Big debate in California right now is whether or not to tax out-of-state online purchases as if they were purchased locally. On the ‘pro’ side, Betty Yee argues that local brick and mortar retailers currently paying 8.5% sales tax can’t compete with online retailers residing in states with significantly lower, or non-existent tax rates. A member of California’s tax board, she claims that we are thus ‘losing’ $1.2 billion in tax revenue for these purchases. On the ‘con’ side is David Henderson, a Libertarian Lunatic from the far-right Hoover Institute corporatist “think” tank, argues that the lost amount is far smaller ($621 million/year), that tax competition between states is healthy and that California taxes its residents too much anyway as it offers too many unnecessary services, such as freeway building. Seriously, he suggests that we should turn over our freeway system to private concerns who will make them into toll roads (somewhere at Stanford a clock is missing its cuckoo!).
Surprisingly lost in the debate is any discussion of ‘why’ the California legislators are contemplating a tax that would most likely get thrown out in Federal court (per a decision in 1967 ruling that a catalog retailer needs a local presence in order to be subject to local sales tax) – Prop 13! A state like Oregon doesn’t need a sales tax to pay for their services as local assessors aren’t hamstrung by ludicrous legislation effectively ‘fixing’ the value of a property to the time of original purchase.
Of course an Oregonian e-retailer gets the 8.5% ‘edge’ over a California retailer provided our tax rate stays so ridiculously high. But toss out the crazy cap on property value assessment and Blam!, California could easily make up it’s budget shortfall, reduce the sales tax rate and still have money to spare.
Rather than discuss the elephant in the room, the California Left and Right shift into preposterous positions (fighting establish Federal Law or turning our freeways into private toll roads) in a self-parodying attempt to address our state’s chronic budget woes.
As I mentioned before, California politics represents a microcosm of our woes at the Federal level, as now evidenced in the absurd showdown over the debt ceiling. In that discussion, the Left argues that huge deficits are a good thing during an economic downturn, and that the Feds need to make up in spending what the consumers are not. The Right, who didn’t care about deficit spending when they controlled Congress, trots out the same old trickle-down prescription of keeping taxes low on the wealthy, increasing fee-bases services for the middle class and cutting or eliminating social programs for the old, the poor and the disabled.
Seriously, there are plenty of things that could be cut out of the Federal Budget, like cutting hundreds of billions of dollars out of the Defense for unneeded programs, winding out of Shrubya’s legacy wars. And on the other side, why not have a conversation about eliminating the NEA? Trimming back the Department of Education? Folding the ATF into the FBI (and similarly reducing redundancies)? Encouragingly, there was some talk, albeit muted, of eliminating loopholes in the tax code, but not-surprisingly that seems to have gotten dropped from the Boehner/Obama capitulation. And never discussed were some basic measures such as getting private interests to pay commercial rates for use of Federal land (ranching, mineral extraction, etc).
The underlying issue, though, is that addressing the deficit isn’t sufficient. All our Free Trade deals have proven extremely successful at outsourcing manufacturing and even back-office work to Asia, in a perverse vindication of ‘trickle-down’ economics, as rich corporations ‘trickle-out’ of the country. If the trickle-out continues, and the tax base continues to shrink, how can the Fed possibly spend its way out of our economic malaise?
Bottom line is that we are in absurdistan precisely because the Congressionals can’t/won’t go against their corporate campaign funders, either in the form of eliminating some tax loophole, collecting ‘fair use’ royalties on Federal land, eliminating a defense program that benefits a local defense contractor, or getting corporations to pay taxes on their overseas payroll or unrepatriated profits. The Dems and the Repugs put on a little show but go back to business as usual – with the other 99% of us continuing to fall behind the other 1%.