Tuesday, August 9, 2011

Taxes: Main Street v. eStreet

Today’s topic involves an issue about which I am conflicted. Should states be allowed to “tax” internet merchants? I put “tax” in quotes because that's not actually what's going on. The real question is: should states be allowed to force internet merchants to collect sales taxes from customers? This is a much more complicated issue than it seems at first glance. Here is the problem as each side sees it:

1. The State View: Americans buy about $10 billion a year from the internet (and growing). But as a practical matter, states can’t tax this. Technically, they can and do tax it, but they can only collect the tax from the purchaser. Indeed, most states have laws requiring you to report what you purchase and pay tax on that. . . fat chance.

From the state perspective, this is lost revenue. To solve this problem, states keep trying to force internet retailers (e-tailers) to collect sales taxes just like bricks and mortar retailers do. Right now, e-tailers don’t do that, and states don’t have the power to force them.

The reason states can’t force this is the way jurisdiction works in the United States. To be able to regulate (and tax) a business, that business must have some “nexus” to the state. But the term “nexus” isn’t clearly defined. Operating a warehouse within a state clearly constitutes a nexus. Having a retail operation does too. But what if people buy from your catalog or off your webpage? So far, the courts have always said that is not enough to form a nexus. Thus, states can’t force e-tailers to collect sale tax for them. . . though they keep trying.

California is the latest state to try. What they’ve done is to declare that any e-tailer who deals with local sellers has a nexus to the state. Amazon falls into this category because it partners with small businesses all over the country including California. Because of this bill, Amazon has begun terminating its relationship with all of these people if they are located in California (10,000 were terminated in July). Amazon is also trying to get this bill repealed by referendum.

2. The Main Street Retailer View: Main Street retailers hate companies like Amazon. They have no choice but to collect the sales tax imposed by the state. Thus, they are at a disadvantage to the e-tailers, and the disadvantage can be serious. In liberal states like Illinois, for example, it can reach nearly 12% with local surcharges. That’s a significant handicap when the e-tailer doesn’t have to collect those taxes.

Extending this argument to its natural conclusion, retailers argue that if this situation is not remedied, then e-tailers will eventually wipe out retailers. But keep a couple things in mind. First, these are the same retailers who wiped out the mom and pop shops two decades ago. . . so their argument rings a little hypocritical. Secondly, there are other benefits the retailers get (like property tax breaks) that are not given to the e-tailer. Third, the retailer business model may be defective, and rather than trying to force a tax hike on e-tailers, maybe they should be looking for new services to lure customers back into their stores. Fourth, some products simply aren't amenable to the e-tailer model.

3. The eStreet Internet Retailer View: The e-tailer response is twofold. First, to allow states to force them to collect the tax would make them a special case that violates 200 years of jurisprudence. It’s the business equivalent of letting New York haul you into court just because you sent a letter to someone who lives in New York.

Secondly, e-tailers make a practicality argument. There are 8,000 different tax jurisdictions in the US, each with different rules, procedures and rates, which change at a moment’s notice. Moreover, these jurisdictions don’t align with zip codes. Thus, it would be a practical nightmare for a company like Amazon to assess and collect the right amount of tax. It would be impossible for smaller e-tailers. This change could effectively kill off all but the largest e-tailers.

4. My View: Politically, I am conflicted on this. As a firm believer in federalism and the 10th Amendment, I generally favor letting states handle their own affairs. . . even if they make a mess of it. So they should be allowed to tax whatever activity goes on inside their borders provided they don’t discriminate against out-of-state companies. But that argument really doesn’t apply here because they can tax these transactions, they just can’t get it collected the easy way. States have a right to regulate themselves, they don’t have a right to regulate outsiders just because it makes things easier for the state.

And practically speaking, I think it would be disastrous to allow 10,000 tax regimes to force themselves upon e-tailers. What’s more, how can we then be sure they are being treated fairly (i.e. that there is no discrimination against out-of-state companies)? Suppose a single sales tax is imposed on both retailers and e-tailers. That sounds fair, but what about the property tax breaks, utility discounts or other things the retailer gets that reek of local favoritism?

I don’t care for the idea that in the long run we are likely to end up with most retailers going out of business in favor of e-tailers (e.g. book and music stores). But on the other hand, these e-tailers have been very good for consumers even beyond the sale tax issue and the death of the retailer may be inevitable unless retailers find some way to improve their business model.

