Prop Zero
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Amazon Offer A Bad Deal for California

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    NEWSLETTERS

    Amazon.com, having bungled California politics and government, finds itself stucking spending millions to qualify a referendum of legislation that forces it to pay sales tax, just as brick-and-mortar retailers do.

    That referendum may not even be enough, since the legislature is moving to pass new legislation that will do the same thing -- but won't be subject to referendum.

    So Amazon, in its desperation, is trying to buy the state off -- offering to build distribution centers and hire 7,000 or more workers here in California.

    The proposal has mostly been dismissed.

    That's a principled stand. A company shouldn't be able to buy itself a special deal on taxes -- it looks like a bribe. (Though, of course, companies do exactly that all the time).

    Bu let's take a more interesting approach to the Amazon offer -- an unprincipled one.

    Is this a good financial deal for California?

    No way. Estimates vary, but at the low end, the state is losing $200 million a year in uncollected sales taxes under this law. So how many workers would Amazon need to hire to make up that money in, say, income taxes?

    Well, according to public sources, distribution center workers for Amazon typically make around $13 an hour.

    Let's assume they all work full, 40-hour weeks -- which would mean annual salaries of $27,000 a year. Taxes for people at that income level are 6 percent in California. Assuming no deductions -- that's income taxes of $1620 a year.

    How many workers would it take to get to $200 million? About 123,000.

    Which makes a natural counter-offer to this bid.

    Of course, Amazon had, as of 2010, more than 26,000 employees.

    So there's probably not a deal here.

    Let us know what you think. Comment below, send us your thoughts via Twitter @PropZero or add your comment to our Facebook page.