Archive for the ‘Taxes’ Category.
I got a lot of email that Republicans aren't libertarians and to stop complaining that they are not. OK. But let's look at their campaign messaging in the context of their own values.
Republicans had a golden opportunity to use the results of a natural experiment over the last four years between red and blue states. Obama constantly harped on the fact that 3.5 million new jobs had been created on his watch. Rather than play dueling statistics or end points in this analysis, the Republicans should have taken advantage of existing red/blue data:
Yes. And the vast majority of these jobs were created in states like Texas which have been successful precisely because they have labor and tax policies which you, Mr. Obama, oppose. And they have been created in industries like Oil and Gas production that you, Mr. Obama, have done your best to hinder. All the jobs you claim to have helped to create were actually facilitated by a philosophy of government you oppose, by regulatory policy you would overturn if you could, and in industries you would prefer did not exist. States like Texas -- with organic growth driven by private capital -- stand in stark contrast to your investments of our taxpayer money in bankrupt companies like Solyndra. If you had had your way, Mr. Obama, few of these jobs would have been created. Yes, this country saw some job creation, but it occurred despite your efforts, not because of them.
Instead of this clear kind of message, we get a bunch of wonky stuff about tax deductions vs. tax rate changes. Heck, even if you told me I had to run my campaign on the single plank of eliminating tax deductions, I could have done a better job. I saw this part of the debate that Romney supposedly won. His explanation was lame. What about this instead:
This country over the past several decades has increasingly become plagued by cronyism. Whether it be Wall Street bankers or public employees unions or casket sellers in Louisiana, everyone wants to try to convert influence with the government into taxpayer money for themselves. We have to end this. And a good place to start is with the tax code. Every special deduction and tax credit in the tax code is a giveaway to some special interest. At best it is a misguided attempt, like the money we wasted in Solyndra, of politicians to try to pick winners and losers, to say that one kind of spending is somehow better than another. At worst, these deductions are a crony giveaway. Sure, it's eliminating these deductions will help reduce the deficit. But even more importantly, eliminating them would be an opening shot in the war to take cronyism and corporatism out of Washington.
In 2010, Arizona v0ters passed proposition 100, a 1% "temporary" sales tax increase that was meant to help fill in the budget hole created by the recession. The tax was only to last 3 years.
It is pretty clear that by the end of 2013, when the tax expires, the rationale for the temporary tax cut will have passed. Already the state's finances are improving and all signs are that by 2014 the economy and real estate market should be greatly recovered.
But, having got taxpayers used to paying the higher tax, supporters of big government and public employees unions have put a proposition on the ballot this year (204) to make the 2010 tax increase permanent. The tax extension will go to a mish-mash of new programs.
This is how the government spending ratchet works. A "temporary" tax increase is justified in a fiscal emergency to fill in a recession-created hole. Government insiders decide they like having more money, and make the tax permanent. The new money is used to create brand new programs. Then, in the next recession, when all these brand new programs are now "essential" and "beyond the reach of even the worst austerity", a new, even higher "temporary" tax increase is necessary.
For a while I have advocated for the idea that we eliminate the corporate income tax and simply tax capital gains and dividends as regular individual income. Corporate profits eventually flow to one or the other. Out would go a whole expensive class of taxation that has all kinds of distorting effects (and really does not raise that much money). Out would go the tax preferences for corporate debt over equity financing. Out would go double taxation of investment income. Out would go the disincentive to repatriate corporate profits and relocate headquarters to foreign countries. And out would go the perceived need for the goofy "Buffett Rule."
At least some on the Left might be open to the idea.
I already had this column at Forbes in the works, but I could not resist switching the protagonist from myself to Obama's Julia. Every tax, license, and story here are real ones I have experienced in my business. Here is just a small sample:
So twelve registration numbers and 12 monthly/quarterly/yearly reports later, surely Julia has fulfilled all her obligations to the government. Unfortunately, no, because she has not even begun to address licensing issues. To begin, the County will require that she get an occupancy permit for her campground, which must be renewed annually. This seemed surprisingly easy, until someone from the County noticed she had removed an old rotting wooden deck from the back of her store that had been a safety issue and an eyesore. It turns out she was in violation of County law because she did not get a removal permit first. She was required to get a permit retroactively, which eventually required payments to seven different County agencies and at one point required, for a reason she never understood, the collection and testing of a soil sample.
