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Unexpectedly!


It seems that California governor Jerry Brown is leaving no stone unturned in his search for new revenue to plug the state's enormous budget deficit.  But he might have really stepped in it this time:

Gov. Jerry Brown has signed into law California's tax on Internet sales through affiliate advertising which will immediately cut small-business website revenue 20% to 30%, experts say.

The bill, AB 28X, takes effect immediately. The state Board of Equalization says the tax will raise $200 million a year, but critics claim it will raise nothing because online retailers will end their affiliate programs rather than collect the tax.

Amazon has already emailed its termination of its affiliate advertising program with 25,000 websites. The letter says, in part:

(The bill) specifically imposes the collection of taxes from consumers on sales by online retailers - including but not limited to those referred by California-based marketing affiliates like you - even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

The new law won't affect customers, Amazon said, but added that the immediate termination of the affiliate program also applies to endless.com, myhabit.com and smallparts.com.

And there you have it.  Rather than subject itself to the expensive red tape of having to track all the bonus money given to California-based Affiliates, then calculate the taxes owed, then withhold the taxes and pay them directly to California (because, guess who would be held responsible in the event that the affiliates didn't voluntarily pay) Amazon is simply terminating its relationship with its California-based affiliates.  Other online retailers or content providers with similar programs will probably quickly follow suit.

This will be a huge blow to bloggers and freelance website owner/managers, who often depend on affiliate programs or click-through advertising as a primary source of the revenue that pays for website hosting and up-keep. 

And when websites start closing down, or when their owners dissolve their California companies and file for business incorporation in other states, the Mainstream media will once again be stumped by the UNEXPECTED failure of this bill to raise even a fraction of the revenue that was originally projected.

It has been said that insanity is repeating the same failures over and over again, hoping to achieve a different result.  I think we can now safely say (as if we hadn't suspected all along) that the government of California is truly insane.

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Comments (19)

Why won't the kulaks simply... (Below threshold)
Jay Guevara:

Why won't the kulaks simply accept collectivization? Why must our betters get progressively (?) more unpleasant to implement our march toward the socialist paradise?

Seriously, I was pissed that the morons in my beloved California voted in again the architect of so many of our present woes. Still, there is a bright side - watching the blue on blue (Red on Red?) fratricide as Brown tries to do something about the mess. (But $200 million? Please. Our budget shortfall is two orders of magnitude larger than that.)

I think it may be a good strategy for fighting liberal spending insanity. Simply allocate a sum, and then invite the liberals to help decide how to allocate it, and watch the fur (turkey feathers?) fly. To meet a budgetary shortfall, should universities, for example, stick it to their faculty, to their unionized employees, or to their students? I dunno. Liberals, you decide. I call it the "Big Popcorn" scenario.

"the government of Calif... (Below threshold)
Caesar Augustus:

"the government of California is truly insane."

Well, yes, it's entirely controlled by Democrats. QED.

California is the perfect m... (Below threshold)
Jim Addison:

California is the perfect model of Democratic Party policies.

The only glitch in their one-party rule is a vestige of when Republicans had a say, making it harder to raise taxes. Otherwise, they would already be just confiscating all income and redistributing it according to their "wisdom."

The solution here is simple... (Below threshold)
docjim505:

The solution here is simple: ORDER Amazon to continue its program, and, if that doesn't bring in enough revenue, ORDER people to shop at Amazon and its affiliated vendors.

After all, the government has the right to tell people that they MUST buy something because NOT buying it is an economic decision that is the same as buying it even when you don't want to buy it because you wouldn't buy... I mean, WOULD buy it... if you had to even when you don't need to because... um... er...

Oh, f*ck it! The government needs money, peons! NOW PAY UP!

Illinois did that last year... (Below threshold)
jim m:

Illinois did that last year. Instead of taxes they drove $160M in taxable revenue out of the state.

What is it with liberals? W... (Below threshold)
Jay Guevara:

What is it with liberals? Why can they not grasp basic elements of economics?

They always calculate how much one of their hare-brained policies will generate in tax revenue, but apparently it never occurs to them that people will change their behavior.

So, sure, CA could get $200 million from this tax - if absolutely nothing else changed. But that won't happen.

In some contexts, liberals get it. They want to cut carbon emissions? Tax 'em, and people will emit less CO2. That they get. Want more business activity? Tax it, and nothing will change.

This lacuna in their cognitive skills never ceases to amaze me.

Somewhere someone in Califo... (Below threshold)
BigFire:

Somewhere someone in California is making money. The state legislators in Sacramento cannot tolerate this, so they're doing their best to rectified it.

And when websites start ... (Below threshold)
Murgatroyd:

And when websites start closing down, or when their owners dissolve their California companies and file for business incorporation in other states, the Mainstream media will once again be stumped by the UNEXPECTED failure of this bill to raise even a fraction of the revenue that was originally projected.

One of the defining characteristics of left-wingers is that they've always been kinda hazy about that whole "cause and effect" thing.

And speaking of UNEXPECT... (Below threshold)
Murgatroyd:

And speaking of UNEXPECTEDLY! let's not forget this one:

Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.

