During one of the worst economic slumps in California’s history, you would think the state would not want to make it more expensive for families to buy things they need and at the same time put thousands of Californians out of business. But Gov. Jerry Brown and legislative Democrats did that, further enforcing their convoluted belief that higher costs will improve our economy.
As part of the Democrat budget deal passed in the middle of the night in June, the Legislature passed the “Amazon Tax,” which targets Internet retailers such as Amazon. Under previous law, only so-called “brick and mortar” retailers with an actual physical presence in the state are required to charge sales tax. When we, as consumers, purchase from an on-line retailer we are to pay the sales tax on our income tax form.
This new law forces the out-of-state retailers to collect California sales tax on items sold online, even if the company has no physical presence in California and the only connection it has to our state is a “live link” or “click-thru” to another business’ website located in California.
I voted against the Amazon Tax because it will increase costs for millions of Californians who make Internet purchases and hurt efforts to bring back jobs to our state. In fact, California is already suffering the consequences. Right after Gov. Brown signed the bill into law, Amazon severed its ties with 10,000 affiliates based in our state who are paid commissions to steer buyers to Amazon’s website through links on their own sites.
Ironically, the Amazon Tax could very well lead to less tax revenue for the state. That is because the tens of thousands of California-based affiliates are small businesses that employ Californians and generate vital economic activity for our communities. According to one estimate, California web-based companies that earn income from ads placed on their websites paid $151 million in state income taxes. But now, thanks to the Amazon Tax, we could lose this revenue because out-of-state retailers will partner with out-of state website companies to access California’s market in response to this new law.
While the decisions of Amazon and other companies to drop their California affiliates are regrettable, who can blame them?
Sacramento already imposes on Californians one of the highest tax and regulatory burdens in the nation, all of which make economic success here much tougher than in lower- taxed states. As if the Amazon Tax was not enough, Democrats tried to raise the income, sales and car taxes even further. Thankfully, my Republican colleagues and I were able to block those tax increases.
Last year the Legislature considered similar legislation. At that time the state Board of Equalization estimated that the state might receive zero revenue from the Amazon Tax because of lost business. While it remains to be seen what the overall effect will be, California stands to lose tens of millions of tax dollars annually because of the severed relationships between online retailers and California affiliates.
Forcing families to pay more for the things they need will leave them with less money for other priorities, which will hurt their pocketbooks even more. The Amazon Tax may make some Democrats feel good, but it will be our economy that will be left holding the bag.