[redsymbol]

Oh come on. This isn't blackmail, it's offering an exchange that's win-win. California wants - actually, badly NEEDS - jobs; Amazon wants to avoid or at least delay the sales tax. They have every ethical and legal right to make the proposal.

If I'm selling burgers for $5, and you give me $5 for one because you're hungry, am I "blackmailing" you to get your cash?

Perhaps I'm missing something? If so, please point it out.

[mturmon]

There are two things you're missing.

First, Amazon has studiously avoided any effort to collect state sales tax. They use a variety of clever dodges to raise doubt that their design and development shops in CA amount to a business presence in CA. The "affiliates" program, recently shut in CA, was another such dodge. Same with the distribution centers being a "separate" company.

Then, when the state decides to go ahead with collecting something that is theirs to collect, Amazon tries to deflect it by raising a totally different matter (jobs in the state). The fact that they're not arguing their sales tax case directly, but threatening to pull jobs, is another aspect of the case you're missing.

I don't see how this is "win-win".

Here's a summary of the TX situation:

http://www.internetretailer.com/2011/05/16/texas-moves-ahead...

Featuring this choice quote which is replete with doublethink:

"We're committed to growth in Tennessee because the people here have demonstrated their commitment to Amazon jobs and investment," says Dave Clark, vice president of Amazon North America Operations.

[sliverstorm]

It seems to me this is not blackmail, but rather a perfect analogue to The Prisoner's Dilemma in game theory.

The fact that Amazon is posturing is inconsequential; the State is doing the same thing, and it doesn't really change the core question.

[joezydeco]

They're "blackmailing" the politicians by making it look like they don't want jobs in California. That's a pretty sensitive subject to be voting against...at least when Amazon frames the argument that way.

The reality is that the jobs brought in will amount to about 2% of the sales tax revenue that would be brought in. But do you think the public will understand the math, or the phrase "voted against job creation"?

[redsymbol]

How do you get the 2% number? From what I found, the Governor's office expects $200million in extra tax revenue per year from doing this [0]. 7,000 jobs [1] is $350million per year, if the jobs pay about $40K/year (which means the cost to the employer, after payroll taxes and overhead, is at least $50K... 7K * 50K == 350mill.)

[0] http://jan.ocregister.com/2011/06/29/amazon-terminates-deal-...

[1] http://www.forbes.com/sites/ericsavitz/2011/09/02/amazon-off...

[joezydeco]

The 2% was from an NPR Marketplace story I heard on the radio last night.

http://marketplace.publicradio.org/display/web/2011/09/01/pm...

"The state estimates sales tax would bring in around $83 million from Amazon alone -- $317 million from all Internet retailers. Income tax from Amazon's promised 7,000 jobs might add up to 2.5 percent of that."

What we're comparing here is how much sales tax California would pull in from online retailers vs how much income tax those 7,000 new workers would pay to CA. You can't compare the gross payroll amount to the sales tax.

[redsymbol]

Thanks for explaining. I guess it's hard for me to think of these things in isolation. Tax revenue is one factor in the equation; employment levels are another.

One thing the state presumably would like to do with the tax revenue is promote job creation. Having 7,000 extra jobs available would bring all sorts of great benefits to California - some of which are easy to quantify, and some of which aren't.

The whole situation reminds me of a little skirmish recently between the San Francisco board of supervisors, and Twitter. Twitter was willing to move its main offices to a slightly run-down section of San Francisco in exchange for some city tax breaks; otherwise, they'd relocate to (I think) Burlingame instead. Twitter was going to have those jobs SOMEWHERE; the only question was whether it was going to be in SF, or somewhere else. And it didn't make economic sense for them to set up shop in SF without the tax breaks.

Providing jobs in an area, as well as the local business benefits of those people spending their salary in that location, was expected to bring enough benefit that the tax breaks were given, and Twitter decided to stay [0]. A lot of people were howling about corporate subsidies, though.

This whole subject is near and dear to my heart. One primary goal with my own startup is to create jobs that help financially support people and their families.

And on that note, back to work ;)

[0] http://venturebeat.com/2011/04/22/twitter-san-francisco/