Right now Senate Democrats are trying to come up with a bill (the Main Street Fairness Act) to “solve” this problem. Amazon supports it, eBay opposes it. Frankly, this sounds like it will impose a fairly heavy regulatory burden on e-tailers. I suspect Amazon likes it because it will make it hard for smaller competitors to enter its market. eBay probably opposes it because eBay relies on thousands of small sellers, who would likely end up violating the new rules.

There may be no good answer, but when in doubt, I find myself coming down against any solution offered by Democrats with the support of the biggest company in the field and with the support of trade groups looking for a little protectionism for their members. So if I had to vote right now, I would vote to leave the system as it is.

What do you think? How would you solve this problem?

59 comments:

Tennessee Jed said...

Tennessee is going through this with Amazon right now, and I totally agree that is both complex and frustrating. I've felt like if one looks at Best Buy compared with Amazon, the business model choice appears to be:

1) Amazon has to add shipping and handling to their price. Plus there is the "delay" while the product is shipped.

2) Best Buy has state and local taxes thrown in plus the soft cost of gasoline, wear and tear to get there. But, if it is important to get a product immediately, that would be the better choice.

Maybe, a state could tax a warehouse for Amazon; e.g. collect revenues for all items shipped from that warehouse. They could negotiate with the state that cuts the best deal; e.g. reduced tax rate for the jobs, revenue, etc.

StanH said...

Only $10Billion? …hell I think my wife does that monthly.

You know me Andrew, I’m a “Fair Tax” guy, so I believe that all taxes should be collected at point of the sale, this includes state taxes. As far as these financial basket cases, California, Illinois, etc. are concerned let’em pound sand. We all must remember, that taxes are a pass through, invariably the customer pays the tab.

DCAlleyKat said...

Given enough power the state would use the position of 'lost revenue' to create taxation Hell. There will always be the need to feed the beast!

The problem(?), the real problem is that states like California are becoming as oppressive as the federal government. They overspend then expect/demand the citizen pay for their foolishness/greed and are always looking for a way to get more.

Internet sales are proof that a market/people left alone by 'statists' thrives, while interference from government does the opposite.

DCAlleyKat said...

And, welcome home Andrew!

Joel Farnham said...

Andrew,

I am a big believer in "If it ain't broke, don't fix it." school of thought. I also am a huge believer in starving the federal government and the state government of unneeded revenues.

As it stands right now, the various government agencies have overspent to the tune of trillions of tax dollars. They have also regulated to death, our society in such a way as to kill off businesses and discourage new start-ups. What they haven't killed off, they have taken over the largest concerns and forced them to capitulate and make products people don't want to buy.

Indeed the only thing that hasn't been really affected is the electronic version of the marketplace. The reason it hasn't been affected is because the various interlocking government agencies have absolutely no control over the Internet. Oh, they act like they have a control, but they really don't.

What the proposal in effect will do is give eventual control over the Internet to the same government agencies and politicians who have misspent our money and have dominated our lives. Don't start by saying there will be safeguards against abuses. There won't be.

Right now there is a death struggle between the forces of the statist and the forces of freedom. This proposal of new taxes on the Internet is giving the statist more power and money. Do you really want that?

rlaWTX said...

I understand the conflict...

I do a lot of online shopping & I like the ones that don't bother with sales tax - but just cuz I am cheap!

AndrewPrice said...

Jed, The states with warehouses and distribution centers, etc. do imposes taxes on places like Amazon. The ones without these connections are the ones who can't impose the taxes.

That's why California is now reaching for these small partners. In fact, they are even arguing that things like the high tech companies who write the software for the Kindle should be considered a nexus.

But that would be the same thing like saying Jed has contacts in Colorado because he gets his news from Andrew in Colorado or because he buys onions that come from a Colorado farm.

AndrewPrice said...

Stan, I was pretty stunned to see that the number is still so small as well. I would have guessed at least another zero on the end of that.

Collection at the point of sale makes sense, but where is the point of sale for an internet company? Is it in the home or at the distribution center?

This is actually a bit of a hiccup in the sales/fair tax idea that does need to be sorted out.

AndrewPrice said...

DCAlleyKat, There is definitely a sense feeding the beast to this argument. States like California have made it unprofitable for companies to stay in California, so now they want to reach out into other states and get the companies that have moved beyond their reach.