Because she will be selling packaged foods in her store (e.g. chips and pop-tarts), she also has to get a health department license and inspection. She had originally intended to keep some fresh-brewed coffee for customers in the store, but it turned out that required a higher-level health license and eight hours training in food handling. She might have been willing to pursue it, but the inspector told her that to make coffee, she would need to install a three-basin stainless steel wash-up sink plus a separate mop sink in her store, and she decided that coffee would have to wait.
Once through the general health licensing process, she then needed to obtain licenses for individual products. She wanted to sell aspirin, so she had to get a state over-the counter drug sale license. She knew that customers would want cigarettes, so she had to obtain a tobacco sales license. One day as she was setting up, a state inspector noticed she had a carton of eggs in her cooler, and notified her she needed a state license to sell eggs (as Dave Barry would say, I am not making this up). And then there was the problem of beer.
Most of you likely remember the state settlements with tobacco companies. The settlements were set up to pay states a percentage of future tobacco company earnings and sales. But just like a profligate homeowner borrowing against his paper equity in his home after housing prices increased, governments wanted to spend the money NOW, not over 20 years. So they borrowed against future settlement payments. Except that now, given lower smoking rates (incentives work) the settlement payments are less than they were forecast, and states must find a way to make up the difference and pay their creditors.
The tobacco settlement has created funky incentives for state governments form the very beginning. Formerly adversaries, the settlement effectively made large tobacco companies partners with state governments, and states have had substantial incentives to promote the business of large tobacco companies and sit on their rivals
Big tobacco was supposed to come under harsh punishment for decades of deception when it acceded to a tort settlement seven years ago. Philip Morris, R.J.Reynolds, Lorillard and Brown & Williamson agreed to pay 46 states $206 billion over 25 years. This was their punishment for burying evidence of cigarettes' health risks.
But the much-maligned tobacco giants have subtly and shrewdly turned their penance into a windfall. Using that tort settlement, the big brands have hampered tiny cut-rate rivals and raised prices with near impunity. Since the case was settled, the big four have nearly doubled wholesale cigarette prices from a national average of $1.25 a pack (not counting excise taxes) in 1998 to $2.10 now. And they have a potent partner in this scheme: state governments, which have become addicted to tort-settlement payments, now running at $6 billion a year. A key feature of the Big Tobacco-and-state-government cartel: rules that levy tort-settlement costs on upstart cigarette companies, companies that were not even in existence when the tort was being committed.
I commented here:
The government has found over time that it is able to sell higher taxes to the voters on certain items if they can portray those items as representing some socially unwanted behavior. These are often called "sin" taxes. The justification for the tax in its beginning is as much about behavior control as revenue generation. Taxes on cigarettes, alcoholic beverages and even gasoline and plastic grocery bags have all been justified in part by the logic that higher taxes will reduce consumption.
However, a funny thing happens on the way to the treasury. Over time, government becomes dependent on the revenue from these taxes. The government begins to suffer when the taxes have their original effect — ie reducing consumption — because then tax revenues drop. The government ultimately finds itself in the odd position of resisting consumption drops or restructuring the tax so it no longer incentivizes reduced consumption so that it can protect its tax revenue collections.
Proponents of higher taxes and larger government often criticize small government folks in Congress for being "obstructionist" and "not willing to compromise."
But here is the problem: Coyote's first rule of budget politics is to never trade current tax increases or "temporary" spending increases for future spending cuts, because the future spending cuts never happen. Ever. Not once. In fact, I would not agree to trading current tax increases for current spending cuts, because taxes will stay forever but spending cuts will just be over-ridden in a few months.
Here is a recent example:
Last summer, Republicans in Congress agreed to increase the federal debt limit in exchange for the Democrats’ pledge to cap future spending at agreed-upon levels. The compromise was embodied in the Budget Control Act; discretionary spending was to increase by no more than $7 billion in the current fiscal year. I wrote yesterday about the fact that the Democrats intended to violate the Budget Control Act by increasing deficit spending on the Post Office by $34 billion. The measure probably would have glided through the Senate without notice had Jeff Sessions not challenged it. Sessions insisted on a point of order, based on the fact that the spending bill violated the Budget Control Act. It required 60 votes to waive Sessions’ point of order and toss the BCA on the trash heap.
Today the Senate voted 62-37 to do exactly that. This means that the consideration that Republicans obtained in exchange for increasing the debt limit is gone. Moreover, some Republicans–I haven’t yet seen the list–voted with the Democrats today.
