Amazon.com has put forth a plan to avert the referendum to
overturn a new tax law that is ready to qualify for the next election. The
proposal probably falls into the "too-little-too-late" category for Amazon’s
political opponents to avoid a ballot battle. History of a similar referendum
from many years ago indicates the ballot fight will be hugely expensive.
First, to the negotiations: Amazon has asked for a two-year
suspension of the tax law requiring online, out-of-state retailers to collect
sales tax while Congress works on a national solution to collect taxes across
state lines. The company also offered to set up distribution centers in
California, which could create up to 7,000 jobs.
The initial response to the proposal from opponents lead by
the California Retailers Association is that the deal is unacceptable.
President of the association, Bill Dombrowski, said, "We don’t think it’s a
serious compromise."
Senate leader Darrell Steinberg says the state needs the
tax money now and is working to pass a new online retailer
tax measure in the next week as an urgency measure, which would prohibit a
referendum.
Supporters of the Amazon tax law want to level the playing
field between brick-and-mortar stores within the state boundaries that must
collect sales tax and Internet retailers, which, under a U.S. Supreme Court
decision, do not have to collect sales tax if they have no nexus in the state.
The fairness question is important to solve. In this corner, the best solution always seemed to be a
national one, especially with online retailers dealing with so many varying
sales tax rates around the country.
With only a week left in the legislative session, it is
unlikely that the two sides will find common ground. As I have already
written, despite the need to find a solution for fairness for local
businesses, the urgency measure is a subversion of the referendum process and
should not go forward. Likewise, Amazon’s opponents don’t seem in the mood to
accept the new Amazon proposal.
If the referendum proceeds to the ballot, the battle brings
to mind a little known California history dealing with a referendum on a tax that had
segments of the business community at odds.
As described by David Doerr in his book California’s Tax
Machine, a measure was passed in the 1935 legislature to levy a tax on
chain stores. Support for the tax came from the Anti-Monopoly League of
California, a group of independent store owners.
According to one assembly member supporting the independent
stores, the chain stores "suck the life blood from every community they enter."
Local stores took on what they saw as outsiders and
supported a tax to disadvantage the chain stores. The rhetoric is different
this time as the local shops, including chain stores, say they are just
leveling the playing field. But, the effect and outcome is similar.
The chain stores mounted a referendum against the new tax
and qualified it for the 1936 ballot as Proposition 22. The slogan for the
defeat of Prop 22 (and thus an end to the tax) was "Twenty-two is a tax on
you."
Probably a similar theme will promote the Amazon position if
the tax referendum goes to the ballot.
Whether the results of the 1936 election portend anything
about the Amazon referendum will be left to academics. But for the record, in a
campaign that spent an unusual amount of money for an election at the time,
over $1.2 million, (roughly equivalent to about $19 million today) the
proposition was defeated, with around one million votes for keeping the tax law
and 1.3 million votes against, carrying in only one county – San Francisco. The
tax law was killed.