The Consequences of Being Irrational

This week California Governor Jerry Brown signed into law a tax on Internet sales in California.  His thinking (and the “Board of Equalization”) was that if they would just mandate that taxes be paid on internet sales in California then the state could collect a $200 million it doesn’t currently collect.

Immediately thereafter Amazon.com email 25,000 of it’s affiliates a termination notice.  Good for Amazon and shame on the Governor’s office and the “Board of Equalization” (a faceless government name seemingly straight out of an Ayn Rand novel) for getting in the way of the free enterprise system.

Why do governments operate as if they live in a vacuum?  What did California government people think was going to happen?  It’s 2011, why do governments think that all they have to do is raise taxes to raise state revenue.  If they want to raise state revenue, they would lower taxes and generate more velocity of money (lots of repetitive economic activity) in their own backyard economy, which would in turn generate more tax revenue.

California seems to be doing everything it can do drive business and businesses out of California. This is just the most recent example of failed centralized economic planning from people not in the private market but who think they should have some all powerful dominion over the individuals in the private market that actually work productively and truly support families.

No entity is more irrational and nothing destroys like government.

The best line in this article on the story tells it in plain English – “Board of Equalization Member George Runner blasted Brown for signing the law. “Even as Governor Jerry Brown lifted his pen to sign this legislation, thousands of affiliates across California were losing their jobs. The so-called ‘Amazon tax’ is truly a lose-lose proposition for California. Not only won’t we see the promised revenues, we’ll actually lose income tax revenue as affiliates move to other states.”

Think about that.

Bureaucrats seem to have a very hard time understanding the unintended consequences of their “actions”.

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