One principal lesson can be drawn from this experience. It happens all the time that Congressional leaders will trumpet a budget agreement that allegedly saves the taxpayers trillions of dollars–not now, of course, but in the “out years.” But the out years never come. Tax increases are rarely deferred to the out years; they take place now, when it counts. But spending cuts? Never today, always tomorrow.
Purported agreements about what federal spending will be years from now are utterly meaningless. Congressmen will make a deal, brag about the ostensible savings in the press, and then walk away from it the moment our backs are turned, as the Democrats (and a handful of Republicans) did today.
When folks say, "we just want a compromise" on budget issues, what they are really saying is "we want to roll you. We are hoping you are stupid enough to trade for future cost reductions that will never happen. We can get away with this because we have an ally in the press, who always treats promises of future cost reductions as entirely credible and believable and thus paint those who are skeptical of them as radical obstructionists."
I don't think you could find any better example of paying off one's political constituents at the cost of out groups than this:
Congressional Democrats and the White House have agreed to pay for a bill to freeze student loan interest rates for a year by raising taxes on so-called S Corporations, according to a top Senate Democrat and senior House and Senate aides, but Republicans said the tax increase may ensure the bill’s defeat in the Senate.
Apparently, the taxpayer-subsidized rate of 3.4% on student loans is set to go up to a less-subsidized 6.8% in a couple of months. So to keep this subsidy rolling, Congress is proposing to tax S-Corporations, mainly used by entrepreneurs and small businesses (disclosure: including mine) to avoid double taxation of business income.
I don't think its possible to come up with a real policy reason that money should be taken away from entrepreneurs and given to 18-year-olds so they can overpay for college, especially since most of the subsidy for student loans is captured by universities that have simply raised tuition to soak up each successive college subsidy program. Note that Congress is instituting a permanent tax hike on entrepreneurs in order to give just a 1-year break (ie through the next election) to students.
But this is the perfect political bill. It takes money from a group likely to be lost to the Administration in the next election anyway (e.g. entrepreneurs and small business people) and transfers it to a group that is very likely to vote for Obama if it votes at all, but needs to be energized to get to the polls. The Obama Administration was obviously watching the Occupy movement carefully, and noted that much of the angst seemed to be aimed at student loans.
Expect similar payoffs to other constituencies over the next few months. Oops, here is one already.
It is becoming increasingly clear that it is impossible to calculate exactly what you owe to the IRS (even the IRS will not take responsibility for what their customer support people tell you that you owe). Given that, one can't really know his or her tax burden for sure until and unless one is audited and the case is adjudicated. Doesn't this put the tax code in violation of the Constitution's prohibition of ex post facto law?
Congrats to New Mexico for this picture on their Department of Revenue site. This is EXACTLY how I feel when I am trying to track down some bizarre new tax I have just found out that we may owe.
As I wrote previously, I am entering business in Tennessee, trying to reopen some closed TVA campgrounds. I was initially pissed off that Tennessee is one of the few states that double taxes S-corp earnings. I expect this kind of BS in California, but I keep finding more Tennessee taxes I have to pay. Here is what I have so far:
- Pay annual Secretary of State registration fee (Fixed $)
- Must collect state sales tax (% of revenue)
- Must collect county sales tax (% of revenue)
- Must collect a county lodging tax (% of lodging revenue)
- Pay state Franchise tax (% of net worth)
- Pay state Excise tax (% of corporate earnings, even for S-corp)
- Pay something called a county business tax (% of revenues)
- Pay annual registration fee for county business tax (fixed $)
- Withhold employee state income taxes (% of wages)
- Pay state unemployment taxes (% of wages)
- Pay state individual income tax (% of pass-through corporate earnings)
- Pay county property tax (% of assessed asset value)
I am sure I am missing a few. Except for #2 and #3 which are collected together, every single one of these requires a separate registration and separate monthly or annual filing.
My company is moving into Tennessee as a campground operator. I was disappointed to see Tennessee is one of only a couple of states that double tax s-corporation earnings. The state takes a straight 6.5% cut of all corporate earnings, even of an S-corp, and then charges regular income tax rates on the same income as it passes through to the individual. This makes Tennessee one of the few states where, from a state tax perspective, S-corps are worse than C-corps, because if you are going to be double taxed, at least with the C-corp you can indefinitely delay taxation by not issuing dividends.
PS- TN lodging tax rates are horrendous. Whenever I see tax rates higher than comparable rates in CA, I know they are too high.
