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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.'"
Special tax deals for individual companies is a recipe for corruption.
-Dave
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.
Is it just my observation, or are there way too many stupid people in the world?
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.
make imaginary.friends COUNT=100 VISIBLE=false
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).
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
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.
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.
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. :)
Liberty in your lifetime