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Best of Jeff Ward: 'How I Stopped Worrying About the Municipal Mindset and Learned to Loathe it'

How can you lose something you were never entitled to?

  • Editor's note: This "Best of Jeff Ward" column was originally published, appropriately, on April 1, 2011, on Geneva Patch. We're republishing it here for the Patch West Region because (a) Jeff's on vacation this week, (b) most of you folks haven't seen it before and (c) it introduces one of Jeff's favorite themes: "the municipal mindset."

Though I refer to it as the “municipal mindset,” that kind of magical money thinking goes far beyond our city limits. Our illustrious Springfield regulars make the most spendthrift Geneva alderman look like a fiscal conservative. What the municipal mindset really describes is any politician that harbors an intense sense of entitlement to our money.

What really frosts my cornflakes is municipal government's attitude toward sales tax. Given the average politician’s random pronouncements on the subject, you’d think, along with the four basic forces of nature, sales tax was a direct result of the Big Bang. As I told the Geneva City Council, the Universe has gotten along for 13.7 billion glorious years without it.

You hear ‘em say it all the time: “We’re losing sales tax to the Internet!” But how can you “lose” something to which you were never entitled in the first place? Ah! But like a True Blood vampire that just won’t die, that entitlement mindset is nearly as impossible to kill.

To wit, our fiscally fractured Illinois Legislature just passed the Main Street Fairness Act. This law means online retailers with no Illinois presence must collect sales tax if they have just one in-state affiliate. This new brand of insanity specifically targets Amazon.com and Overstock.com.

The term affiliate, as it’s used here, refers to a web-based business that, through a link, directs traffic to a site like Amazon. That business then receives a portion of any subsequent sale. Prior to this ludicrous law, Chicago Sun-Times film critic Roger Ebert’s website link made him an Amazon affiliate.

I say prior because Ebert is no longer an affiliate. Despite Gov. Quinn harboring the delusion this move would rake in $170 million in “lost sales tax,” the second it went into effect Amazon and Overstock pulled the plug on every last one of their Illinois affiliates. So in addition to losing out on all that income tax revenue, many of those alienated affiliates are considering moving to a neighboring state. How did that Guinness beer commercial go? “Brilliant!”

Arizona, Rhode Island and Oklahoma have already treaded this thorny path and, faced with declining tax revenues instead, they're all looking to repeal their statutes.

And politicians weren’t the only culprits. The Illinois Retail Merchants Association pressed hard for this law claiming this web merchant sales tax collection “loophole” amounted to an unfair advantage. “We can all rest easier knowing the right policy prevailed and everyone is now on an even playing field,” they said.

Cow cookies! What about the instant gratification of taking the product home with you? What about having to pay for shipping? And don’t give me that bilge about free Super Saver Shipping, either. Try telling a middle schooler he’ll have to wait for his Pokemon video game purchase to arrive. For 10 excruciating days all I heard was, “Is it here yet?”

If brick-and-mortar businesses can’t compete on the basis of that prodigious advantage, then they deserve to go out of business. Because Barnes & Noble was also behind this flagrant money grab, I will be purchasing any future books online.

Now that they’ve foisted this one on us, it’s just one small step toward their ultimate goal of forcing out-of-state retailers to collect sales tax for in-state purchases. Texas, my least favorite state for a variety of reasons, has already done this.

I asked The Comfort Company owner Renee Wood, should that collection requirement eventuality come to pass, how would it affect her Geneva-based Internet business? The Comfort Company sells thoughtful gifts one might give to a friend who’s going through a grieving process.

“It would be a challenge no doubt about it,” Renee said, “It’s not just the time involved, but the logistics and expense as well. We bring in someone once a month just to pay Illinois sales tax. We’ve done better than many during this recession, but sometimes it feels like we’re just treading water.”

Renee continued, “The majority of Net businesses that would be affected by something like this are the small businesses. To undercut us in that way would take the fuel from the car that’s driving the economy forward. They’ve just spent billions bailing out big business. Small businesses need the small advantage of not having to collect sales tax beyond Illinois.”

I couldn’t have said it better myself. If these small Internet businesses were forced to collect sales tax times 50, many of them would be forced to shut down.

I understand government services come at a cost, but that’s completely beside our point. Whether you’re a Geneva alderman, an Illinois Rep or a U.S. Senator, you are not entitled to one dime of my money. And that includes sales tax! You are charged with the solemn responsibility of being the faithful stewards of whatever money we choose to remit via the democratic process.