That tends to swing me away from letting states like California do this. I am concerned that they would use this to start imposing their monsterous tax schemes on other states and destroy businesses there as well. Not to mention, if they can do this, what else can they do? Impose labor or environmental laws?

All that said, I do see the problem that retailers face and I don't like the idea that retailers will die out? (Assuming they will.)

This is a tough one.

AndrewPrice said...

Thanks DCAlleyKat! It's good to be home! Very good!

LawHawkRFD said...

Andrew: Taxing sales under the warehousing law is fair, and I didn't object to that. At least there is some connection with the seller and the state. But California (as usual) went too far to pay for its welfare programs by taxing manufacturers and sellers who have no connection to the state other than shipping something into the state. I hate granting the feds their due, but interstate commerce belongs to them, and the states need to collect their taxes from their own residents and businesses. Long-arm statutes have been problematic since their inception.

AndrewPrice said...

Joel, That's a good point. And maybe the best solution would be to force states (and retailers) to adjust their models rather than letting them attack the internet?

I am particularly concerned that if states get to do this, then what other rules and regulations will they be allowed to impose? For example, supposed California decides "we impose a $20 per hour minimum wage on our companies, anyone who sells in California should be forced to do that as well."

I've seen them try things like that to keep businesses from moving to places like Mexico already. So far it's only worked with things like emission control because of the need to register the product before you can use it. But I could easily see things like that becoming the next step. Then California gets to impose it's stupidity on the rest of the country rather than being forced to fix it's own lunacy.

AndrewPrice said...

rlaWTX, I love the no tax and free shipping places. I really do pay attention to that because if I'm going to shop on line and wait for it to arrive, then I want a discount and that's the discount to me. I hate buying something for $20 and the price turns out the be $27.34. That really angers me.

So as a shopper/consumer, I want the states stopped.

On the other hand, I don't want this to kill off the retailers either and right now that seems to be what is happening -- at least with book stores, that's been the case.

AndrewPrice said...

Lawhawk, I agree. This really should be a federal issue if it's an issue at all.

And you're right about the long arm statues. I've seen judges pull companies into state courts just because they sold good to a national retailer who them sold them within the states. I've also seen judges declare that a trucking company that bought $10 million in fuel within a state and had 3 lots where they kept old trailers wasn't doing business within the state. It's just a jumbled mess.

AndrewPrice said...

By the way, I don't know if anyone has paid attention to this, but the economic data and the behavior of the stock market are looking like we're headed for a serious double dip recession. What's interesting is that we're following the same path as the Great Depression, which contrary to the simplified history, also saw fake-recoveries.

Joel Farnham said...

Andrew,

Book stores? Do you mean the humongous book retailers who regularly hide conservative books and cater to the arugula eating, cafe-mocha drinking, uber-professional, oh-I-am-so-smarter-than-you crowd? Those book stores?

The only ones I see dropping out are the ones who aren't jumping into the Internet. Like Borders.

Retailers that don't easily lend themselves to the internet are food stores, hardware and lumber stores, clothing stores, and restaurants. These are adjusting quite nicely to the internet.

Books on the other hand are being written to be read only on the internet. Now, I do like a book in the hand, but I like the Kindle price better.

AndrewPrice said...

Joel, Yeah, those book stores... although, I have a grudge with those guys too. We used to have a couple of great local book stores. They had everything and they were very nicely set up. It was very pleasant to go there and browse.

Then came Borders and B&N and they pushed this company out of business by selling fewer titles, but selling them a good deal cheaper.

So in that regard, I have little sympathy for the big guys like Borders who are failing. But on the other hand, I do like having book stores around.

I'm hoping that the collapse of these book book stores might open the door again for the return of the local book store, but who knows?

AndrewPrice said...

P.S. You're right that certain retailers simply don't lend themselves to internet sales -- food, cars, lumber. But that's just a small portion of the retail world.

Joel Farnham said...

Andrew,

I know. The local bookstore was so cool to go through. I could talk to the guys and get them to buy what I wanted. Until Tower Books decided to emulate the larger chains, it was my goto store.

I envision the local bookstore will come back into vogue but not selling new books. Older books only. And internet access for the new books should a customer want to get one. That way, bookworms can get their enjoyment. :-)

I understand my list isn't the end all, be all of retail.

AndrewPrice said...

Joel, Our local book store (had three locations) was great. They had all the new stuff, lots of older stuff, a whole section on Colorado, and just a great "deep" selection of books. Borders has many more books, but it feels very shallow -- only the most popular books of the most famous authors. And they never had much in the way of local interest.

