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March 13, 2010 12:31 AM UTC

Spelling "Mendacity" H-a-r-s-a-n-y-i

  • 45 Comments
  • by: Colorado Pols

SATURDAY UPDATE: The Denver Post’s David Harsanyi did respond, but we think beer-thirty started early at the Post yesterday afternoon. Should have probably just taken his lumps, because this response is, well, it’s unusually and notably ridiculous.

The bill gives Amazon an ultimatum. Collect taxes on your site for Colorado or hand over the names of those who do not pay up. If you do not, Colorado can subpoena you for the names and/or fine you 10 bucks a pop. Sounds like “force” to me. But in the interest of peace, I concede, I could have qualified “force” with “try to,” as per a Supreme Court ruling. But it’s far from a mendacious statement…

Below, you can catch up on what we’re talking about if you haven’t already: in a column yesterday, Harsanyi asserts that the bill in question “forces” online merchants to collect sales tax. The bill very plainly does not do that, having been exhaustively debated and amended to coexist with federal law. And reaching for the most incendiary terms in one’s vocabulary–isn’t every law ever passed an ‘ultimatum?’–doesn’t make this demonstrably false statement any more truthful.

But now that Harsanyi has determinedly picked up the shovel, for God’s sake, don’t stop him.

I gather most people comprehend while reading. So it would be mind-bogglingly deceptive if I had actually written ‘lose’ or ‘loss’ or ‘losing’ or anything of the sort. My column does not – not once. What I wrote was: “Unfortunately, this meant closing its associates program, which involved an estimated 5,000 jobs.’ That statement is true.

Sorry, but there is no way to read Harsanyi’s column and not determine that he wants the reader to think 5,000 ‘jobs’ were lost. The sentence Harsanyi cited in his own defense quite obviously asserts that, and his closing paragraph again deplores the idea that the legislature would be “willing to risk the jobs of thousands of citizens for a couple million bucks.”  For reasons we’ve described below, Harsanyi’s invocation of “5,000 jobs” wildly hyperbolizes the economic impact of Amazon’s actions earlier this week–period. We’re not sure exactly what Harsanyi thinks he is refuting here, but it’s not the point we made.

Original post, which, needless to say, we stand behind completely, follows.

—

The big political story this week in Colorado was Monday’s announcement by online retail giant Amazon.com that they are terminating their relationships with “affiliates” located in the state. Conservatives have rallied to Amazon’s defense, while Democrats and their allies have reacted with indignation and threatened to boycott the retailer.

The biggest problem we see here is a profound lack of understanding: of what the new state law in question actually does, and what Amazon did in response–and why. And we’re sorry to say, that lack of understanding isn’t helped a bit by Denver Post columnist David Harsanyi today:

[I]f anyone ever needed an obvious illustration of how government overreach can damage an economy, they need look no further than the Colorado legislature’s foolish attempt to wheedle a few extra bucks out of consumers via an Internet sales tax.

After legislation forcing online companies to collect sales tax passed, Amazon.com moved to protect its consumers and long-term interests by severing its ties with Colorado. Unfortunately, this meant closing its associates program, which involved an estimated 5,000 jobs.

Amazon’s actions were not surprising, as it did the same in North Carolina and Rhode Island…

Full stop–this is some pretty shockingly false information to find itself printed in the state’s newspaper of record, even in an opinion column. Everyone who has followed this issue since House Bill 1193 was being debated knows that the bill does not “force” online companies to collect sales tax. Until federal laws change states can’t do that, and that is why the bill merely requires online retailers to report sales to the state and customers. This has been argued out so many times that the only way for Harsanyi to get it this wrong is to intentionally do so.

