California’s New Tax – 10,000 Businesses Hurt

by Jack Lee

As you may recall we brought you the story about a bill being passed by the State legislature that will force internet companies doing business with California to charge our outrageously high sales tax on all online purchases by Californians.

At the time Amazon.com was furious with this proposal and said doing that would impose burdens on them that were totally unacceptable. They warned: If the governor signs this bill into law they would drop California business. Well, the governor did sign it into law today and Amazon just announced they were cutting loose over 10,000 California based retailers. Those companies will no longer be able to take advantage of Amazon’s global marketing.

In the short run, this won’t hurt the lifestyles of the governor or the legislators that backed this tax scheme. However, California business will be punished starting today. No out-of-state E-tailer will be anxious to take on the burden of collecting sales tax for the State of California. So you know Amazon is just the beginning of the impact on commerce within this state. Eventually this is going to catch up with the democrats and the long term consequences could be severe .

Historical perspective: Virtually from the beginning of online marketing, if you lived in the state where you were buying (online) from, you paid the state sales tax. Fair enough. If you didn’t live in that state, you were not charged the state sales tax. This was a great incentive for out of state consumers to buy from California businesses. It also had the impact of stimulating nationwide commerce. This is the lesson the legislature needed to learn. Low or no tax stimulates business. High taxes restrain business, restrain job creation and hurt the overall economy.

The profits from internet sales are eventually taxed by the state, so California got their cut and all was well However, when the free spending habits of the state’s legislature collided head-on with the Great Recession it exposed and threatened all this extravagant, wasteful spending.

Now tens of billions in state tax revenue have been lost. ironically this is precisely the dire scenario republicans had been predicting. Unfortunately, the spendy dems weren’t listening, thus they were totally unprepared when the economy tanked. Reps were a minority factor in the state legislature and therefore dems could pass any sort legislation they wanted despite the conservative’s protests – the big “I told you so has arrived”.

Dems are faced with cutting back on the very programs that brought them into power (gasp). They have been buying votes with gimmee programs for years and it’s caused a whole lot of unsustainable addiction. Now that the state is broke they have to cut loose the addicts and those voters will be furious, as you might expect any addict would be!

The only alternative to responsible cost cutting is, RAISE TAXES, and do it fast…because this is a political emergency! Careers are at risk – their careers! Control over State is at risk – their control! It doesn’t get any worse. So they do what dems do best – they tax!

This time their plan is going severely damage the core working class by beating up on businesses (employers) just struggling to survive in an already business-unfriendly climate. One more burden on them could prove fatal and that would only add to the political disaster dems were hoping to avoid.