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However we vote, Amazon loses

The sure-fire winners in the California battle over sales taxes on online purchases will be the political consultants.

July 25, 2011|George Skelton | Capitol Journal
  • A worker unloads boxes of merchandise at the Amazon.com Phoenix Fulfillment Center.
A worker unloads boxes of merchandise at the Amazon.com Phoenix Fulfillment… (Joshua Lott, Bloomberg )

From Sacramento — The Amazon tax fight has all the signs — dollar signs — of the sort of ballot brawl that causes political consultants to dream and drool.

I'm guessing 100 million dollar signs — maybe $50 million spent on each side. We're talking very deep pockets.

One special interest — Amazon and some e-tail cohorts — is desperately trying to regain a competitive tax advantage. A rival interest — Wal-Mart and other brick-and-mortar retailers — is seeking fairer competition.

It's vintage California politics. And it's why the political-industrial complex thrives in this state despite a lingering slump in other sectors.

Thank you, Hiram Johnson and your initiative, referendum and recall "reforms" of a century ago, all of which sorely need reforms of their own.

Here we may need a quick civics lesson. Many people — even close observers of politics, including media types — get confused about these citizen/special interest political tools. Initiatives and referendums are not the same although the words are often misused interchangeably.

In California, an initiative is a proposed new law that is placed on the ballot through the collection of voter signatures. A referendum — much less used — is a proposal to repeal a law previously passed by the Legislature. It also qualifies for the ballot via signature gathering. Both are propositions.

This may not seem particularly important. But the Amazon argument is likely to be with us for a long time, so it would be nice to get the language straight.

Seattle-based Amazon has filed a referendum to repeal a new law signed by Gov. Jerry Brown that, as of July 1, required out-of-state retailers to collect sales taxes on online purchases by Californians.

Budget-writers conservatively expected the tax collection to raise about $317 million in this fiscal year, $200 million of it for the deficit-strapped state general fund and the rest for local governments.

But Amazon promptly refused to obey the law and fired 10,000 California "affiliates" — website operators that provided links to its online showrooms in return for a commission. Without the physical tie to California of affiliates, Amazon claims, it isn't required to collect taxes under a 1992 U.S. Supreme Court ruling. Never mind that it still has other business ties in California, including Kindle.

Last week, Amazon was given permission by state officials to begin collecting the roughly 500,000 signatures needed to qualify its repeal measure for the next statewide ballot, probably June 2012.

It has recruited some of the consultant corps' heaviest hitters, including political attorney Steve Merksamer, a longtime crafter of ballot measures, and Rick Claussen, arguably the state's most successful proposition strategist.

The other side has lined up Adam Mendelsohn, former Gov. Arnold Schwarzenegger's communications director, and has been talking with veteran Democratic strategist Gale Kaufman.

There's a long line of hopefuls trying to get in on this full employment act for campaign consultants.

Amazon undoubtedly will campaign against Sacramento's unpopular politicians, claiming that they're at it again, trying to raise taxes. It'll be up to the other side to point out that these aren't really new taxes; they're already owed by the consumer, just not collected.

But the "you owe it, you're just not paying it" argument will fall on deaf ears, I suspect. If people aren't being forced to pay the tax now, but they would be under the new law, that's a tax increase by any practical, logical definition.

The referendum's opponents most likely will denounce Amazon as just the latest arrogant corporate behemoth to try to buy an election and carve out a competitive advantage for itself. In this case, it's out-of-staters benefiting unfairly at the expense of California businesses.

There's also a more subtle issue, it seems to me. It may not matter much politically, but at stake is what remains of corporate-civic partnerships in California, a sense of company commitment to the community.

It's about a monster merchant in cyberspace with no connection to or concern for civic life squeezing out local entrepreneurs who, at least, act as if they give a rip, especially the surviving Mom and Pops.

And it runs two ways. Nobody's going to foot the bill for educating kids, maintaining parks or filling potholes unless taxpayers do. That includes consumers paying sales taxes.

A Times-USC poll last week showed a close contest. After registered voters were read some arguments on both sides, the so-called Amazon tax was supported by 46% and opposed by 49%.

Looking inside the numbers, two factors stood out, neither shocking.

A majority of Democrats (52%) favored collecting the tax online; the majority of Republicans (59%) opposed it. Independents were almost evenly split.

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