Next, there’s the matter of the ‘loss’ of “an estimated 5,000 jobs.” If you read that without comprehending, you might actually believe that what we’re talking about here are 5,000 actual paycheck generating, family supporting jobs. That is exaggeration well past the point of misleading–we’re still waiting to see estimates on average income for Amazon’s “affiliates,” but just about everyone we’ve talked to who carried Amazon’s ads on their site never even earned the minimum amount required for Amazon to generate a check. One person who had an Amazon box on their page has made about five dollars in as many years. Obviously some people may have focused on these ads a little more and done a little better, but to call the termination of this commission program ‘losing 5,000 jobs’ is just mind-bogglingly deceptive.

The rest of Harsanyi’s column doesn’t get much more intellectually honest: he doesn’t think that the state should be considering “fairness” with regard to Amazon’s tax advantage over local retailers–leave that to “toddlers and legislators,” he says. Of course, he doesn’t want to talk about the tax advantage at all; it’s all about their ‘far superior business model,’ even though the tax advantage is pretty darn central to that ‘superior business model’ based on how vigorously they defend it.

We have trouble imagining how this story could be more egregiously misrepresented.

UPDATE: More explanation on what really happened and why this column is wrong.

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45 thoughts on “Spelling “Mendacity” H-a-r-s-a-n-y-i”

  1. If our Dimocrat governor and Dimocrat state legislature were truly concerned for the working folks in this state, they would have made a proposal to end regressive sales taxes — taxes that hit working folks disproportionately more than the wealthy. They could have replaced the money with a progressive state income tax with revenue sharing back to the counties and municipalities.

    The online sales tax scheme is old politics as usual — put more burden on financially stressed Coloradoans who are just looking for a bargain during this recession.

    Frankly, I don’t blame Amazon for what they did (and I was an Amazon affiliate), they shouldn’t have to be the state government’s bookkeeper. I blame the stuck-in-the-mud Dimocrats for reverting to form by raising taxes on average people.

    This boycott is further evidence that the Dimocrats and some of their wine-and-cheese-type liberal supporters are really out of touch with everyday life for most everyday citizens of this state.

    1. You act like legislators could just wave a magic wand and create a “progressive state income tax” as though it isn’t any more complicated than just holding a vote.

      Perhaps we need to completely change our tax structure, but it’s a little more complicated than just writing a bill.

      1. under TABOR, wouldn’t it? While that might have been good policy in the long run, it seems like doing that to avoid the Amazon backlash would be taking a sledgehammer to a gnat.

    2. Every large brick and mortar retailer has been collecting sales taxes per state and district for as long as there have been mail order sales.  WAY before computers and the intertubes.  

      Dude, the Republicans have you really, really fooled.  Which party do you think is that of the plutocrats, historically and at present?  

    3. “wine and cheese” elite garbage.  The Republican party is and always has been the party of the true elite,  If you are a Republican and aren’t a member of 250K+ a year elite (Of course the only elite that really matters in Republican circles makes much more than that, the rest are just  little people by corporate elite standards), you’re voting against your own economic interests every election and you were probably among the millions who were better off under that awful Dem, President Clinton.

      1. We vote against our own interests because we are not above that 250K threshold … and still not even close when we include benefits, etc that you’d propose to include as “income”. Right?

        What the Democrats always propose are pure-public or public-private partnerships … that is “letting in” some special interest to leverage their deal with public finance or other public assets. Tell me, how does that serve my interests?

        Aren’t my interests better served by creating a very low business tax and business cost environment in which ANY business can compete for capital with which to create products and profit? Doesn’t that create more jobs and make Colorado more attractive to businesses who seek to sell product both within and outside of Colorado?

        Aren’t those same 250K+ people, plus me and others better served with more job opportunities and lower income taxes so that we can put our money to work for us versus relying on the govmint tit? Aren’t Colorado businesses better served without special access, but with lower taxes (eg manufacturing S&U exemption, no occupational tax).

        Aren’t we all better served with consumption taxes on end products so that we feel the impact of taxes and understand the value received by the govmint services that they fund?

