California Lawmaker Wants To Change Law To Tax iTunes; Pretending Infinite Goods Are Tangible
from the reality-is-meaningless-if-it-gets-in-the-way-of-tax-revenue dept
Slashdot points us to the news that a Los Angeles (surprise, surprise) area politician is pushing to change a California law that requires sales tax on the sale of tangible goods. He wants the law to be adjusted such that digital goods would be considered tangible goods so they can be taxed. Effectively, this is a way of applying a sales tax on iTunes downloads as a way to make up the California budget shortfall. Considering that the entertainment industry has been trying to convince the world that intellectual property is no different than tangible property, it's not surprising that a politician coming from LA would see no problem with pretending infinite goods are tangible goods. However, it seems likely that such a plan would backfire. If anything, it will push more people to look for alternatives (potentially unauthorized) alternatives if California forces an unwanted price increase on iTunes. Also, if the law starts treating digital goods as tangible goods, will that give people other rights -- such as the right to do what they want with the content after purchase? It looks like there's plenty of opposition to this plan, so it probably won't go very far. In the meantime, though, does someone want to explain the difference between tangible goods and infinite goods to Assemblyman Charles Calderon?
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: california, charles calderon, digital goods, infinite goods, itunes, tangible goods, taxes
Reader Comments
Subscribe: RSS
View by: Time | Thread
So what would their property tax be now?
[ link to this | view in thread ]
[ link to this | view in thread ]
iTax
This is no different than Michigan residents (myself included) coming up with all the reasons a "sin" tax seems unjust. You need to put the screwy rationale behind the justification for the tax aside, and find other reasons it shouldn't exist because no amount of proving California politicians wrong will make any headway for your cause. Let's say you make some awesome case for identifying, rightfully so, that digital goods are intangible. Do you really think that would prevent an "iTax?"
You should focus on either coming up with a new source for the necessary evil of taxes, or put your energy towards curbing the massive spending that creates the need for such taxes. Anything else is a waste of your time.
[ link to this | view in thread ]
make it less value
[ link to this | view in thread ]
Raise
[ link to this | view in thread ]
intangible is not necessarily infinite
[ link to this | view in thread ]
[ link to this | view in thread ]
But here is the second problem. They would get very little money from this as they would only get money from California residents buying from Itunes. It would be up to all the other states to folow suit to get their own money.
[ link to this | view in thread ]
iTunes taxed
[ link to this | view in thread ]
Sean paid taxes so he thinks everyone should - Not surprising
[ link to this | view in thread ]
Infinite Goods/Internet Tax
http://havemacwillblog.com/2008/03/28/the-myth-of-infinite-goods/. So the posting is really about taxing Internet businesses selling downloadable product run out of California. If you tax such businesses, you'll run them out of California.
[ link to this | view in thread ]
Re: Infinite Goods/Internet Tax
[ link to this | view in thread ]
Re: Re: Infinite Goods/Internet Tax
[ link to this | view in thread ]
Re: Infinite Goods/Internet Tax
Manufacturer Reputation.
Ease of use.
Support.
None of this has anything to do with the cost of the software itself, but rather, as Mike points out, how you make money with something that costs little or nothing to produce copies of. Lets face it, a copy of MS office, when you eliminate the fancy packaging etc, costs a couple dollars. You pay for the things you get with it, the things mentioned in the referenced articles. But that is what you are paying for, the things that come with the software. The compatibility with others, the reputation, the usability, the support (though not from MS, but friends, and those who write books on it). That is what I paid for, when all is said and done. And yes I paid, perhaps more times than I should have, for my use of the same version of the software, but those are the rules.
[ link to this | view in thread ]
Re: Infinite Goods/Internet Tax
If you want to say that something isn't "infinite" because the number "infinity" is never reaches - i.e. there are never "infinity" copies of an MP3, then fine, but you're missing the point. The point is that an MP3 can be copied (i.e. a new good created) at zero cost to the producer (because the copies are made by the consumers themselves, etc.) If you want to say that the bandwidth isn't free, then fine, but that's still not the point.
Then you also "debunk" economic growth caused by free goods because you think that economic growth IS the proliferation of the free goods. That's incorrect. The economic growth comes when the free goods lead to greater sales of scarce goods such as tangible goods or services.
You seem to misunderstand pretty much every facet of the concept.
Someone posted a GREAT link about "12 ways to make money from infinite goods". It was a perfect textbook article, and I just can't find it again. I can't remember if Mike or Timothy linked it.
[ link to this | view in thread ]
Re: Infinite Goods/Internet Tax
It's a particularly weak explanation, actually. The author attempts to "disprove" infinite goods by equating infinite them with plentiful supply. Cost is also introduced into an effort to disprove the concept, but it really doesn't have much to do with the argument. There will always be costs, however small, involved in reproduction, but those indirect costs don't limit supply.
If something can be reproduced ad infinitum, then it's an infinite good. In terms of a digital good, I suppose you could argue that the supply is limited to the total hard drive capacity of planet...but that is available in essentially unlimited supply as well.
