For the benefit of anyone too stupid to understand why the California Internet tax is a bad idea: All the revenue from sales commissions to California’s 25,000 Web site operators who had participated in the Amazon Associates program was taxable as income.
Now? Zero income. And also zero sales.
Ergo, nothing to tax.
Illinois did the same thing recently, with the same result. In fact, Illinois and California are the two least viable state governments in the entire U.S. of A. right now.
And both are so desperate for funding that they pass a tax on Internet businesses that have no physical presence in the state, other than purely electronic affiliate relationships that can be easily yanked at a moment’s notice.
How does one explain this? Stupidity? Desperation? Both?
I’m going with “both”, Alex.
So where there was once taxable income, at least, now there is nothing. This year, next year, into perpetuity.
People in public policy positions, such as lawmakers, need to understand that new laws and new taxes create both incentives and disincentives: reasons to do things, and reasons not to do them. And often, a person or business will choose to change their behavior, and possibly their income, based on new laws and new taxes.
Because people are not stupid. There is a level of taxation, around 25-30%, above which people will find ways to avoid having more of their income snatched away from them to pay for abortions and union pensioners and God-knows-what-else.
But sadly, government at all levels now see people and businesses as ATMs. Walk up, press some buttons, and out comes free cash! Uh, no. Doesn’t work like that.
Once again: people are not stupid.
And finally, more and more of us are slowly waking up to the brutal truth: Governments across the country are addicted to cash flow, and don’t want to stop, and even if they did, they don’t really know how. Government always grows, it never shrinks, so when we say “cut spending”, they look back at us, slack-jawed, and immediately talk about starving orphans and tax breaks for corporate jet owners.
They talk a good game, with this cynical stew of half-truths and outright lies, but let’s not kid ourselves: they love these programs because they are spending somebody else’s money.