        Under your plan if we can just get the top 10% or 35% to pay for everything that the 50%+1 enjoys and turn them into net tax receivers we’ll solve Colorado’s problems by living off the tit of those top 10%-35%.

        I’ll tell you what, lets get Stryker to cough up her $2 billion into a trust that kicks off $200 mill to the state and $250K to her for yearly expenses. Problem solved, right?

        Heck, she probably wouldn’t mind it much if everyone above 250K paid 50% income tax.  The problem is anyone aspiring to get to that level would mind it.

        The point is your policies line-up well with those of a European socialist.  You’re for redistribution of wealth and increasing the role of govmint in our lives.  

        1. 99% of us were better off under Clinton era tax policy. Bush era policy was exactly what you claim is the sacred way to prosperity but 8 years of that put the economy in the toilet.

          Hardly unusual. Decades of economic info put into graph form show that we have consistently done better under Ds than under Rs yet you still believe in the theories that have failed over and over to produce the promised results.  You still insist, against all evidence, that more of the same will miraculously work this time even though it hasn’t ever worked before.

          The only thing shrinking under the policies you promote is the middle class, not government and not poverty.  If you aren’t a member of the uber-elite that has been shoveling this shit, then you are one of the easily manipulated little people they get to vote against their own interests, a sap, a mark.  Of course we already knew that, Tad.  

        2. Aren’t my interests better served by creating a very low business tax and business cost environment in which ANY business can compete for capital with which to create products and profit? Doesn’t that create more jobs and make Colorado more attractive to businesses who seek to sell product both within and outside of Colorado?

          Colorado has some of the lowest business taxes in the country. The logic that you and many Republicans use implies that it is ALWAYS better to reduce taxes further. The problem with that logic is that it suggests that the best situation is zero taxes. Because zero taxes should maximize a company’s ability to hire workers. But what you ignore is the fact that those same businesses receive services from tax revenue. Services like enforcing intellectual property, providing effective transportation routes, etc.

          There is a balance that must be reached between taxing too much and not taxing enough to fund important services.

          So please, answer my question. What tax percentage do you consider “low”? What do you consider to be a reasonable tax?

    4. Yawn – how 1986. Why don’t you add “arugula” to your silly, childish putdowns?

      “Raising taxes”? I thought this was just a minor step towards closing a massive loophole. I thought Republicans were all about more “efficiency” and enforcing EXISTING taxes rather than adding new ones. Weren’t they?

      Hypocrite.

  2. I paid sales tax.

    It broke right after I started it the first time- and I returned it.  I wanted the same model- they were out of stock.

    So I bought a lawnmower online from Sears. And I paid sales tax.

    And then I priced the same lawnmower at ebay & Amazon. Exactly cheaper by the amount of the sales tax.  How is that fair?

        2. I’ve had tax licenses in FL and CO, but I can’t recall which one (or both) let you keep a small percentage for the record keeping.

          David, I am really surprised with your tech background that you would think this is an almost insurmountable problem.  Some company, or several, are making the programs that allow Wart-Mart and every other combo B&M/online retailer to calculate and collect taxes.  And it wouldn’t surprise me that they don’t write 582 checks, one to each taxing entity, but turn that over to a contractor.

          Hey, just give me $1 for every copy of Windward Tax Man Services that you sell and service!  

          1. …when a sale is taxable in Colorado. The issue is not can we do our part efficiently, it’s when we hit the interface with the government departments we have to work with.

            I initially supported both the software sales tax and going after Amazon. I felt it was fair & reasonable. I still think it’s fair. But in trying to actually comply I’ve learned that it is impossible to get the answers you need from departments of revenue. (Or in the case of Boulder, you get answers that will cause people to never buy from you.)