I think the book store model can work, they just need to come up with a new set of services -- something the internet guys can't match.

If the small book sellers were smart, they would band together into a buyers club to get discounts. Then they would computerize so that they could locate older/rarer and used books, i.e. become a book finding service. Then they need to find some other service that gets people paying money while they browse, like the coffee bars -- maybe even partner with local coffee shops and try to locate right next to each other.

I've wondered if they couldn't act a bit like a commercial library for some of the newer books by letting people borrow them for a fee?

I don't know. But I'd like to see them come back.

Right now we have some used book stores in town. They seem to be surviving, but they don't seem profitable and they are very unfriendly to consumers.

Ed said...

Andrew, I favor anything that reduces tax revenue! :D

AndrewPrice said...

Ed, I can't argue with that. LOL!

Tehachapi Tom said...

Andrew
First off glad your experience with hospitals was good and you are ok. secondly My personal experiences with hospitals(for family members only so far) has been good to excellent also.
You did not pose the view from the purchasers point.
I have found that in most cases e-purchases from any company are not all that much less costly. Maybe no sales tax but shipping is added to the price. When an e-purchase is from an in state supplier then you get tax also.

AndrewPrice said...

Thanks Tom.

On the purchasers, it depends on the company and the product. I've found huge discounts on lots of things online, but other things have been about the same as in stores. I think online sellers are generally cheaper for small, generic items (like books, CDs, electronic gear), but are not so good with larger items.

The other advantage the online guys have is that they offer a lot more variety than the locals. I've always been able to find what I want online, whereas retails play games with what brands they will carry and then they don't carry anything that isn't a big seller.

BevfromNYC said...

NY tried something similar with interstate sales tax many years ago. Some brilliant person in the NYC finance office realized that there were many people going over the border into NJ because the sales taxes were much lower and in some cases like clothing, there was no sales tax.

At first they actually had the really brainiac idea to take down all of the license plate numbers of any NY cars in NJ mall parking lots and send the owners strongly worded messages that they needed to pay NYC/NYS sales tax on any items they purchased in NJ. They called it a "use tax". Some other brainic reminded the stupid brainiacs that people were free to purchase from any state they wanted and NY had no right to mandate an additional tax.

Then yet another set of brainiacs decided to take the "if we can't beat them, join them" approach and suspended sales tax on clothing in NY. THey did a voluntary "Use tax
line on the state tax form to list the amount to be added to ones taxes for any items purchased out of state. Hmmm, I always for get to keep track...

If I had an internet business and the state I warehoused my products was going to charge an extra sales tax, I'd move my warehouse to a more tax friendly area. Well, like what is happening in CA. Why do they think people and companies are flocking to Texas?

T-Rav said...

Whenever Democrats (or politicians in general, really) come up with an Act that has "Fairness" in the title, you should run. That's my thoughts on the issue.

BevfromNYC said...

Andrew - I think most people shop online for convenience, more than savings.

LL said...

I didn't buy from California merchants when I was buying from Amazon before the California embargo because I had to pay 10% more. They collected from me because I'm a California resident.

And when the Federal Government cracks down on the Internet, wait for the on-line businesses to move to a NAFTA country like Canada or Mexico.

T-Rav said...

On the books thing (note to self: read the comments before posting), I've grown up with chain bookstores like Borders and B&N being the norm, so the prospect of them closing may hit me a little harder. I have been to some smaller bookstores, but they're often very trendy and not overly reliable. A few of them are quite nice, though.

Mainly, I just react against stuff like Kindles as a threat to all books. I never can understand why people would prefer staring at a computer screen rather than have an actual book in their hands. I have this in front of my face too much as it is, so material pages are a needed relief. I don't get it.

AndrewPrice said...

Bev, Several states have done that with the license plates. I knew someone from Delaware who said that New Jersey and Pennsylvania both send tax enforcement snoops to the malls to write down drivers license numbers. At one point, they tried to get credit card record related to these people, but that failed.

I agree about moving to a tax friendly state. Why would you stay in a place like California?

It's no accident that the tax friendly/lower regulation states have all been booming businesss-wise and the uber-controlling liberal states are bleeding businesses.

AndrewPrice said...

T-Rav, Yeah, I had that thought too. Anything a Democrat does with the word "fairness" in it, is guaranteed to be extremely unfair and destructive. They are a horribly destructive bunch.

