Best Buy, Target or your local hardware store. In most places, local levies raise the sales tax at brick-and-mortar stores well above 9 percent.

Amazon wants its customers to pay less than others for the same goods because that assures it a larger share of the market. Such an uneven playing field is part of the firm’s basic business model.

To see how predatory this company is, look no farther than the action it took the day after the law passed. Amazon immediately severed connections with about 10,000 California affiliates – individuals, businesses and nonprofits – that earned commissions by referring customers to Amazon via links on their own Web sites. Dumping those affiliates was Amazon's way of eliminating any semblance of a physical presence in California, which would force it to collect sales tax and operate equally to others. So who killed those jobs? Amazon, and no one else.

This was, simply put, action aiming to set a precedent for other states, warn them off attempting anything similar, just like the company did when New York imposed a similar level-ground tax collecting law which Amazon is now fighting in court. No ballot referendum attempt there because New York doesn’t offer that method of trying to cancel a new law.

Amazon has long done whatever it could to avoid paying any kind of sales tax, so this was nothing new. This aim is the reason Amazon assiduously avoids placing its huge warehouses in states that might force it to charge tax, instead locating them in places like Pennsylvania and Kentucky, whose laws differ. Amazon, then, is willing to avoid putting warehouses near its biggest markets – places like New York City, Los Angeles and the San
Francisco Bay area – just to avoid collecting sales taxes and keep its pricing advantage over competitors that actually operate stores.

Putting this whole thing in its proper perspective was Edward Lampert, chairman of Sears Holdings Corp., who wrote to his shareholders that “Either all retailers should be required to collect sales taxes or none should...”

The real question here is why politicians who oppose new taxes want some companies to stay exempt from existing levies. Do they not realize that things like police and fire protection, parks, street cleaning, sewer service and other basics of government are funded at least in part by sales taxes? Or do they think those basic services are unnecessary?

Runner, for one, announced less than two weeks after the new law passed that “Clearly…(it) is not working.” It is already costing many thousands of jobs, he says.

His pronouncement was premature, at best. No one yet knows how this will work out. If forcing customers of Amazon and other Web merchants to pay sales tax should drive buyers away from those firms and into brick-and-mortar stores where they can actually see and feel what they’re buying, jobs will be created there – probably more than could be spurred by the same amount of online sales.

But Runner and others don’t consider that possibility – one that Amazon and eBay plainly know is likely to happen. It is precisely their fear of such a development that has kicked their greed reaction into gear or they would not be fighting this as hard as they are.

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Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough," is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net