This is known as "bad luck."

— Robert A. Heinlein

jim m @ 5 notes:<bloc... (Below threshold)
Rodney Graves Author Profile Page:

jim m @ 5 notes:

Illinois did that last year. Instead of taxes they drove $160M in taxable revenue out of the state.

Ah, but California Democrats expect a different outcome this time...

They're on a permanent Holiday from Sane, or at least as permanent as the law of unintended (though totally predictable) consequences will allow it to be.

Lol"Illinois di... (Below threshold)
Art W:

Lol

"Illinois did that last year. Instead of taxes they drove $160M in taxable revenue out of the state."

By taxing untaxed sales they drove taxable revenue out of the state by ... uhm, imposing a sales tax on the untaxed sales that weren't taxable to start with.

Scary. Looking inside the conservative mind is scary.

To Art at #11:I thin... (Below threshold)
pa:

To Art at #11:
I think what is meant is that the Amazon affiliates would have reported $160M as taxable income on their own returns. When Amazon leaves a state, the affiliates have a lower income and therefore pay less in income taxes. It has nothing to do with sales tax, which as you note, were not being paid to the state anyway. However, the affiliates' income taxes WERE being paid, and that revenue is now lost to the state.

See?

You can't educate Art. His... (Below threshold)
GarandFan:

You can't educate Art. His head is so far up his ass it's a wonder he knows when the sun is out.

New York City is doing the same thing to all the 'millionaires' who live there - and pay most of the taxes. Funny thing about millionaires. They can afford to live anywhere they want and commute to the city rather than LIVE in it.

Gonna be hard for Hiz Honer to tell the peasants that THEY are going to have to start paying for all the services they demand.

Art W:By taxing u... (Below threshold)
cirby:

Art W:
By taxing untaxed sales they drove taxable revenue out of the state by ... uhm, imposing a sales tax on the untaxed sales that weren't taxable to start with.

...and all of the OTHER taxes from those companies, and all of those jobs, and all of the state income taxes from those employees, and all of the property taxes, and...

The Democrats are busily proving why the Laffer Curve works, after years of desperately denying that it ever could.

Art W,I'd bother t... (Below threshold)
jim m:

Art W,

I'd bother to correct you but others already have.

Illinois also raised the corporate income tax to be the 4th highest in the world. Companies are now fleeing the state and the state has given $100's of millions in tax breaks to companies like Boeing, Caterpillar, Jimmy Johns and others in an attempt to keep them in the state. So the tax revenue windfall they anticipated is being given away to big businesses instead of filling the state coffers.

The left is still ignorant after all these years and thinks that if you raise taxes people will just shutup and pay them and they won't act to avoid those taxes. Funny, because that's what the leftists do. John Kerry parks his Yatch in RI to avoid half a million in taxes. The senator from MO (can't remember her name just now) kept her private jet (Oh my god! a private jet!) out of MO to avoid paying punative taxes there that she supported.

Yeah taxes always increase revenue, except most of the time when they don't.

"Well, at least somebody go... (Below threshold)
Jeff Blogworthy:

"Well, at least somebody got screwed, and that makes me feel a lot better!" -- typical Democrat

Jeeeez.... I live in this c... (Below threshold)
Son Of The Godfather:

Jeeeez.... I live in this crazy state. Anyone got some lakeside land in a state where folks are sane? Oh, to have the option to move...

No sense in adding insult t... (Below threshold)
boqueronman:

No sense in adding insult to injury. The Art-ful Dodger has been thoroughly fisked. A lot of the enjoyment of visiting Wizbang is feeding the Prog-lodyte troll fish. But sometime I'd like our pet Progressives to explain to us Neanderthals what they really want. Is it the international socialist-communist principle of government ownership of the means of production? Is it the national socialist principle of government domination of nominally private ownership (crony capitalism on steroids), or is it the "you can't get there from here" principle of more and better taxes, subsidies, regulations and bureaucratic meddling to "help" the private sector grow and prosper.

If it's the latter, please add an explanation of how all these good works are conducted free of side effects like disincentives from the costs (known and unknown) of taxes, fees and mandates, barriers to entry for new investment, sector or firm favoritism, direct and indirect corruption (from "Friends of Angelo," to Pelosi's ObamaCare waivers, to Rep Jefferson's freezer), the law of unintended consequences, the creation of moral hazard, etc., etc. I guess I could ask how all these well intentioned (assuming Cloward-Piven is NOT at play) legislative and administrative interventions are consistent with a limited and enumerated powers written into the Constitution. But that would probably inspire a useless rejoinder such as this from Woodrow Wilson, the father of Progressivism, "The Constitution was not made to fit us like a straitjacket. In its elasticity lies its chief greatness."

My every Hollywood pal/aqua... (Below threshold)

My every Hollywood pal/aquaintance angrilly blames "the Republicans" Pete Wilson and Arny Kennedynegger, for the effect of California's every "Democratic" party depredation.

Go figger.

B A - L A - CA 90028 -- and The Very Far Away




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