[ link to this | view in thread ]
Re: Infinite Goods/Internet Tax
What he speaks of is the fact that once I put a file on a server that file can be copied infinitely without degrading. Then I can copy that copy and a copy of the second copy and they will still be identical. So once the copy gets out the original douse not have to be available any more becouse an identical copy is still available.
[ link to this | view in thread ]
Re: iTax
> new source for the necessary evil of taxes
The thing is, these taxes aren't necessary. California is the populous state in the union and its residents are already taxed more heavily than any other in the nation. The fact that they still can't seem to cover the basic services (while at the same time funding every politically-correct special interest group that screams loud enough) speaks to the inherent moral bankruptcy of the state's politicians.
Until that problem is resolved, no amount of taxes will ever be enough.
[ link to this | view in thread ]
What's New Here?
Actually, the way the tax on iTunes works is pretty ridiculous. There's no indication that there is a tax until you purchase the songs, which seems unfair. And whether or not you get hit with the tax depends on how you set your home address for your account (not you billing address). I had a gift certificate and noticed that after purchasing a few songs that they were costing me more than $.99. After simply changing my address to a neighboring state, one that does not tax iTunes, I was able to avoid the tax altogether.
Yeah, ok, taxing iTunes may be silly in principle. In reality, it doesn't really mean anything if there's such an easy way to cheat the system.
[ link to this | view in thread ]
if they were really serious
[ link to this | view in thread ]
Re: intangible is not necessarily infinite
Oh, I agree. Intangible definitely is different than infinite, but in this case, all the intangibles he's looking to tax are infinite goods... But, yes, I should have been more careful in the explanation.
[ link to this | view in thread ]
Re: Infinite Goods/Internet Tax
http://havemacwillblog.com/2008/03/28/the-myth-of-infinite-goods/. So the posting is really about taxing Internet businesses selling downloadable product run out of California. If you tax such businesses, you'll run them out of California.
Hi Robin. I'm a fan of your work, but I hadn't seen this response to my work. I'm rather surprised that it's so weak.
First off, you make a few statements that are simply incorrect: "Scarcity can never be removed, only reduced to a very low level." That is simply incorrect. Certain things (ideas, for example) are infinitely reproduceable.
Then you discuss what happens when supply is *plentiful* which is not the same as when it's *infinite*. And I agree when you say there's nothing new -- but I disagree about the idea that it's well understood. The problem is that people freak out about zero (as you have done implicitly, by ignoring the zero for "very low.") Yes, if supply is plentiful, price falls to very low. But if supply is infinite, it falls to zero. You seem to stop short of that because you pretend that infinite goods do not exist. You are incorrect on that statement.
You then seem to confuse marginal costs with total costs in trying to explain why nothing can be free, and you fail to break out the basic components of scarce and infinite goods (which I know, you don't believe in). You are correct that any infinite good is tied to scarce goods, but you incorrectly then assume that means that there is no infinite good. You implicitly bundle them together into a single good... which is where the problems in your reasoning occur.
You then try to simplify my statement about infinite goods growing the market into: "nothing more than that low prices grow demand by attracting more buyers." That's actually incorrect. It's not what I'm saying at all. More buyers/lower prices doesn't grow a market -- it just changes the market. Infinite goods actually grow a market. It's the difference between sliding up and down the demand curve (what you describe) and *moving* the demand curve (what I describe).
As for the Malthus thing, I never said his mathematics were at fault. In fact, I completely agree with you that he was incorrect in expecting linear growth -- but that's because he, like you, misunderstood infinite goods. The reason linear growth in food didn't occur was thanks to increased efficiency that came from new ideas (infinite goods).
You then TOTALLY misunderstand what I said about Dean Kamen, claiming that I claim he shouldn't want personal reward. Did you not read what I wrote? I was explaining how the personal reward could be much greater for him. It's like the exact opposite of what you think I said. Also, I wasn't saying that the machines should be free -- but the *idea* should be free.
And then you name a bunch of scarce goods that you mockingly claim "should be free" totally missing the point that it's not scarce goods that should be free, but infinite ones.
You mock a lot, but do so in a way that totally misunderstands what we're talking about. I know you're pretty sharp so I'll assume it's my inability to explain this well enough, but I think you might want to rethink what you wrote.
[ link to this | view in thread ]
Re: Re: Re: Infinite Goods/Internet Tax
Not deaf ears at all. I'm always willing to engage in a debate on the topic, and have changed my thinking on things over time a great deal based on these discussions. Otherwise, why would I even bother to engage in these discussions?
[ link to this | view in thread ]
Who cares about iTunes?
I thought however that the state had changed something. A couple years ago I purchased about $100K of Oracle licenses and no matter what we demanded, Oracle insisted that by law they had to send us a CD, so we had to pay the taxes. That was one VERY expensive CD.
I am NOT in favor of raising taxes, but this quirk in the law always seemed strange.
[ link to this | view in thread ]
Re: Re: iTax
"or put your energy towards curbing the massive spending that creates the need for such taxes"
[ link to this | view in thread ]