AndrewPrice said...

Bev, I think that's a big part of it. I know when I'm looking for something like headphones or an MP3 player or something, I don't want to go marching from store to store hoping they have the model I want... I just order it on line and it shows up at my house!

America! What a country! :-)

AndrewPrice said...

LL, That's true. A bill that lets states hit businesses in other states could easily become the "Mexican Warehouse Improvement Act."

If businesses are already ready and willing to move around the US just based on taxes, why not move to Mexico? And you can bet that Mexico would be happy to take them.

On avoiding California merchants, that's rational and I expect a lot of people probably do that. Why pay 10% more when you don't have to by just finding a different merchant?

AndrewPrice said...

T-Rav, I thought the same thing about the Kindle, but I decided to give it a shot and I really love it. First, it doesn't look like a computer screen. Secondly, the convenience is great because I've got dozens of books on it. So I can switch around and read whatever I'm in the mood for. And if I want something new, I can just go buy it within seconds. Finally, it's like and easy to read and I honestly don't miss having to hold the page in a way that I can read them without breaking the spine -- none of that is an issue here.

On the bookstores, the one we had locally was really rather large -- probably about as big as a Borders or B&N. But their selection was better. They had less trendy and more depth. But they died off. And now their replacements have died off.

(We did and still do have a hippy book store downtown, but they don't interest me -- small, left wing selection, very expensive.)

Joel Farnham said...

Andrew,

The cost of doing business means that the size of real estate of the item and the popularity of the item and actual cost to the business controls what gets put on the floor in any given store.

Fluidity is very important when deciding which piece of inventory gets selected. Best sellers have a high fluidity. Unique items don't. Remember as long as a unit stays in inventory, the money paid for it is locked up.

Retail real estate where customers can browse around is very expensive to rent unless you own it. Warehousing the unique items close by is the usual norm. It is why the better companies buy the real estate under the stores, shops, restaurants etc. To keep costs down.

Also, the richest people own real estate first. They have what is known as profit centers on top them. It doesn't matter to the owner what is on top, just as long as the unit pays rent. As long as an owner keeps sight of this, he or she won't go far wrong.

BevfromNYC said...

T-Rav - I understand your reticence with E-books. I was an E-Book denier until I got my Ipad. I dont' think that I would buy an e-book on a topic I wanted to share, but for summer/beach reads, it's great. It is especially handy with newspapers. I just download in the morning and I'm set. And as long as I have a wireless connection, I can get my newspapers even when out of town. Do I feel guilty about putting people out of jobs? Yes, but then there aren't many buggy and buggy-related industries anymore and yet the world still goes round.

What I do miss with E-books is sharing. You can't read a good book and then pass it on. There will no longer be ancient discoveries of old books, just like there will never again be discoveries of long lost letters from great, great, great grandparents found tucked in some drawere either because of email. History will be lost...

AndrewPrice said...

Joel, That's true. But there was a huge difference in terms of the quality of the offerings.

For example, Borders had lots of copies of all of the NYT best sellers and whatever else was being pimped by the industry at the moment. It also had the big sellers of the past -- like The Lord of the Rings.

By comparison, our local shop had fewer copies of the NYT best sellers and the best sellers of the past. Then they would fill in the extra space with copies of things you would never find at the bigger stores.

For example, they wouldn't just have the top 3-4 Agatha Christie books, they had the whole set. They also had whole sets from authors who were no longer famous, but had a good catalog.

The difference felt like this: at the big chain book stores, they were selling popular product at volume. At the local shop, they were selling books.

AndrewPrice said...

Bev, That's true. Plus, it's hard to put kindles on your shelf -- I like decorating with books.

I think it's unlikely that books will ever totally die off because there is just something special about them. But I do think that the summer reading type books will probably vanish in book form because of the kindle.

For one thing, it's just too easy to be able to carry 10-20-300 books with you without having to find room in your suitcase. For another, I suspect most people see those books as throw away entertainment.

I also think magazines and newspapers will eventually become electronic only. That would save them a fortune in printing and distribution and opens the door to personalized advertising.

rlaWTX said...

"Whenever Democrats (or politicians in general, really) come up with an Act that has "Fairness" in the title, you should run. That's my thoughts on the issue."

Amen!

Oh, and a ditto on your Kindle vs books feelings... although lately, I've been considering the jump...

USS Ben USN (Ret) said...

