Amazon Poised To Get Cut of CA Sales Taxes

theodp writes "Eager to host Amazon warehouses and receive a cut of the tax on sales to customers statewide, the LA Times reports that two California cities are offering Amazon most of the tax money they stand to gain. After agreeing to collect California sales taxes beginning in the fall, Amazon is setting up two fulfillment centers in San Bernadino and Patterson, which will gain not only jobs but also a tax bonanza: Sales to Amazon customers throughout California will be deemed to take place there, so all the sales tax earmarked for local government operations will go to those two cities. The windfall is so lucrative that local officials are preparing to give Amazon the lion's share of their take as a reward for setting up shop there. 'The tax is supposed to be supporting government,' said Lenny Goldberg, executive director of the California Tax Reform Assn., of the proposed sales-tax rebate. 'Instead, it's going back into Amazon's pocket.' Sen. Mark DeSaulnier added: 'It seems like the private sector finds a way to pit one city against the other. You can't give away sales tax in this manner.'"

Comments

recipe for corruption

[bigdavex]

Special tax deals for individual companies is a recipe for corruption.

Re:recipe for corruption

[mwvdlee]

It's not like a small start-up competitor for Amazon wouldn't get these same tax cuts in these same cities, right? Right? Please tell me I'm right.

Re:recipe for corruption

[N1AK]

A company comes to you and says you can have 5,000 jobs and $20,000,000 as long as you give them $15,000,000 back. That's a tempting offer and you can hardly blame the towns for considering it. Someone comes to you offering 10 jobs and a worn out $5 it's not worth the effort. It's not corruption it's the cost of allowing internal variation in tax and rebates.

If you want to know why your taxes are so high

[Overzeetop]

If you want to know why your taxes are so high you only need to look at the deals which are given to major corporations to attract and retain their business. It's getting to be a bit like CEO compensation packages. Will the best ones make you money - sure. But that money is collected from everyone else - essentially a tax increase on the everyman.

The fact that governments are pitted against one another just means that the downward spiral will continue, as each locality offers to unlevel the playing field to favor their locality.

Re:If you want to know why your taxes are so high

[crimoid]

I'm sorry, but the lions share of the tax money (at least in CA) is not going to major corporations in the form of incentives. Most of it goes to state employees' salaries and benefits, the latter of which is grossly out of whack in this state.

I'm all for keeping a close eye on corporate/government activity, but saying that taxes are high because of it is just incorrect.

Don't blame Amazon

[gstrickler]

Blame the design of the tax laws, and the city officials who are willing to give huge tax breaks to major businesses. We see this type of thing all the time in the building of major sports facilities. It's welfare for billionaires.

Re:Don't blame Amazon

[thomasw_lrd]

Its not really though. They will tax the employees. This is how the city makes additional tax revenue. That's what it really all about. Plus all the residual services that new job bring.

People only bring up the issue at hand, they aren't considering what is really happening.

It's much the same with the whole X amount of billionaires don't pay any taxes on their income. The news media doesn't report that's because they give 90% of the money to charitable causes, or what not. It's the residual effects of their money that makes the biggest difference, not the fact that they don't pay X amount of taxes.

"supporting the government"

[roman_mir]

It seems like this story is trying to make Amazon look bad or trying to make cities that are hunting for Amazon's money look bad, because they are providing the most competitive environment to the other cities and government officials don't like it. It's a story that needs to be cut just like Gordian Knot.

Yes, governments require money.
Yes, private enterprise creates money, so governments require private enterprise.

So governments competing for money of private enterprise makes sense. Some argue that this is wrong, they want 'one government' even 'world government' and 'world taxes', etc., all just to KILL competition (and majority of the mis-educated public believes that government increases competition, not that it destroys it in every way possible).

But of-course the real issue needs to be distilled here just like the Gordian Knot needed to be cut to be solved:

1. Sales taxes and income taxes should not coexist. Income taxes are illegal and collected illegally and sales taxes, excise, import taxes are legal and they are the preferred way to run governments, because they can be moderated by the people's purchasing and saving behaviour, and we shouldn't believe in propaganda that we exist to support the government structure and that individual rights are secondary to collective.

2. Governments SHOULD HAVE TO COMPETE for money. Governments that compete for money are governments that are much less spending happy and are aware that their financial situation wholly depends on the financial situation of the actual market and not on their ability to ENSLAVE people through taxing their labour, DESTROY competition by creating, supporting and bailing out monopolies/oligopolies and STEAL liberties and freedoms from people through growth of government offices due to all of the laws and regulations governments come up with.

People must be free to choose between different governments and governments must be local, not global.

Global government above you is a single point slave owner that you cannot escape.

Re:"supporting the government"

[roman_mir]

The fact that you call it "the correct solution" is very telling.

