CO Democrats' Internet tax takes another step forward -- toward their own electoral destruction

One of the Democrats' "Dirty Dozen" tax hike bills is a measure which would change the definition of doing business in Colorado so that many sales by Internet companies would be taxable. In particular, if a retailer used a Colorado-based "affiliate" who advertises for the company, the state would try to tax any sale by the company in the state. The measure, HB 1193, passed its last state Senate committee today (and passed the state House last week). It will soon go to the full Senate for a vote.

As scary as the concept of trying to force Amazon.com to collect sales tax on many things you buy from them is, just as scary is the bill's proposal to create a subpoena power by which the state's Department of Revenue claims to be able to demand documents from out-of-state Internet retailers and even demand that the retailer send a person to Colorado to answer questions. Further, if that if the retailer doesn't send the subpoenaed person, the Department of Revenue can ask a judge to issue an arrest warrant for him!

Overstock.com is already warning affiliates that the company "will have to sever relationships with Colorado Affiliates before the bill becomes law."

I wish I were kidding you, but I'm not.

[An interesting discussion of the constitutionality and likely impact of the law can be found HERE. The bottom line is that while the law is almost certainly unconstitutional, many online retailers will likely choose to just end their affiliate programs rather than spend money on lawyers.]

And if all that isn't enough, the Democrats are arguing that the bill "is necessary for the immediate preservation of the public peace, health, and safety." The purpose of this "safety clause", which Democrats are attaching to all of their tax bills, is to (1) prevent the ability of opponents of the measure from sending it to the people to vote on as a referendum, and (2) allow the bill to take effect immediately upon the governor's signature rather than at least 90 days after the adjournment of the General Assembly (a period during which a referendum petition can be filed.)

I asked Senate Minority Leader Josh Penry "How can Dems be this stupid? They're passing things which will possibly cost them control of both houses of the General Assembly and the governorship in 9 months..."

Senator Penry responded as follows:

I had exactly that same conversation with a Democratic friend on the floor. They will get no cash, they will cost people jobs, and they'll put make themselves among the first in the history of humankind to make the Internet a big tax target. It's not insanity. These people are smart. It's arrogance.

In my view, it's also unenforceable and probably unconstitutional. (But who cares, right?)

The Democrats are trying to pass a dozen tax hikes simply because they have no backbone when it comes to spending, particularly when it comes to the most obvious place to look: the cost of operating government. Bill Ritter hired a couple thousand government employees after he instituted a hiring freeze. Government worker salaries are going up while the rest of us are tightening our belts. This has to stop.

The Republicans in the State Senate are a group Coloradoans can generally be proud of (much more proud than Americans overall can be of those serving in our federal Senate).

Yesterday, in what struck me as someone reading my mind, the proposed the Taxpayer Protection Act of 2010, which calls for a 0.24% across the board cut in state employee compensation and then a 4.39% across the board spending cut next year, "giving first priority to eliminating non-essential and vacant government positions, and in pay cuts to state employees primarily making more than $100,000."

The bill, which would not impact teachers, will "eliminate the need for Democrat proposals to increase taxes by $17.8 million in the current year and $306 million next year." According to Senator Penry, the Republican proposal would also restore the senior homestead exemption and the "vendor fee."

This is not brain surgery. Our state government has gotten unbelievably bloated under Governor Ritter, despite a fictitious hiring freeze. It's time for government to work smarter, smaller, and more efficiently, just like most of us in the private sector must during difficult economic times. They've been using this appropriate quote:

“Don’t make me fire my employees so you can hire more.”
Rick Enstrom, Owner, Enstrom’s Candy, Colorado-based business

In a press conference on the measure, the Republican Senators noted that their proposed cuts are smaller than those proposed by the Democratic Governor of Montana, Brian Schweitzer, who recently ordered a 5% across-the-board cut in state agency budgets.

Even soon-to-be-unemployed Massachusetts Governor Deval Patrick has called for cutting 2,000 jobs in the Bay State.

But all our Colorado Democrats can do is try to tax internet sales, software sales and downloads, energy, soda, and candy. Remember Penry's words: Not supid, but arrogant. I think it's a little of both.

As Coloradoans tighten our belts while watching our Democratic government expand the size and cost of government at our expense, I believe Colorado's Democrats are soon to reap the whirlwind.

  • Steven E. Kalbach
    Comment from: Steven E. Kalbach
    02/05/10 @ 04:31:57 pm

    I swear what I think is these people want a war. What they'll gain I don't know...but I really think that's what they want.

  • Mike Garner
    Comment from: Mike Garner
    02/05/10 @ 05:32:54 pm

    Great analysis! As an owner of a primarily online based business in Colorado, this is hitting a little too close to home. I can tell you that most of the people whom this new tax will have an impact upon are young, middle class, and tech savvy. It will be interesting to see their reaction, and how it will affect online campaigns going into the elections this year. As for me, the day Colorado taxes internet retail sales, is the day my house goes on the market. I am sure I am not alone.

  • Rich Toyota Prius S
    Comment from: Rich Toyota Prius S
    02/06/10 @ 03:12:40 pm

    I sit on the Board of Directors of a Colorado-based marketing affiliate for many online retailers. The "Amazon tax" as HB 1193 is being called, will not raise a single dime for the State. It will lead to layoffs. Marketing affiliates are basically advertising agencies for online retailers. If this bill passes in its original form, online retailers will simply fire Colorado-based advertising companies, and hire those in the 46 states that don't have this type of legislation. No sales tax revenue will be raised. No Colorado industries will be helped. The only result will be layoffs at Colorado-based advertising agencies. This bill has to go.

  • Blacque Jacques Shellacque
    Comment from: Blacque Jacques Shellacque
    02/07/10 @ 05:12:20 am

    As Coloradoans tighten our belts while watching our Democratic government expand the size and cost of government at our expense, I believe Colorado’s Democrats are soon to reap the whirlwind. Good. And may Democrats everywhere else receive a pummeling as well.

  • art poster
    Comment from: art poster
    07/16/10 @ 04:41:07 pm

    So essentially, the democrats are going to add an internet tax. Personally, I don't know if that's a good idea. I think while there might be people who will deal with the tax, there will be even more people who will move their stores or locations to somewhere overseas, where there is no tax. D: