Dan Walters

By Dan Walters
Published: Sunday, Jul. 24, 2011 – 12:00 am | Page 3A

Professional political operatives are salivating over the prospect of a deep-pockets ballot battle between Internet colossus Amazon and brick-and-mortar retailers, including megaseller Wal-Mart, over California’s bid to impose sales taxes on online transactions.

Amazon has filed a referendum that would challenge the state’s new tax law by placing it before voters next year, and the political pros see jillions in campaign management fees.

Whether those high-dollar fantasies become money-in-the-bank reality, however, is very unsettled.

Amazon could be merely buying time, spending a few million dollars on a petition signature drive that would suspend the new law until the June election – assuming that a looming legal challenge doesn’t invalidate the referendum.

It’s also uncertain whether the big retailers such as Wal-Mart would devote the many millions of dollars that a full-fledged anti-Amazon campaign would require.

However it turns out, taxing Internet sales is not very important to California’s government finances – a few hundred million dollars in a state budget that approaches $100 billion.

Mostly, it’s symbolic of a rapidly changing consumer economy and its widening disconnect with an outdated sales tax structure.

Three decades ago, when Jerry Brown was serving his first stint as governor, taxable retail sales were the equivalent of more than 50 percent of personal income, and sales taxes were the state’s largest revenue source.

Today, taxable sales are just a third of personal income, and income taxes far outstrip the sales tax as a revenue source, even though sales tax rates have been raised several times.

The state’s consumer economy has shifted to non-taxed services and, to a much lesser extent, online sales. Or to put it another way, were taxable sales at the same relative level today as they were in 1981, the state would be getting another $20 billion a year in revenue, thus wiping out its chronic budget deficit.

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