Notebook: From Estimates to Secessionists

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For most of the last decade of my life, I've spent the Independence Day weekend either waiting for the phone to ring about a budget deal, or camped out in a Capitol hallway awaiting a budget deal.

This year, a welcome change. And a lazy weekend means a chance to clean out the notebook.

Today, a kickoff to a new occasional feature: snippets of the week's leftovers in California politics... from the not-really-reported to the things-worth-a-second-look.

Click Me, Pay Me: The news that Amazon and perhaps other online shopping giants were severing California ties in the wake of the budget bill demanding sales tax collection became an instant cyber news maker. And some of the rancor included assertions like those in an emailed press release that said the following:

ABX1 28 is just more of the same, it will simply not address the budget deficit because out-of-state [sic] are terminating their advertising relationships with 25,000 California website owners as well. These California web-based companies earn income from ads placed on their websites. In 2010 they paid $151 million in state income taxes.

So are those numbers accurate? Are thousands of Californians in danger of losing their jobs? I tracked down the creator of the analysis: Rebecca Madigan, who heads up a trade group called the Performance Marketing Association.

(And for those who don't get understand how this biz works: these are folks who place a clickable ad on their website, and the big online retailer pays a commission when someone clicks through and actually buys something, with the commission often based on the product's purchase price.)

Madigan offered some insight into who the folks are that might be affected by the new state sales law (and even then, it's not because the California businesses themselves are involved in collecting sales tax, but only because retailers like Amazon have decided that cutting the 'click-thru' affiliation with these websites also may sever any tax nexus to California).

Of the 25,000 California-based "affiliate" websites, she says 75% are a part-time endeavor -- including civic groups like Boy Scout troops. Only 5% of the affected state websites (and that's not to say they're unimportant, mind you) are operated by businesses with four or more employees. The remaining 25% of Californians who run these sites are self-employed.

The press release also claims $151 million in state income taxes paid. As it turns out, this number begins with an industry analysis suggesting national profits in 2009 of $15 billion (an estimate that, itself is whittled from larger estimates about online ad revenue as a whole). Madigan says she then used census data showing that 12.6% of all U.S. businesses are in California, and thus concluded that the California portion of those revenues would be $1.9 billion. Finally, Madigan used the state's personal income tax rates to calculate the tax liability on $1.9 billion in revenues, which got her the $151 million.

Madigan says the data above was a "complicated exercise." While it seems to be as good a methodology as any for understanding this niche marketplace, it's troubling that these kinds of numbers are often reported as facts. And as this proves, they're not.

One final note: Madigan says Amazon isn't known as one of the higher paying online retailers for these small affiliates. Which begs the question: is it Amazon's decision that's the problem, or rather that other companies might follow suit?

From Cities To Counties: It was Tuesday evening before several Capitol insiders seemed to notice a provision in the bill that financed part of Governor Jerry Brown's government realignment plan. That provision in SB 89 said that $453 million in realignment funds would come from redirecting vehicle license fees... and that this includes $153 million that, until now, went to cities.

So where is the money going? To counties, who will be assuming control (through realignment) of low-level criminals, mental health services, foster care/child welfare, and more. Whether that pits the two giants of local government against each other remains to be seen. Cities and counties -- while aligned on many issues -- don't always see eye-to-eye. Remember that last fall, the state's association of counties wasn't all that keen about Proposition 22, both strongly supported and pushed to electoral success by the state's association of cities.

No, I've Actually Never Heard You Say That: Thursday's big news conference from Republican legislators, an event cheering the expiration of 2009's temporary taxes, featured a moment that -- had the circumstances been different -- might have received more attention. I jotted it down in the notebook, but it didn't quite fit into the day's narrative.

Assembly GOP Leader Connie Conway was asked by a reporter whether the tax cut was coming at the expense of services for the most needy. She said that those cuts were chosen by Democrats, and that Republicans had laid out a budget plan with their own priorities, including a social "safety net for those in desperate need."

Then Conway said the following: "As you know, you've heard me say before, we very much appreciate a safety net. We just don't want it turning into a hammock with cute little drinks with umbrellas."

The GOP leader's overarching point was probably that Democrats could have cut things other than social services programs (though the GOP alternative budget actually cut deeper into those programs, at a level first advocated by Governor Jerry Brown). But the quip above suggests that those programs were in danger of being overfunded by the budget-with-tax-extensions, or have been overfunded in recent years, suggestions that some advocates dispute.

Break Free! Friday's news that Riverside County Supervisor Jeff Stone intends to put forth a resolution for 13 counties to secede from California becomes just the latest in a long line of folks who angrily have said it's time to cut up the Golden State. Stone's new "South California" (not all in the south, however) would be comprised of 13 counties.

Setting aside the legal and political roadblocks, though, it's worth examining some data about those 13 counties: Riverside, Imperial, San Diego, Orange, San Bernardino, Kings, Kern, Fresno, Tulare, Inyo, Madera, Mariposa and Mono. The state's highest unemployment is found in this grouping (Imperial: 27.7%); the #2 and #3 counties in May 2011 unemployment benefits paid out are here (San Diego & Orange, respectively); five of the six highest county rates for welfare assistance in FY 2009-10 were here (Fresno, San Bernardino, San Diego, Riverside, Fresno); and it would feature one of the state's most Democratically-heavy counties by percentage (Imperial 51.63% Dem) and one of the most Republican by percentage (Tulare 46.03% GOP).

Make of it what you will...

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About John Myers

John Myers is Sacramento Bureau Chief for KQED Public Radio and "The California Report," heard daily on 23 public radio stations across the Golden State.
  • Bernie Mikell

    John,

    Your do a great job in cutting through the BS to get to the “heart of the matter.”

    Bernie Mikell (UVA)

  • Little Buddha

    John, you’re the best in the business. Skelton used to be, but he’s got grumpy old man syndrome. Have a great, well-deserved holiday.

  • Little Buddha

    FYI, I recently complained to Amazon about their belligerent posture on taxes, and I’ve always felt the playing field is tilted against Mom and Pop stores bad enough without the government putting their thumb on the scale by not charging taxes on internet sales. Here’s their reply:

    Hello,

    We do understand your concerns about the unconstitutional tax collection scheme in California. The unfortunate consequences of this legislation have been explained in detail to key senators, representatives and executive branch officials of California.

    We’ll be sure to pass your comments on to the appropriate people in our company.

    We hope to see you again soon.

    Regards,

    The Amazon Associates Team

    Here’s my response:
    Taxes are the price we pay for a civilized society. I will no longer do business with Amazon while they fight paying their fair share. Unconstitutional? So the guy answering emails at Amazon is a constitutional expert? Where did you go to law school? So long. Good luck without California.

    I haven’t heard back from them. To Hell with Amazon and to Hell with King George!