If Medicare is really an insurance program, than as I wrote last week, the premiums are absurdly low. And this isn't even a rich-poor transfer issue - the premiums are too low for everyone. See the bar chart about halfway down on this page at the NY Times. Here is a screenshot:
Take Social Security first. Taxes come fairly close to covering benefits, with some rich-poor redistribution. These numbers look sensible (leaving aside implied annual returns on investment and whether the government should be running a forced retirement program at all) -- the main reason social security is bankrupts is that in the years when premiums exceeded benefits, Congress raided and spent the funds on unrelated things.
Medicare, though, is a huge problem. Even for high income folks, premiums cover only 43% of the expected benefits (I am not sure how they treat present values and such, but again lets leave that aside, I don't think it affects the underlying point). Assuming we end up with some rich-poor transfer, it looks to me that premiums are low by a factor of three.
Everyone seems to think Medicare is a great deal. Of course it feels that way -- premiums are only covering a third of the costs. There is no way we can have intelligent debate on these programs when the price signals are corrupted. Its time to triple Medicare premiums.
1. Set corporate tax rate to 0%.
2. Tax all dividends and capital gains on individual returns as regular income (ie no preferred lower rates).
All corporate profits eventually show up on individual tax returns one way or another. There is absolutely no logical reason to tax corporations except out of some kind of progressive hatred of, and need to count coup on, corporations.
My plan eliminates corporate tax preference for debt. Eliminates numerous distortions from political meddling in corporate tax structure. Eliminates double-taxation problems. Eliminates double taxation of foreign corporate income. Levels the playing field between C and S corps. Eliminates the practice of corporations keeping two sets of books (one for tax authorities, one for investors) which is a common practice. Saves a ton of money on tax preparation and compliance, essentially eliminating a whole class of taxes.
Once this is done, then we can start working on simplifying and taking out all the distortions in the individual tax code.
Update: One could go on a length discussing the hypocrisy of the current corporate tax system. Basically it has become a vehicle for each party to reward its favored constituents and punish its enemies. The Obama administration's current tax plan is a great example. Obama wants to reward manufacturers, and manufacturers only, with special lower rates because they are, err, much cooler somehow than other businesses. But it turns out that most of those supposed tax subsidies that Obama proposed ending for oil companies are just the same breaks all manufacturers currently get and he wants to increase. So is he now going to say we need to favor all manufacturers except oil companies with special tax breaks? And he wants to encourage investment and R&D, except in the oil industry (which happens to be one of the larger sources of capital investment and R&D spending). And what ever happened to the notion of equal treatment under the law?
Yesterday, Congress agreed to extend the payroll tax reductions for another period of time. I have been thinking about this for a while, and I am slowly coming to the conclusion these taxes should be raised. I am still thinking this through so I welcome feedback.
I don't think I have to convince regular readers of this site that I am against government-run and mandated-for-all retirement funds (income via Social Security, medical via Medicare). But if we are going to have such programs, and maintain the pretense that they are insurance programs and not welfare/transfer programs, then the "premiums" we are forced to pay should reflect true costs.
I don't think Medicare premiums are covering anywhere near the actuarial-expected costs of one's future medical care. And while Social Security rates may be set correctly if trust funds were truly held securely, the fact of the matter is that past Social Security premiums that were paid to support future benefits have all been spent by a corrupt Congress. Rates are going to have to be raised to replace this theft.
I don't like raising taxes. I wish these two programs would go away or else be restructured drastically. If they exist, though, there is nothing more dangerous than an incorrect price. Prices help consumers make price-value tradeoffs -- the Keanu Reeves lifetime DVD collection may be a deal at $6.99 but not at $99.99. So charging the wrong prices for these programs not only royally screws up the government's finances, but it also misleads Americans about the value of these programs in comparison to what they pay for them.
Via the Weekly Standard (with video):
Gene Sperling, director of the White House's national economic council, said today at an official meeting that "we need a global minimum tax":
Pegging our tax rates to France is almost as good an idea as pegging our exchange rates to Greece.
Also, this statement is a hilarious mass of contradictions
“He supports corporate tax reform that would reduce expenditures and loopholes, lower rates for people investing and creating jobs in the U.S., due so further for manufacturing, and that we need to, as we have the Buffett Rule and the individual tax reform, we need a global minimum tax so that people have the assurance that nobody is escaping doing their fair share as part of a race to the bottom or having our tax code actually subsidized and facilitate people moving their funds to tax havens," Sperling said.
