Amazon Offers Calif. 7K Jobs to Put Sales Tax Law on Hold; Dems, Retailers Refuse
September 2, 2011 9:48 AM
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Senate President Pro Tem Darrell Steinberg is even going as far as gaining support for a bill that prevents Amazon from bringing a referendum to unravel the present sales tax law
Amazon CEO Jeff Bezos
If state leaders can put a hold on the new law until 2014, Amazon will drop its effort to repeal it and would hire 7,000 new employees in California
Amazon has been fighting a tax-related battle for quite some time now. In the past, state's like
, Illinois and Colorado have pressured the online retailer to collect taxes in order to make up for state budget shortfalls, but Amazon refused and would simply pack its bags to move on to another state.
recently joined the list of states who've pressured Amazon to collect. In fact, Governor Jerry Brown signed a bill in June that would require websites that forward shoppers to Amazon to collect sales tax in California. The law, which took effect July 1 and is expected to generate $200 million in revenue, angered Amazon to the point that it
asked California voters to repeal the law
Now, Amazon has
a new proposition
for the state of California that was discussed in a meeting Tuesday with leaders of the California Retailers Association and those in the office state Senate Republican Bob Dutton in Sacramento: If state leaders can put a hold on the new law until 2014, Amazon will drop its effort to repeal it and would hire 7,000 new employees in California.
While the hiring spree could be an appealing option for the state, since California's unemployment rate was at 12 percent in July and is expected to remain in the double-digits through 2012, Democrats are rejecting Amazon's proposal due to budget-related woes.
Earlier this year, state leaders needed to close a $10 billion shortfall. This gap was closed in June after deep spending cuts in previous budget cycles, but Democrats are backing the new law due to the fact that it has the support of local governments, public employees and small and large businesses.
like Best Buy and Walmart have been complaining about "unfair competition" with Amazon since they have to collect taxes and Amazon doesn't. The California Retailers Association quickly rejected Amazon's proposal.
"Our people came back and said this isn't legitimate," said Bill Dombrowski, president of the California Retailers Association. "It's unacceptable."
As for local governments and public employees, their "ranks are being thinned" due to a weak local revenue and overall state.
Senate President Pro Tem Darrell Steinberg is even going as far as gaining support for a bill that prevents Amazon from bringing a referendum to unravel the present sales tax law. Amazon spokespeople said they believe they'll have enough voter signatures by September 27 to qualify its referendum for next year's ballot.
In addition, Steinberg and other Democrats will create California jobs without the help of Amazon by proposing tax breaks for businesses, creating an economic development office and easing regulation.
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Government should layoff people and cut benefit.
9/2/2011 5:29:32 PM
Californian legislation, in order to remove deficit, you only have TWO ways, either way or combined:
1. Cut government employee's benefit, cut the pension.
2. Layoff government employee.
Where there is deficit, you should NOT just think about raise/increase tax!
When a private business ran out of money they have to take loan or layoff people. Why, government cannot?
RE: Government should layoff people and cut benefit.
9/4/2011 8:12:43 AM
You're kind of dumb, huh?
While cutting government employee benefits and pensions would help to reduce the deficit, as would simply laying off government workers, there is another part to the deficit. You see, dear simpleton, a deficit is the word we use to refer to the magnitude of the difference between spending and revenue (what normal folks would call income), provided that spending is larger than revenue -- thus implying a net negative balance. Had the revenue been larger we would refer to this as a surplus and nobody would complain, as everyone is happy. So happy in fact, legislators may decide to buy things like roads and parks.
Sadly, CA has a deficit. And it's a big one. In a case like this you simply can't layoff everybody and expect that to recoup the $10B they're in the hole.
You have two more choices:
3. Cut spending on state-sponsored programs
4. Raise taxes on people / find new things to tax
Currently CA is not receiving sales tax from sales made to CA residents from Amazon. Supposing this tax they approved can collect the $200M they think it can, and it does so for 2 years, that's $400M. It's 4% of the budget deficit, rather worth doing it.
However, consider Amazon's proposal. It would require each worker to net the state about $29,000 to do as well as simply taxing sales. I'm sure you believe this means each worker must pay $29,000 in taxes, and figure at a state tax rate of 5.3% (I'm using MA state tax here), each worker would need to be paid about $540k/yr. Which would cost Amazon $3.7B/yr, how stupid.
But no, it doesn't work that way. If even half of the hired employees are currently receiving unemployment and have, on average, half of their payments due then it saves the state a bundle by not paying unemployment. (This is like that whole cutting services thing you have managed to miss.) We can't simply assume that everyone Amazon hires has all the unemployment payments due to them, some will have had it run out and others simply weren't eligible to start with. In addition, Amazon would now have to contribute to the unemployment fund because they have hired 7,000 people. It's even better! And Amazon has agreed that in 2014 they will collect sales tax.
Now taking this into consideration, I estimate that the 7,000 workers would end up saving CA about $43M/yr. It's not much compared to the $200M/yr collecting sales tax would be. But with the former it is legal (though Amazon still sounds like they're extorting CA), whereas the latter may very well be struck down in the SC and then CA would owe up to $400M to Amazon.
"It seems as though my state-funded math degree has failed me. Let the lashings commence." -- DailyTech Editor-in-Chief Kristopher Kubicki
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