If main street retailers think it's unfair that they have to pay more taxes than e-tailers then I suggest one of two things:

1. Work to get your state taxes lowered.
2. Move to a state that's business friendly, like Texas.

Otherwise they shuolf just STHU, because imposing their state taxes on out of state businesses won't solve their problems and it reeks of envy and hypocrisy.

The problem is out of control and irresponsible state spending.
Businesses can send a powerful messagew by moving out of states that are always looking for new sources of revenue (ie taxes).

Boeing has done that by moving a lot of their operations from Washington to South Carolina.
Of course, leftists are enraged and Obama is using the NLRB to punish them, but that shouldn't deter businesses from moving to responsible states that understand that businesses are good for business.

The only way we can stop this newest money grab from states is to punish leftists and throw the bums out!

More GOP candidates need to ask voters if they are tired of the party that always increases taxes, fees, levies, tolls, etc..
And if they are tired (and the vast majority are) vote for the candidates that wanna lower all these draconian costs that consumers (voters) have to pay.

Most people don't understand (or wanna understand) politics, but everyone is interested in getting more of their own hard earned money and spending it the way they want.

Hope you're feelin' better Andrew.
Good to see you back! :^)

AndrewPrice said...

rlaWTX, If you know someone who has one, borrow it and try it for a couple days. I was very hesitant to make the jump myself, but I'm really glad I did. It's been incredibly useful and has actually increased my reading by a good amount lately.

Joel Farnham said...

Andrew,

You forget, the cost of doing business. The cost is also the human beings to take care of the customers and the inventory as well as making the rent.

When a company cannot make the rent, it moves or folds. If the use laws of the real estate changes, the company, if wealthy enough, and fast enough moves. This is when you see a business relocate.

Quite frequently a company that owns the land splits itself into two companies. The business on top and the land underneath. This is when you see a small strip mall that has multiple businesses when it used to have only one large business. All the businesses pay one company rent.

This is also why Proposition 13 tax revolt happened. Property tax, which is the ultimate rent paid to the local government, went up too high during the 70s. This precipitated a general tax revolt and shut down most of government. Since then local government has been made to do with less. Part of the reason why the local governments are going under is that the Federal government is sloughing off it's obligations onto the states.

Now, the feds are a different deal altogether. The feds get mostly the taxes from people directly through payroll taxes. In saner times, this means that the Feds should do all that they can to facilitate businesses to hire people. With Obama and Company, they insanely attack, demean and restrain businesses.

This isn't that complicated. It is made complicated by the MEDIA and politicians.

Now the reality is the internet has taken over retail functions. The reasons are mostly it costs too much to do business any other way. You can thank the government with it's short sighted, greedy bureaucrats.

USS Ben USN (Ret) said...

StanH said...
Only $10Billion? …hell I think my wife does that monthly.


LOL! I feel your pain, Stan! :^)
I'm surprised it's only 10 billion.

As for shipping costs, Amazon shipping is free if the order is over $25. Not a bad deal.

AndrewPrice said...

USS Ben, That's a great point -- that this is just an attempt to stand in the way of the message businesses are sending governments. And ultimately, this seems to be a problem only for high tax states -- as the rest don't really seem to care. So maybe the answer is to fix the state governments rather than try to "fix" the etailers, who really aren't doing anything wrong.

Great point about Boeing too. They've been slowly moving away from Washington for some time because of the labor laws. In fact, one of the strongest assets about the US is the ability to move when you don't like the state government. It would be a shame if the bad states could use the federal government to push their stupidity on the rest of us.... as they are doing with Boeing.

Soooo, all in all, it looks like Commentarama readers are opposed to letting states get away with this.

AndrewPrice said...

Joel, Good points. I think a lot of this is the result of distortion caused by the government. Property taxes push businesses outside of towns. Income taxes push businesses outside of states or beyond the country. Income tax discourages working. Minimum wage laws and employment regulations discourage hiring. Environmental laws and other regulations discourage expansion and manufacturing.

All of this has consequences. All of this distorts the market and leads to companies making decisions they wouldn't normally make in a free market. Unfortunately, rather than eliminate the distortion, the liberal answer is always to try to create a new distortion to eliminate the first distortion. That, of course, then causes other unintended consequences. Before you know it, the regulatory scheme is such that only a few favored businesses can continue and the rest have no choice but to move or close.