He wants to lower rates for people investing, but he wants to institute the Buffett Rule, which effectively raises taxes on people whose income is substantially dividends and capital gains, ie people who invest. He wants special rates for creating jobs and extra special rates in manufacturing, but he wants to get rid of loopholes, most of which were created at least with the nominal intent of spurring investment in certain sectors, particularly manufacturing.
Bruce McQuain has a roundup. Here is the list from the American via Q&O:
1. The top income rate would be raised to 39.6 percent vs. 35 percent today.
2. Under the “Buffett rule,” no household making over $1 million annually would pay less than 30 percent of their income in taxes.
3. Between now the end of a second Obama term, Obama proposes $707 billion in “net deficit reduction proposals.” Of that amount, only 16 percent is spending cuts.
4. The majority of small business profits would be taxed at 39.6 percent vs. 35 percent today.
5. The capital gains rate would rise to 25.0 percent (including the Obamacare surtax and deduction phase out) from 15 percent today.
6. The double-tax on corporate profits (including dividends) would increase to 64 percent based on the statutory corporate tax rate (58 percent using the effective tax rate), easily the highest among advanced economies.
7. The double tax on corporate profits (including capital gains) would increase to 51 percent (44 percent using the effective tax rate), also among the highest among advanced economies.
I think they may be under-estimating the double taxation of corporate income as the Buffett rule would increase the capital gains and dividends tax to 30% for wealthy individuals who rely mostly on these as a source of income.
Given that his own party would not pass most of this stuff last year, it is impossible to believe they will pass it in an election year.
Neither Medicare nor Social Security should be government programs. The government essentially takes on two roles in these two insurance programs: 1) To subsidize the premiums of low income Americans; and 2) To use its power of coercion to force everyone to participate. I have no stomach for the latter role and the former could be much more cheaply achieved with some sort of voucher or credit program.
But these programs are not going away. While both need reform, it may turn out to be politically impossible to even reform them.
But if we take off the table for a moment their existence and their basic structure, there is still an enormous problem we might fix: pricing. There is absolutely nothing more deadly to an economy than a false or corrupted pricing signal. But that is clearly what we have with these two programs. The Medicare "premium" (tax) taken out of every paycheck is clearly way too small to cover true actuarial costs of this program. And while Social Security rates may have been set right if the premiums were really being kept in escrow for the future, the fact is that the so-called trust fund has been raided into oblivion by past government spending programs -- Social Security taxes need to be reset to reflect that fact.
The result, of course, will be a substantial increase in both payroll taxes. I am not a big fan of tax increases, and find taxes on labor to be among the worst. But as long as we hold on to the collective notion that these are insurance programs and the taxes we pay are premiums, its time to stop fooling Americans into thinking that the premiums they are paying are truly sufficient to fund their benefits. Maybe after we reprice the "premiums" to their true actuarial value, we can then have a real debate about the structure and existence of these programs.
Every time we enter business in a new state, it is a constant challenge to figure out all the taxes we owe. In Alabama, for a single campground, we file and pay
- Alabama lodging tax
- Alabama sales tax
- Alabama boat rental tax
- Marshall County lodging tax
- Marshall County property tax
- Marshall County sales tax
- Marshall County occupancy tax
- Marshall County health certification
- Alabama unemployment tax
- Alabama withholding tax
- Alabama personal and corporate income tax
So of course we got billed for a new one today, for the Alabama Business Privilege Tax, apparently a corporate net worth tax. No forms or notices are sent for this tax until after it is due, when one owes about 80% in penalties.
By the way, pay the government for the "privilege" to conduct commerce is one of those government euphemisms that drive me up a tree.
You decide (origins and data for chart here)
I am generally opposed to tax increases because they never seem be matched to spending cuts -- the tax increases are passed but Congress finds ways to gut the spending cuts. But I would accept this proposal in a heartbeat: Return to both Clinton era tax and spending levels. There, that's my super committee proposal. Taxes and spending both targeted at 19% of GDP. Problem solved.
Yes, its stupid, but perhaps for a different reason than has been mentioned. The tax is on producers, and is meant to fund a promotion and marketing campaign. Really. Because Christian families in the US might forget to buy a tree this year if the government did not remind them. Seriously, do any of these folks have kids. "Dad, can we get the tree today, can we, can we, please?"
By the way, this kind of taxation authority that bypasses Congress is actually fairly often used by the Department of Agriculture. If you see random TV ads for avocados or almonds, you probably are seeing one of these government marketing forced-cooperatives.
