State Lawmaker Wants to Tax Facebook Gifts, and iTunes Music? OMGWTF?

Thank God for term limits, loopholes in term limits, and a perpetual budget “crisis” in Sacramento, for it allows California’s well paid lawmakers to invent new and improved ways to to invent half-assed ideas and “solutions” that just create more problems.
We saw it last year when the state Assembly voted to gut MUNI funding (and funding for every mass transit agency in the state), all the while cooing “green” to the cameras. Today, we have the strange case of Assemblyman Charles Calderon, who’s eager to tax America’s #1 music retailer, iTunes (and apparently all those little dollar gifts on Facebook as well).
To do so, however wants to avoid the 2/3 vote in the Legislature, because well, he’d need some Republicans to vote for it. So instead, he’s trying to get some wording changed in the code that governs sales taxes, which mandate that to levy a sales tax on something, it has to be something tangible, in Our World, as opposed to the virtual world. (i.e. that rubber ducky you bought your high school friend on Facebook should be taxed the same as if you bought one at the dollar store.) The advantage to this back-door approach is that you only need a simple majority to rewrite code language. Clever, but not particularly honest, since the effect would be to, um, levy new taxes on consumers.
First, let’s tackle the politics of this little gem. Ya see, the state of California’s budget system is a joke, hepped up on mandated spending (courtesy of the voters) and mandated debt (all those *@#$! bonds, also voted on by the voters), and the usual Dumb Things Legislators and Governors do. We’ve heard big talk from Gov. Doofinator for years, but after all this time he’s done nothing besides pile on bond debt like crazy. The revolving door of legislators, term limited (thanks, voters!) doesn’t help much either – everyone’s so busy looking ahead to the next job, they really don’t do anything productive to get past the BS and find some honest solutions.

Thanks to some clever loopholes in the term limits law, re-treads like Calderon can continue to serve in the legislature, even though they have served way past the term limits imposed by voters.These “re-treads” have one advantage over their greener members, in that they have more experience to pull more shenanigans over and over and over again, and by the time anyone notices, they’re off to the next political office. Don’tcha love how term limits got rid of career politicians?
Now it’s one thing to sneak what is essentially a new tax with shenanigans – we expect that from our lawmakers. However, in his zest for “more money” for our broken state budget, he may be opening up an entirely unrelated can of worms, primarily in the world of online music sales.
When you buy a CD at a record store (surely you remember those places), the artist and the music company are paid out money based on long-held agreements regarding music sales of records and CDs.
However, when you buy from an online service, in many cases you’re not really “buying” a music product – you’re buying a license to use said music on your iPod, etc. instead.
You, the user don’t notice any difference, but the artists sure notice it. That’s because if say, Amazon sells “licenses” for music, they pay a much smaller royalty to the artists than if they’d sold said song on an actual CD. Online services could make the argument that tax code changes or not, they’re not selling a tangible anyting – just selling licenses, which would not necessarily be covered under Calderon’s proposed change.
Worse, it could end up forcing some online retailers to tack on taxes, but other could get around it, thus putting them at a disadvantage, all because someone in Sacramento looked at a quickie fix instead of a long term solution.
Can of worms time: If the state starts defining music purchases as a tangible item the way Mr. Calderon would like, one has to wonder if at some point this wouldn’t affect the royalty structure governing online music and video stores.
Many, many great legal minds work in the field of entertainment law either to avoid paying out royalties, or suing to get said royalties, and the whole business is insanely complex. Show of hands, folks, of all those who think that someone(s) won’t use a cocktail-napkin designed law to open cans of worms all over Hollywood, in the pursuit of cash.
There are better, and more comprehensive ways to control California’s spending, and stabilize revenues so we don’t go through these bust-bust-boom-bust-bust cycles again and again, and keep “cutting budgets” in meaningless ways that only end up doing long term harm to our state. It was hoped that term limits would have brought some new ideas to the table, but it looks like instead we got a double-dose of doublespeak from our Governor and Legislature. Surely we can send some better people up to Sacramento once in a while – this is California, after all!
Or perhaps…that’s the problem?
PS: For those of you who weren’t political nerds in the 80s, Chuck here was the guy who allied himself with the “Gang of 5” Democrats who tried to topple Speaker Willie Brown with the GOP. That didn’t exactly turn out as hoped for him, or other G5’ers, including Our Pal, Gary Condit.
I was actually in the observer’s gallery in the Assembly on the day of the vote, as I’d traveled up there to watch the swearing in of a candidate whose campaign I volunteered on in 1988. Needless to say, both the spectacle of the attempted vote, as well as some brouhaha on the GOP side, made for an electrifying afternoon, and Speaker Brown’s speech once he got re-elected Speaker was pretty good.

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