- says the guy, whose main objection to all of my actual prescriptions was: you are a 'libertarian sob' or some such.

As if it is the only single way to run a country,

- it's the best way to run a successful country, like the USA was 1870-1913. But surely, countries can be run for some time without being economically viable at all, USSR, Greece, USA post 1971 especially, Japan for the last 20 years, etc.etc.

You can run a country and then you can run a country into the ground.

but I'm afraid the tendency to grossly over-simplify things is a common trait in all libertarians I have encountered.

- seriously? The simplest things like: not running over your budget, spending within your limits, not growing the government above its basic and authorised functions and not growing government spending and in fact cutting government spending when there is no money for government, because the government has already done enough to hurt the economy, so the economy is shrinking. Those are not just simple ideas. Those are ideas that nobody wants to follow because they don't want to face the music, yet they love talking about the proverbial kids.

Simple ideas that nobody follows because sticking your head into the sand is even simpler.

And please do not hold me up as an example of the failures of your US publicly financed education system.

- first, it's not my publicly financed education system.

Neither is USA my system, nor does it have to be US system to be a publicly financed failure. Wherever you were 'educated' today, it's most likely you were 'educated' by a publicly financed, publicly ran system, and your failure to understand that point, that it doesn't matter whether it is a USA system or any other nation's, is just another testament to how pathetic this idea is in the first place.

  Your inability to stop talking about any specific circumstance, my or your own ('your father', etc., who asked you? Who gives a shit and what does it have to do with the point that is being made? nothing), proves how completely irrelevant the education systems have become. Worse than irrelevant.

I am sure you weren't actually BORN this stupid - they had to beat this into your head over time.

Re:"supporting the government"

[roman_mir]

centralization of wealth within a very small population

- only in your mis-educated mind was the time in history that produced the most competition among all sorts of businesses, created all sorts of new products that never existed before and created entire new concepts of distribution of these products and services, was the time that somehow worsened the actual conditions of the general population.

The time that provided maximum freedom to people to run their businesses and to make money not by buying political system or just running the political system directly (dictatorships, monarchies), but instead the time that allowed people to do business unhindered by the dictatorships, monarchies and other forms of totalitarian regimes.

Obviously there were people who became much wealthier than other individuals, but the society increased its wealth production and distribution by a factor that was never observed at any previous time in history. Just the growth of population itself is the testament of the total success of the free market that people in USA enjoyed.

Every monarchy, dictatorship, socialist regime can just look in awe and wonder: how come it was not them that created the most prosperous and industrious nation in a very short time period, but it was a scarcely populated afterthought of a country. Well, today USA is not that USA.

The mis-education that you are getting in your publicly financed propaganda centres gives you a version of history in which actual captains of industry, people who STARTED entire industries are now known as the 'robber barons'.

As to working conditions - without the captains of industry the working conditions would have stayed exactly the way they were before, precisely as they always were. Kids always worked, people always lost limbs and lives at work, it was industrialisation, free market capitalism that forced search for efficiencies due to competition that created new tools and had to create more and more safe environments, because special skills are not acquired overnight and workers with special skills are much more valuable than workers without any special skills, generic workers are only worth as much as their health and individual physical abilities.

Specialised workers take years to train and are not as easily replaced, so their tools are more complex and their conditions must be made safer, because there is always competition who also COMPETES FOR LABOUR.

That's right - workers sell labour, they are not forced into it. And they can sell to highest bidders, whether this concerns monetary compensation or working conditions, and governments can do nothing to improve any of it, they can only watch as the private sector create new tools and systems and require more education and training.

But once the gov't destroys the private sector, none of the tools can or will be manned, education is no longer important.

Tools won't even be present, they are capital, and capital leaves when forced to by the ever hungry, ever growing monster of a government.

Re:"supporting the government"

[KozmoStevnNaut]

The best way to run a successful country? That obviously depends on how you define "successful".

Can we agree that a successful country is one where each person has the best possibilities to break their social heritage? One where each person has the best possibilities to rise up and create their own wealth? One where education is equally accessible by all and not a road to financial ruin for the unlucky? One where equality between all people, no matter sex, religion or sexual orientation etc. is a priority? One where even the poorest people can live a decent, well-fed existence?

If we can agree on this, and I believe we can, you really should study the Nordic Model, or "capitalism with a human face" as it's also called. Sure, I would love for my country to move further left. It works well right now, notwithstanding the idiotic policies of the previous 10 years of populistic, lowest-common-denominator right-wing politics that sought to dismantle our world-leading welfare model.

Please, do tell me what is wrong with my education? I work for an industry-leading company, among the top people in my country within my field of expertise and I am paid handsomely. I comfortably within the top tax bracket and pay my taxes with pride in exchange for the society that helped me get to where I am today.