            And for the filing, what happens when 400 of those 500 jurisdictions want you to purchase a sales tax license every year – for $25.00 – $150.00/yr. Even if most years you sell nothing in their jurisdiction…

          2. I don’t know what it is called but the vendor gets to keep a tiny pittance.

            I’ve long thought that the leg ought to send thank you notes to vendors. Although the customer does pay the tax, for small, non-computerized businesses, there is pain involved. Another deadline. More math and double checking your math. Penalites if you err or are late.

            1. Shooting yourself after trying to get a response out of DoR for weeks… And failing. Now if we can hold back a reasonable hourly fee for all time spent trying to get answers out of DoR, then it would be better. But in that case the state will owe us money at the end of the year.

  4. First, and most importantly, Mr. Harsanyi has no idea what he is talking about. If all of the affiliates (100% of them) suddenly disappeared, Amazon’s obligations under HB 1193 are exactly the same. The affiliates were taken out of the bill and have no connection or impact on Amazon’s legal obligations under HB 1193. Whatever Amazon’s motivation for terminating the affiliates, it certainly had no substantive connection to HB 1193.

    Second, there are 5,000 jobs at stake if all or most of the online retailers followed Amazon’s example and terminated their affiliates. If only Amazon terminates its affiliates there won’t be anywhere near that kind of job loss because there are literally thousands of online retailers who have affiliates (about 4,000 in Colorado).

    Third, for the long run, internet sales continue to grow and cause a loss of state sales taxes. Last year internet sales equaled about 8% of total retail sales in the United States. Some estimates show the internet share of retail sales growing to 20 to 25% of the retail market over the next three to five years. States can’t take that kind of a decrease in sales tax revenues.

    Fourth, Mr. Harsanyi is just the run of the mill so called conservative who is ideologically wedded to the idea we can never cut taxes enough but we can still provide all of the government services. He needs to look at federal spending as an example. People like him continually blast the federal government for deficit spending but what they fail to acknowledge, even before President Obama’s tax cuts in the Stimulus bill, we have spent the past decade cutting federal taxes and it never created an economic boom that generated enough tax revenue to cut the deficit. In fact, the deficit continued to increase. Our porblem isn’t the fact we should cut taxes even more than we have. Its the fact we need to stop cutting taxes.      

    2. When you face a lawsuit, you never know what it’s going to turn on. I once lost getting a patent on an issue that still makes absolutely no sense to me. So if you have an issue that is “unlikely” to be a deciding factor, but it can – then you address it.

      My guess is Amazon is doing this so that when they go to court the state cannot use the affiliates as grounds for nexus. The fact that it’s not in the bill does not mean it can’t be used as an argument.

      I also think the legislators who passed this made one of the cardinal sins of warfare – assuming your enemy will react as you planned. Why on earth should Amazon react in the manner Colorado wants?  

      1. but the way HB 1193 is written, the affiliates are irrelevant to the issue of an internet retailer’s liability under the new statute. Assuming the new law is constitutional, the fact internet retailers sell products to Coloradans is the nexus for the sales tax, not the affiliates.

        Sometimes legislative history doesn’t mean much in a court of law but in this case the record is crystal clear. The affiliates were in the original bill as the nexus for applying the sales tax to internet retailers, like Amazon, but that concept was removed from the bill in the state senate and the house concurred in the amendments.

        The affiliates are, in essence, advertising sites for internet retailers. The state doesn’t tax advertising in the Denver Post or on Channel 9; nor does the state ask the Post or Channel 9 to collect the sales tax if someone, for example, saw an advertisement and then went to a car dealership and purchased a car based on reading or seeing the advertisement. The car dealer in this example is charged with collecting the sales tax. The same concept was included in HB 1193, except internet retailers are required to send notices to those who purchase a product. In other words, if advertising magically disappeared (whether newspaper, TV or affiliate advertising), retailers, including internet retailers, remain responsible for collecting the sales tax.

         

    1. Um, I thought it was just an attempt to improve collection of existing taxes.

      Look, when I go online to buy something from Apple, they charge me sales tax and collect it. Same goes for Wal-Mart, Target… I don’t see why it’s such a horrible, terrible, thing for a mega-company like Amazon to do the same thing.