Sadly, as is too often the case, sticking their collective heads in the sand as Amazon and Overstock affiliates abandon the state in droves shows their penny wise and pound foolish capacity to be far beyond the pale.

ken loebel April 01, 2011 at 01:50 PM
To add to your article- the braintrust in Springfield also has created a real non-sensical conundrum - they want to save the environment and offer quality education, and they also want to cut smoking and so they created a non-workable business model - use taxes from cigarette sales to fund important projects. Now, they are screwed if their desire to cut smoking works. By cutting smoking, they will contract tax revenues for the projects that they want to fund. It makes no sense long term, and eventually leads to a bankrupt state or a state that is unable to make legitimate spend/cut decisions. What do they smoke in Springfield? It is very similar to the casino bills, where the State embraces building Casinos and using taxes from Casino revenues to fund important projects - it creates a long-term conundrum : encourage people to gamble away their savings, which will require the State to spend more on social program, in order to collect tax revenues. If people actually start saving more and gambling less, the State loses and the important programs lose. The answers need to include: Do not tie a Sin tax ( such as tax on cigarrettes) with a necessary revenue for important projects (healthcare, education, environment) - it confuses the objectives and creates a no-win situation; And don't expect tax payers to continue to replace the elected officals' obligation to manage costs. Show leadership and character by managing expenses in spite of PAC donations.
ChrisD April 01, 2011 at 03:26 PM
Jeff, A very nice article. I couldn't agree more with what you've said. Although I think the overall impact of how much sale tax is gained with this new law will be difficult to determine, the revenue lost as result of Amazon and Overstock cutting the affiliate ties will outweigh anything that was gained and that will have a direct impact on those Illinois affiliate companies.
Kumar April 02, 2011 at 02:31 PM
You are quite right that measures like the Illinois legislation have been rendered impotent by hardball counter-measures of dropping affiliates that online retailers like Amazon have adopted. But that fact does not render the effort as somehow illegitimate as you seem to suggest. I would like to pass on some excerpts from a recent column in RedState.com blog on this subject. http://www.redstate.com/athensrunaway/2011/03/11/state-chamber-of-commerce-declares-war-on-amazoncoms-crony-capitalism/ Quote: ..Are some animals more equal than others? Equality under the law is one of the cornerstones of capitalism. What does that mean? It means that, in order for free-market capitalism to thrive, the government can not be picking winners and losers.. One can argue about the merits of using sales tax for raising revenues, and that is a separate debate. However, as long as this system of taxation stands, it should be fairly and uniformly applied without unfairly favoring the net-savvy consumer who are the ones who disproportionately benefit and treating the out-of-state online merchants as a favored class of merchants exempted from the task of collecting the tax like their fellow in-state competitors. Remember, sales tax is a consumption tax and is actually a tax on the consumers and making the retailer responsible for collecting it is the only practical way to enforce the law, rather than the honor system of expecting the consumer to declare and pay the tax.
Kumar April 02, 2011 at 02:32 PM
** CONTINUED FROM PREVIOUS POST ** Opposing online sales taxes doesn't get you any closer to getting rid of sales taxes altogether. All you are really doing is helping Amazon maintain an unfair advantage. The issue of mainstreet retail facing an unfair competitive handicap is a second issue which has its own negative consequences to the community in terms of jobs and growth and offends our ideals of fair and level playing field for doing business. Here is a good writeup on this issue. "Every Day's a Tax Holiday: How Amazon.com undersells Best Buy, the Apple store, and almost everybody else." http://www.slate.com/id/2275552/ But state after state have been pursuing this type of whack-a-mole measure as a result of Congress’ inaction to plug this loophole which even the Supreme Court exhorted it to do in its 1992 Quill vs. N. Dakota decision which created this loophole.
Terry Flanagan April 13, 2011 at 05:37 PM
Jeff, I wonder if this law affects The Friends of Geneva Library, which is a non-profit with a link to Amazon that essentially works the same way. If so, then the state legislature has closed the door on non-profits using these links as a means of funding. Even if the law has an exclusion for non-profits, Amazon could decide to shut down all such links to avoid any potential problems with the state revenue department. And you couldn't blame Amazon for deciding to do so. The link still appears to work, but who know if the whole process is still in place.
Jeffrey Crane December 30, 2011 at 12:58 PM
i'm sure that they paid dearly for a study that showed the psychological profile of the average smoker indicating that smoking is inelastic and therefore is not sensitive to the price increases. Point being that they could give a rats @#$% if people actually quit smoking as a result of price increases. On the contrary they were BANKING on people to continue the habit to rake in the revenue. One of those sad truths.
Keith Yockey December 30, 2011 at 04:06 PM
The article is just as relevant today as when it was written in April. Affiliate nexus law is not only unconstitutional, it is being challenged as we speak. Even if legal, it would only grab 20% of Use Tax owed to IL DOR. That's leaves a lot of tax fruit on the tree. Assuming Congress passes national legislation, online can still outprice B&Ms bc of lower overhead. So much for the 'level playing field' argument.
Dan F. December 31, 2011 at 05:32 PM
Appointed State Senator Sandack voted for this lousy bill that whacked jobs for thousands of small entrepreneurs here in IL. Amazon and the big on-line sellers just switched to affiliates in other states. Wonder why he didn't tout that in his daily column here? Time for a change!
Jeffrey Crane December 31, 2011 at 11:38 PM
Like!
PAUL C. January 01, 2012 at 03:02 AM
Ditto! More voting facts for the upcoming race!

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