The Tax Professor Blog contains a chart that summarizes the findings of the Nelson A. Rockefeller Institute of Government that state tax revenues fell for the fifth consecutive quarter. Oklahoma tax revenue was down the most of all states last quarter at 26.9%, and Arizona had the second highest drop at 17.1%.
Amazon does not collect or pay California sales tax to purchasers who are residents of California. State law makers estimate that near-bankrupt California could collect $150 million or more if it could force Amazon to collect the tax or give information to California that would allow the state to go after residents who do not pay the sales tax. A 1992 United States Supreme Court case says that a state cannot require an out of state business to collect state taxes if the business does not have a connection (nexus) to the state. Amazon does not have any personnel or offices in California.
California is not the only state that recently has tried to ignore the law of the land and try to force out of state businesses to rat on in state customers. New York, North Carolina and Rhode Island passed similar laws. Virginia, Illinois, Colorado and Hawaii are considering taxing out of state businesses. It’s more evidence that respect for the rule of law in the United States is declining. The governing elites of these states are saying “damn the law, full speed ahead because we desperately need the money to pay for our deficit spending addiction.”
The reality is that companies like Amazon and Overstock.com are not the parties that are affected by these laws. The basis the tax and spend states use to claim they can tax the out of state businesses is the outrageous claim that Amazon and Overstock have a presence in the state because they have “affiliates” in the state. These companies offer affiliate programs where an affiliate places links to Amazon or Overstock products on the affiliate’s website. If a website visitor clicks on a link and purchases a product, Amazon or Overstock pays a commission to the affiliate. This type of tax just doesn’t work. Amazon and Overstock have terminated all affiliates in states that pass this type of unconstitutional tax. The bottom line is that when a state passes this type of law, the affiliates in the state are fired and no longer receive commissions that would produce income tax for the state. Result: No affiliate income from commissions means less income to affiliates means less income tax for the state.
For more on this subject, see the story in the Los Angeles Times called “Lawmakers want to tax Amazon sales in California.”
Update: The California Senate passed the Amazon tax on February 18, 2010. Virginia is also considering an Amazon tax. See “”Amazon Tax Unconstitutional and Unwise.”
From the government workers are hired for life department. The LA Weekly story called “LAUSD’s Dance of the Lemons” explains how difficult to impossible it is for the Los Angeles Unified School District to fire a teacher. The LAUSD attempted to fire 74 year old 4th grade teacher Shirley Loftis, but gave up after five years. The the state Commission on Professional Competence found that the district had grounds to fire her, but did not allow her to be fired. During this five year period the district paid Ms. Loftis $300,000 to perform an admin job plus $190,000 for her legal fees.
Why do we have governmental agencies, including schools, that do not hire and fire based on competence or the lack thereof? Why isn’t educating the children more important than the job of one teacher? Is the purpose of a school to educate the children or to provide employment for life for teachers? The article says
“It is so difficult to dismiss or discipline veteran teachers. . . . Recent articles in the Los Angeles Times have described teachers who draw full pay for years while they sit at home fighting allegations of sexual or physical misconduct. But the far larger problem in L.A. is one of “performance cases” — the teachers who cannot teach, yet cannot be fired. Their ranks are believed to be sizable — perhaps 1,000 teachers, responsible for 30,000 children. . . .
But the Weekly has found, in a five-month investigation, that principals and school district leaders have all but given up dismissing such teachers. In the past decade, LAUSD officials spent $3.5 million trying to fire just seven of the district’s 33,000 teachers for poor classroom performance — and only four were fired, during legal struggles that wore on, on average, for five years each. Two of the three others were paid large settlements, and one was reinstated. The average cost of each battle is $500,000.
The Tax Foundation has an interesting map of the United States that shows the combined state and local tax rates of all fifty states as of September 29, 2009. The State of Washington wants to raise sales taxes by one percent and Arizona voters will decide on May 18, 2010, whether the state will raise its sales tax by one percent for three years.
Phoenix is $242 million in the red, but that number does not include the $300 million it owes on the $600 million new and expanded Phoenix Convention Center. Arizona Republic: “City Manager David Cavazos proposed shutting down senior centers, libraries and sports complexes, and laying off hundreds of police officers and firefighters for the first time in decades. . . . Cavazos’ proposal would eliminate 1,379 of the city’s 16,000 positions . . . . The Police Department would lose about 353 sworn positions, from patrol officers to assistant chiefs. The Fire Department would cut 144 sworn jobs.”
In a shocking story in today’s Arizona Republic we learn that Phoenix’ new $600 million convention center is a very expensive money pit. The Republic story says:
The center has been forced to cut its own operating budget, its revenue is falling and it is soon expected to struggle to make payments on its construction debt. . . . the center is struggling, largely because of the structure of its funding system. It relies mostly on a certain portion of city sales taxes, which includes a part of the hotel bed tax but comes largely from purchases involved in construction. Those tax revenues plummeted amid the economic slump. . . . City taxes provide 80 percent of the convention center’s revenue. Receipts from the taxes that fund the center are falling and are expected to generate $34.8 million this fiscal year, 30 percent less than previous projections. . . . The center is having trouble paying the $14.9 million annual payment on its $300 million city debt. The city and the state split the original $600 million cost. . . . Just 20 percent of the convention center’s operations budget is funded by income from conventions, such as rental fees.
Yikes! The center only generates 20% of the money needed to operate it and that number does not include the annual debt service on the $300 million! The Republic article did not say how much money is needed to operate the convention center each year. What happens if the city cannot make the payments on the construction debt? Will the near bankrupt State of Arizona pick up the tab? This is what happens when government spends money it does not have. Maybe the City of Phoenix should follow the lead of the State of Arizona and sell some of its assets to get the money to pay its deficits and keep the new convention center. I am sure Phoenix could sell the light rail system that has exceeded rider projections for a lot more than the $1.4 billion cost of the system. Surely the value of the Phoenix light rail has increased since its completion.