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The Sad State Of California – The Enigma That Is Jerry Brown.

Ah, Jerry Brown.

Where to start?

I have written some biting commentary during his time as California Attorney General. I did not vote for him for Governor in 2010 (left it blank). But I was not as critical against him when he won reelection to the office after so many years and decide to hold off on criticism until he’s actually done something. I took a “wait and see” approach.

Well, he’s done things.

Every time he does something that goes against the partisan grain, I want to stand up and applaud. See the veto of the union / Democrat sponsored card check bill, a corrupt gimme to the union lackeys, and the veto of the sham budget… OK, the first one anyway. I begin to think that, yeah, I think he kind of gets it now. I start getting comfortable with the idea that, yeah, maybe he’s no longer the “Governor Moonbeam” we all were so comfortable criticizing. Maybe he has changed and is going to be more respectable, more like his Dad.

But then he goes and passes / does something completely stupid –  like this – or this – or now, the so-called Amazon tax.

Jeez! I’m starting to get whip-lash!

Granted, California can’t tax Amazon directly because they don’t have an outlet, a solid brick and mortar store here in the state. So instead,  California has decided to go after companies that are affiliated with Amazon, or other businesses that operate in a similar fashion.. Don’t get me wrong, I’m not opposed to an internet tax, and think that one is inevitable. There is just too much untapped money for politicians to resist. But it has to be done smartly, and probably on the national level. This is not what I consider being smart. In fact, it’s down right stupid. In a recession, you simply shouldn’t do things that pressure businesses to close up shop and or finally provide the justification for the business moving out of your state to a neighboring one that is more business friendly.

From the article:

Amazon affiliate Keith Posehn, owner of zorz.com in San Diego, said he had affiliate advertising agreements with more than 70 companies and these programs were 35% of his company revenue before the California legislature passed a similar bill last year. Then-Governor Schwarzenegger vetoed that bill.

“We got 70 termination letters in one night before he vetoed it,” Posehn said. After that, he started changing his business away from affiliate advertising and has started a new mobile application company.

“I have pitched investors and several question the wisdom of staying in California,” Posehn said. “Some venture capitalists are very keen on placing startups outside California because start-up costs are less.”

So you already have, due to previous efforts to pass similar legislation, examples of the business exodus that would occur if a law like this is passed… And you sign it anyway???? Why do our politicians in this state have such a nasty learning impediment. They say that this tax will bring in between $ 200 to $317 million in new taxes. But if Amazon choses to simply shut down it’s affiliate program, which they had already telegraphed they would do, how do you expect to get that money…. Never mind this will be tied up in courts for the next couple of years, which means, for that period of time, no money from the Amazon tax anyway.

Look, because I run a business here in California, I deal with it’s sales tax collection entity, the Board of Equalization, every year, so I know how stingy they are on tax collection. Here is what one of the BoE boardmembers had to say about last night’s bill signing:

Board of Equalization Member George Runner blasted Brown for signing the law.

“Even as Governor Jerry Brown lifted his pen to sign this legislation, thousands of affiliates across California were losing their jobs. The so-called ‘Amazon tax’ is truly a lose-lose proposition for California. Not only won’t we see the promised revenues, we’ll actually lose income tax revenue as affiliates move to other states.”

When you’ve lost the agency that collects sales tax on this… You know there is a problem.

NOTE: In one article I linked to, it states The California Board of Equalization says “the tax will raise $200 million a year”, while at the same time, it quotes a CBoE board-member saying this will kill jobs and won’t raise much revenue. In an LA Times piece, it says the new tax is expected to raise $317 million in new revenue.

Why all the discrepancies????

In the first case, when legislature is crafting that concerns taxes, the CBoE is required to produce an assessment of the potential revenue that it would generate, including estimates that factor in different scenarios. The legislature (any legislature really) will typically pick the most rosy scenario and use that as the official estimate. In this case, they probably chose the ceteris paribus scenario, that the tax goes up and nothing else changes. The unhappy boardmember knows that is not the best estimate to use, and is saying so.

As far as the $200 to $317 million dollar discrepancy goes….. The legislature is free to include and base its decisions on outside estimates and run with those numbers if of course they are even rosier than the official BoE ones. Why do you think the California state budgets have been one repeated mess after another for the last five years?????