Is it because nothing publicly funded can ever be effective, good or admirable, in your mind? You deride the idea of public education as "pathetic", yet you present no arguments.

I never mentioned my father, but now that you did, he also attended the same public education system that I later enjoyed the benefits of. Today, he is a successful business owner and has been for over 20 years.

I'm sorry, but I completely fail to see your points, both in the discussion to this article and in the post of your own writing that you linked to as "documentation" for your wild theories on the subject of income tax being illegal.

Re:"supporting the government"

[KozmoStevnNaut]

So paying taxes = being a slave, do I understand you correctly? In that case, you have a very twisted definition of being a slave.

I fail to see how I am a slave. There are two things that are for certain where I live. The law and taxes. I obviously cannot do anything that is illegal, that is the rule of any organized society. And I must pay my taxes, to contribute back to the society that has enabled me to earn my wages, through education etc.

Is that slavery? I can quit my job and start over on another line of education, or start my own company, or take my savings and explore the world. I am free to explore my ideas and ambitions, safety encourages creativity and thinking outside of the box.

Being able to break the social heritage and be successful on your own in spite of where you came from in life is the cornerstone of the American dream, yet America is one of the hardest countries to actually do this in, always has been.

Tell me, oh oracle of the free market, how have I chosen to not be free? I have precisely two obligations in life, the law and taxes. These are the only (mild) limitations put upon me and apart from them, I am free to do whatever I like. How is that being non-free?

You tout the free market as some sort of panacea to every ill that plagues the world. Yet when the market is truly free, self-styled monarchs and rulers will spontaneously pop up. Without checks and balances in place to prevent the exploitation of their fellow man, human suffering increases exponentially.

Re:"supporting the government"

[roman_mir]

Aah, the mandatory and false Standard Oil example.

The company that always reduced prices of its product over DECADES and was very successful because it could deliver an ever cheapening, good quality product to the market. The company that had 150 competitors by 1911.

By 1870 Standard Oil had 4% of the market share. The tools and technologies it invested in allowed it to create efficiencies and cut costs and pass cost savings to the consumers.

1869, price of refined oil was 30 cents per gallon.
1874, price of refined oil was 10 cents per gallon.
1885, price of refined oil was 8 cents per gallon.
1897, price of refined oil was 5.9 cents per gallon.

So by 1897 the prices were 5.9 cents, you can calculate how many times the prices fell from 1869 levels as an exercise.

By 1910 Standard Oil had 150 competitors, including Texaco and Gulf.

Saying that any type of 'predatory price strategy' was used is retarded, because prices were dropping over decades.

So yes, Standard Oil is an excellent example of free market at work and then of government meddling with the market to destroy a very healthy competitor, which was bringing a quality product to the market.

"Robber barons" indeed, people who created the industry, provided the necessary and very valuable resource at ever falling prices and developed industries, tools, mechanisms, need for higher education levels, the wealth and infrastructure to the public.

This is exactly what goes against your failed notion that 'trickle down economics' doesn't work. It works very very well, but you have to be part of the production cycle, you have to work, to produce, not to be an illegitimate consumer subsidised by the very money of the very people who then are selling you the product for their own money.

Re:Yes, you can...

[Trepidity]

As far as I can tell, empirically this doesn't really happen: when FAA taxes were suspended for a bit recently, due to a Congressional screw-up when it came to reauthorizing the agency to collect the fees, airlines didn't lower their fares, they just pocketed the savings as higher profit margins.

Another way of putting it is that profit margins, like almost everything else, aren't completely fixed, so tax hikes and tax cuts don't necessarily get passed through to retail prices, but instead may modulate profit margins (or other things, such as employee pay).

The hidden costs of these deals

[KingSkippus]

Yeah, it sounds like a good deal except that a lot of towns are ignoring the hidden costs of these deals. That huge company is going to require a lot of extra government services in the forms of things like electricity, water and sewer, roads, etc. Plus with the extra people, it's going to require more of things like fire nad police services, welfare benefits, unemployment benefits, public parks, postal services, yadda yadda yadda. What looks like a $5,000,000 bonanza, when all is said and done, ends up costing the taxpayers a crapton of money.

These deals ought to be illegal, period. Government at all levels, from federal all the way down to local, should be prohibited from making sweetheart deals to one company without making them for all companies. It would have to be a federal law, since there's no way in hell that cities or states would make such laws on their own. That's the only way that the playing field could be leveled for everyone. Maybe now that corporations are "people," some small companies should get together and sue using the Equal Protection Clause, under the theory that government is prohibited from offering Company X a sweetheart deal that Company Y, Company Z, and every other company doesn't have access to. It's a little like selling bus tickets to the Smiths for $2 each and selling the same bus tickets to the Johnsons for $8.