That's why California and other liberal states are in such trouble and why such deregulated states (like in the South) are not.

AndrewPrice said...

USS Ben, I was amazed it was that small as well. I would have guessed at least another zero on that.

I love free shipping. To me, that's the biggest draw.

Joel Farnham said...

Andrew,

Oh, and what I speak of should be taught at the high school or junior high school level. It won't happen because schools are designed to create drones even when Conservatives are in power.

AndrewPrice said...

Joel, That's true. Schools are busy teaching a simplified (wrong) version of economics based on Keynesian thinking and the idea that the government either does not harm or can help a market. The truth is that the government can only distort a market, and almost never for the better.

This should be taught in schools. Unfortunately, as you note, even conservatives aren't good at making these points.

USS Ben USN (Ret) said...

IRT main st. retailers:

I'm getting sick of the "it's not fair x company is making a profit and we ain't because x company is selling their products cheaper, for whatever reason.

Main st. retailers and even mom and pop stores can survive if they get creative, but most don't wanna change.

How do the smart one's survive and make a profit?

1. Sell stuff people want that the big retailers don't have, or don't have much variety of.

2. Sell stuff that's more reliable.
Tired of made in China goods that are bad? Pissed off because the made in China stuff has idiotic directions and parts that don't fit?

Buy our reliable made in USA, South Korea, Japan, Taiwan, etc., products with more rigid quality control!

3. Sell stuff that doesn't require "some assembly required" and save yourself a huge headache and several hours of labor!

I've seen mom and pop and small retailers do this and they are successful. It can be done unless the owners are stupid...I mean, business challenged.

Let's face it, some folks ain't meant to be business owners, but we tax payers shouldn't hafta bail them out because of their lack of creativity and/or stupidity.

AndrewPrice said...

By the way Joel, I just saw a headline that shopper in Arkansas went crazy on the first tax-free day they've had. Imagine that... drop the taxes, people start buying. Hmmm. I'm sensing a pattern... a conservative pattern.

USS Ben USN (Ret) said...

IRT the double dip recession, I concur Andrew.

Obviously the leftist statists didn't learn from the history of the Great Depression and how FDR made it far worse, so they are doomed to repeat it.

Putzes!

Joel Farnham said...

Andrew,

I heard that too. It is a start, but Obama won't understand it and the Democrats/liberals/socialists/media will hate it and demonize it.

StanH said...

Yeah Ben, and all the damn boxes, it’s like their breeding. Amazon will send something like a hair curler in a box 20 x 24 x 8, and easily could have been shipped in a box 10 x 12 x 4 or a padded shipper envelope. Wow!

Joel Farnham said...

Ben,

I agree. Unfortunately, we have people in power who believe in fairness for their own friends.

AndrewPrice said...

Ben, Excellent point. And that's really the problem -- they don't want to change.

Look at electronics. We had two electronics sellers in town before Best Buy and Circuit City moved in. BB and (now defunct) CC sell the most popular models of the most popular brands. That's it.

One of the local guys tried to offer "service" by which they meant that they knew their product better than the trained monkeys at BB/CC and they could help explain what you needed. He failed because no one saw this a valuable service.

The other local guy changed his product line to high end stuff that BB/CC didn't care, i.e. they got snooty. They got an installment section who would come to your house and help you set up your theater or stereo room or whatever they wanted to call it. They're still around today.

The difference is that the one only tried to change their sales technique. The other changed their business model to offer something you couldn't get from the box stores.

Whenever someone complains that they can't compete, it's because they aren't doing it right. If they would look at their market, find the right niche, find the things they need to add to lure people back, there is always a market.

And you know where you really see this is in the restaurant biz. Mom and pop shops who expect to get by on "we're locally owned" don't live very long. The ones who survive are the ones who offer what the chains don't. Colorado Springs is actually crawling with great non-chain restaurants because people here get that. Other places I've been have become nothing more than chain restaurants because the people didn't get that.

AndrewPrice said...

USS Ben, It's amazing how unwilling they are to learn from history. FDR's own Treasury Secretary said that their attempt at "stimulus" only made things worse. But they don't want to learn and they don't want to hear that they might be wrong.

AndrewPrice said...

Joel, No doubt it was the private sector faking its numbers to make Obama look bad!

AndrewPrice said...

Stan, It is amazing how many boxes they will send and how big they will be for such small items.

AndrewPrice said...

Joel, Well put. They equate "fairness" with "spoils."

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