My Forbes column is up this week and it presents some quick reactions to the Obama jobs speech last night. A brief excerpt:
Overall, I found the package to be an incredible mish-mash of already tried and failed steps to rejuvenate the economy. Even if I were to buy into the Keynesian stimulus logic, everything in this package is so under-scale as to be rounding errors on the larger economy. This is basically a smaller version of the last failed stimulus repeated.
This plan is absolutely in the Obama style, offering goodies to many constituencies without a hint of how they will be paid for. Presidents often offer a chicken in every pot when they are campaigning, but usually are forced into reality once they enter office. Not Barack Obama. Time and again, from health care to the most recent budget fight and last night’s speech, Obama wants to be loved for offering perks, and then wants someone else to take the fall for the unpopular steps required to pay for them. He is like grandma endearing herself to the grandkids by buying them Christmas presents on dad’s maxxed out credit cards, leaving dad to later figure out later how to pay for them or face the ire of the kids by returning the gifts.
Kevin Drum argues that Conservatives have vastly over-estimated the effects of capital gains tax changes on investment.
I can't agree with parts of the article that seem to argue that all taxes have limited effects on behavior (this is easily disproved, just look at what the tax code does for preferences of issuing debt vs. equity, or even look at the mortgage market). But I have always suspected that the political focus on the capital gains tax represents another piece of evidence that financial players (Wall Street, banks) dominate much of economic regulation.
All things being equal, a low capital gains tax is fine. If I sell some stock, its nice to pay a lower tax on the profits, particularly since at some level those profits have already been taxed once at the corporate level. Financial players who buy and sell securities live and die by the capital gains tax, and I suppose for businesses there is some advantage in that it perhaps reduces the cost of debt and equity.
But as a business person with my own company, that capital gains tax is largely irrelevant to my investment decisions. That is because all my investments are made to generate cash flow, and thus the regular tax rate is the ordinary income tax rate. Perhaps one time in my life, if ever, the capital gains tax will be hugely relevant when I sell my business, but that is at some time in the future so nebulous that it does not affect my behavior. Other than the double taxation argument, I have never understood why those who take their investment gains in asset value appreciation rather than in income should get different tax treatments.
I agree with this assessment but did not expect to see it coming from Kevin Drum's keyboard
Contrary to his reputation, Bush mostly succeeded by pressing a moderate, and sometimes even liberal, agenda. Tax cuts aside, which he passed solely primarily with Republican support
He goes on to point out that a lot of Bush's domestic legislation was really liberal (NCLB, Medicare part D). I agree.
But I think this is related to where Democrats go off track in understanding Tea Party and libertarian spending anger. Their rejoinder tends to be "much of current spending is Bush's fault." Leave aside the absurd implicit assumption in this that once a spending level is achieved, no president later has any ability to ratchet it back down. No, what they really miss is that I think the Tea party would agree. They are just as angry about Bush's spending and expansion of government, so the "Republicans started it" playground argument does not really get much traction. The best analog would probably be expansion of Executive power. Drum is not OK (I am pretty sure) with the notion that the President can have any American he chooses summarily executed in the war on terrorism, and isn't likely to change his mind if reminded that "his guy" Obama invented the power.
Kevin Drum, referencing an article by Christopher Caldwell, says
What is Amazon.com's biggest advantage over its competition? One-click ordering? The ability to go shopping in your pajamas? Its enormous selection? Those all play a role, but Christopher Caldwell thinks the real answer is the fact that Amazon's customers mostly don't have to pay state sales tax...
The latest state to insist that Amazon collect state sales taxes is California. Amazon's response? As in Illinois, they summarily severed the contracts of every one of its affiliates in the Golden State. But that's not all. Like mafia goons going to the mattresses in a gang war, Amazon immediately announced that it would spend millions of dollars to place a referendum on the ballot to nullify the new California law. And in the meantime? Law or no law, they won't be collecting sales tax in California, and that's that.
Amazon customers do have to pay sales taxes, or the substitute in states called a use tax. So the wording in the post in technically incorrect. The correct statement is that Amazon does not have to collect the taxes as an agent of the state.
Both Mr. Drum and Mr. Caldwell are likely required by their state to report out of state purchases from online suppliers and pay taxes on these purchases. Most people don't do it, and I would bet that both Drum and Caldwell do not. If I am wrong, Mr. Drum is welcome to post a copy of his return. Otherwise, he and Caldwell are the ones illegally evading taxes, not Amazon.
Clarification: I personally couldn't give a rip about these gentlemen evading taxes the government chooses not to enforce. Join the ranks of tax protesters, guys! The point of the post is hypocrisy.