There is no telling how many trillions of dollars aren't being collected from companies because of deals like this, how much money is being sucked out of local municipalities' and states' coffers and being paid by people who live nowhere near where the money eventually ends up.

Re:The hidden costs of these deals

[characterZer0]

There is a simpler solution. Get rid of property taxes and corporate taxes and tax capital gains as income. This will break the argument that corporations are citizens and make governments pay attention to where the money is coming from - the people.

Re:The hidden costs of these deals

[KingSkippus]

It's not a cost on the cities/towns that take the deal. They got to negotiate (with the entire state's tax revenue) how much they'll need to make it worth their while. Plus the jobs are always a big plus these days. I highly doubt the little costs you mentioned are going to cause it to be a loss for them.

I don't agree. Most towns these days are pretty strapped for cash and are cutting WAY back on basic infrastructure services. In my city, we've had budget shortfalls in the millions for years, and debacle after debacle of basic infrastructure failures because there's just not enough money to go around. Yet when I turn on the news, I'm hearing about yet another sweetheart deal that the city officials have made with some business to get them to come here. I can't help but think that we're just a few more sweetheart deals away from being completely bankrupt. (And indeed, many cities and counties around the country really are literally bankrupt.)

This also neglects an issue that the OP mentioned above: corruption. I also can't help but think--and this has been proven in a court of law in a few cases--that the city officials who are making these sweetheart deals are getting kickbacks for them. In those cases, it's not just entirely possible, but I'd argue that it's probable that they're not negotiating in good faith for the city's best interest, that the costs I mentioned really will result in a net loss for the city.

Re:The hidden costs of these deals

[tsotha]

The tax money in question is only the part of the tax that goes to the local municipality. They cities in question can't bargain away the state's portion of the tax, so other cities aren't losing out on tax revenue. And we're not talking about a lot of money here - of the $316m Amazon is expected to pay in taxes only $8m apiece was slated to go to the cities in question. Now, you could argue that the sale actually happens wherever the customer is clicking away on his computer and therefor that city should get the money, but that's not how sales taxes are collected for brick-and-mortar sales. If I drive to another city and blow a bunch of money at the mall my sleepy burg doesn't get any of the tax money.

These kinds of deals are done all the time by cities and states. Whenever a company decides to build something that's going to employ a lot of people or generate a lot of tax revenue it typically will shop around for the best deal. Nothing wrong with that, IMO. Cities and states aren't losing money when someone comes in and employs a bunch of people, some percentage of whom who would otherwise have been on the dole. All those employed people pay income taxes (which are quite high in CA), and they pay sales tax every time they buy something (well, in CA it doesn't apply to staple foods and clothes, but still).

This happens at the country level as well. Multinational corporations have options when it comes to siting a factory, and what kind of tax deal they can get is always going to be considered along with the normal stuff like infrastructure and labor costs.

What would be shocking is if Amazon didn't shop around. Anyway there isn't anything California could do to force Amazon to collect sales taxes as long as Amazon didn't have a presence in the state, so presumably they ground out all the numbers and decided the supply chain advantages outweighed the tax liabilities.

nothing new

[Charliemopps]

They report on this like it was a new thing, just invented for amazon. It's not. Whenever a large employer has plans to move into a region they negotiate with several potential local governments to find themselves the best deal. In some cases one city might have an advantage like a rail line or a port, and can offer less of a deal, while another may have negatives... poor roads, bad zoning, etc... and they need to offer a lot more.

My father was VP of a company for years and they set up several factories. The local governments would give them free water, electricity, sewage, etc... You may think that's just a give-away by the city, but what the city would get in return is 1000-2000 employees all paying income taxes... Those same employees would then spend the money they earned, usually in town, and generate sales taxes. The money they spent would bring in other smaller businesses that wouldn't get the same breaks as the larger employer. By far the city profited more from the deal than they lost. That was the point of the deal.

Re:nothing new

[Hatta]

In the absence of such a deal, the company would still have to make a factory somewhere. That means those jobs would still exist, and still contribute taxes to the economy. The sweetheart deals only ensure that it's your city that gets the jobs.

So what we have here isn't a situation where everyone's a winner. These deals make your locality a winner at the expense of others. When looked at it from the perspective of society as a whole, these deals are zero sum or worse. They should not be allowed.

Corporatism at its finest

[J'raxis]

I hope all you people who were whining about Internet retails back when they were untaxed, not "paying their fair share" and having an "unfair advantage" over brick and mortar stores, are happy with the results. Now one of the retailers turns around and buys privilege from the government, actually benefiting from these taxes.

I'd write more, but I'm laughing too hard. :)