Thursday, September 1, 2011

The battle between our lawmakers and Amazon rages on

By Associate Clinical Professor Jessica Levinson

This op-ed was originally published in the Los Angeles Daily Journal.

One hundred years ago California voters approved a sweeping set of governmental reforms, which included the introduction of the initiative, referendum and recall. Those reforms were aimed, at least in large part, at giving power to citizens. The initiative, referendum and recall were instituted to allow citizens to check government power, particularly in the case of legislators too cozy with special interest groups.

So one has to ask, when progressives pushed their reform package through the Legislature, could they have predicted that those reforms would be high jacked by special interests groups that were seen to pose a threat to the integrity of the electoral and political processes? While the names of those attempting to influence the government have changed - the 1911 reform package was enacted in large part as a response to the growing power of the Southern Pacific Railroad over the state government - the concerns about their power remain the same. Instead of worrying about the power of a railroad company over our elected officials, we can now ponder the influence of brick-and-mortar and online retailers, like Wal-Mart, Barnes & Noble, eBay and Amazon.

The process meant to empower citizens to check the power of their public servants also allows any group with the ability to raise $2 million to counter legislative decisions, both good and bad (rare as they may be, it is still possible that our lawmakers make good public policy decisions every now and again) by threatening to overturn those decisions at the ballot box.

One of the latest ballot box battles centers on the so-called "Amazon Tax." When California lawmakers enacted a budget for the current fiscal year back in June, that budget included a tax on online retail sales. The tax would raise an estimated $200 million in revenue. Quite understandably, Amazon is none too happy.

Amazon immediately promised to endeavor to qualify a ballot measure, a referendum, which would overturn that tax. Amazon has laid the groundwork for a measure appearing on the June 2012 ballot.

In terms of money, this has become a David and Goliath tale of the lawmakers versus the online retailer. At this point in the campaign, nine months before the June election, Amazon has spent more than another company in the last decade. How much? Over $5.25 million.

That Amazon is flexing its political spending muscles this early in the campaign could show its willingness to spend upwards of $50 million - near the amount that PG&E spent last year in promoting an unsuccessful ballot measure. (Unlikely as it is, the real irony would be if Amazon spends more than $200 million on a ballot measure campaign). In addition, Amazon's willingness to spend big money doesn't hurt its effort to scare off opponents.

Democratic legislators are now seeking to spoil Amazon's effort. Whether they will succeed is another matter. Democratic lawmakers are essentially trying to re-pass the same online tax contained in the budget, but with an "urgency" clause. Specifically, Democrats are attempting to repeal the law enacted as part of the budget and enact a new version.

The presence of an urgency clause means both that the new bill would have to be approved by two-thirds of members of both legislative houses (as opposed to the simple majority vote needed to pass the original bill) and that the bill would not be subject to a referendum. Bills containing urgency clauses must also be "necessary for immediate preservation of the public peace, health or safety." A question for another day is whether or not this bill - which again, would raise an estimated $200 million in revenue - fits that definition.

How are Democratic lawmakers attempting to garner support? Democrats already have brick-and-mortar powerhouses like Wal-Mart and Barnes & Noble on their side. Democrats have also written the bill to make it palatable to the uber-powerful online auction house, eBay. The new proposal would exempt out-of-state eBay sellers who do $1 million worth of business per year in the Golden State. The exemption contained in the existing law is half of that, $500,000.

Still, the hunt for Republicans willing to vote for a tax of any kind presents something akin to finding a needle in the proverbial haystack. Democrats need just two Republicans in each legislative house to support the plan. History has shown, however, that obtaining those four votes will be an arduous task. For instance, but for one Republican in the Assembly, only Democrats voted in favor of the online tax that passed in June. Indeed, underscoring the difficulty of obtaining bipartisan support, the Senate Appropriations Committee approved the plan without any Republican support - by a vote of 6-3.

The Legislative session winds down on Sept. 9. By then the ping pong match between our lawmakers and our online retailer will come to at least a temporary end. If Democratic lawmakers are successful, however, that does not leave Amazon without a ballot option. Amazon could still seek to circulate an initiative.

And of course, Amazon could always take its battle to court.

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