      1. Was the legislature passed the law and is now upset Amazon did not react exactly as the legislature assumed Amazon would. And now they have their panties in a twist because Amazon is not reacting according to the plan.

        1. that obvious, direct solutions to social problems are so often undermined by the complexities of social reality. Who would’ve thunk it? Maybe a more thorough analysis would’ve helped lead to a more effective policy, rather than precipitously latching onto the apparent panacea.

  6.  is disagreeing with CO Pols. He wrote, “The bill gives Amazon an ultimatum. Collect taxes on your site for Colorado or hand over the names of those who do not pay up. If you do not, Colorado can subpoena you for the names and/or fine you 10 bucks a pop. Sounds like “force” to me”

    This is obviously true and is the heart of the matter. Everything else is peripheral.  

    1. It’s actually only $5 for each violation. If Harasanyi has actually read the bill he should know that.

      Additionally, it is no different than any other regulation. If you fail to comply then you get fined. There must be some sort of disincentive to breaking the law.

      Netflix is very similar in its business model as Amazon. Netflix collects sales tax in every state in anticipation of future government regulations. That’s smart business. It’s not that difficult to program your software to do so. Not much different than charging shipping. It’s simple multiplication based on the shipping address of the customer.  

      1. Knowing when to collect against what part of the sale – not so easy for some companies.

        And filing with the 500+ jurisdictions, not a big deal for Netflix with hundreds of customers in each jurisdiction. But it is a big deal for a company with zero customers in most.

        1. This bill does not require you to purchase licenses in different jurisdictions. It simply requires you to disclose to your customers that they owe a use tax and then send a report to the Dept. of Revenue listing the dollars in sales for each customer. It would be wise for a business to be tracking that info anyways, so it shouldn’t be too much of an added burden.

          Perhaps if the online retail industry had not been focusing so much on blindly opposing the bill knowing it was going to pass anyways, they could have worked to improve the language so it would be less cumbersome.  

          1. What should be listed and to who do we send it? If I have a customer that has some licenses going to China, server licenses going to Georgia, and people in Colorado managing all of it and at times running the software – what do I report to who?

            And in Georgia, how do I find out what different tax districts need those reports for a given location?

              1. I finally got that answer from them today. Good thing we didn’t need to sell anything in Colorado before today.

                Now what happens if the other 49 states all require the same thing of us? Especially if their Department’s of Revenue are as screwed up as Colorado’s?

                  1. But Amazon does not have nexus here and Colorado is demanding reporting. That’s what’s killer if Colorado succeeds – even without nexus companies will be required to report. And the reporting encompasses all the hard parts.

  7. from the Sacramento Bee

    Arriving at Harv’s Metro Car Wash in midtown Wednesday afternoon were two dark-suited IRS agents demanding payment of delinquent taxes. “They were deadly serious, very aggressive, very condescending,” says Harv’s owner, Aaron Zeff.

    The really odd part of this: The letter that was hand-delivered to Zeff’s on-site manager showed the amount of money owed to the feds was … 4 cents.

    1. … that led to this ridiculous example of excessive government enforcement.

      It really is a fundamental dissonance of government bureacracy — you’d expect that common sense judgement would prevent this sort of problem.  But the nature of our legislative process is to write the laws with as little flexibility as possible, because at some point, somebody might have exercised poor judgement.

      Ironically, the tighter the rules are written (and implemented in grossly-expensive computer systems), the harder the subjects may struggle to find the loopholes to achieve perverse outcomes against the spirit of the laws and regulations.

      Just my opinion — no links or direct evidence to offer.

  8. Great job, Colorado Pols.  I really appreciate your calling BS on Harsanyi’s response.  This is one of the best things that CO Pols can do to raise the level of political honesty in the state.

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