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Chris Cleveland here, Chairman of the Chicago Republican Party. This tax is an job-killing, counter-productive, astoundingly bad move. We are actively working

by ccleve 11y ago

Chris Cleveland here, Chairman of the Chicago Republican Party. This tax is an job-killing, counter-productive, astoundingly bad move. We are actively working against it. I work out of 1871, a Chicago incubator, and I'm surrounded by several hundred companies that are all going to have to implement this tax in their software if they want to sell locally. We're going to kill this thing. UPDATE: Sign the petition here: https://www.change.org/p/chicago-city-council-repeal-the-chicago-cloud-tax https://www.change.org/p/chicago-city-council-repeal-the-chi...

slg 11y ago
>I work out of 1871, a Chicago incubator, and I'm surrounded by several hundred companies that are all going to have to implement this tax in their software if they want to sell locally. How is this different than any other local tax in that regard?
- stephengillie 11y ago
  I wonder how many of these companies are going to release a free update with the new tax data and formulae, and how many are going to charge for that update.
- rconti 11y ago
  Typically local taxes only affect those who have a physical presence in that jurisdiction. It seems easier for a store in Chicago to nudge the tax collection from, say, "5% for state, 2.1% for city" to "5% for state, 2.2% for city" Now, of course, if the COUNTY decides to implement a new tax, that's a whole new set of paperwork that has to be done. But it still only affects the businesses in that locale. To tax EVERY company that does any kind of business with any customer located in the city means that now tens of thousands (?) of companies have to price this tax in. Where do we end up when every streaming company has to separately track and pay taxes in hundreds of thousands of municipalities, counties, states across the country?
  - slg 11y ago
    >Typically local taxes only affect those who have a physical presence in that jurisdiction You are only partially right there. The local presence requirement is for the obligation to collect the tax. If your company doesn't have a local presence, your customers are still required to pay the tax themselves. Very few tax payers actually follow that rule which is why local municipalities are so adamant about the taxes being collected by the business. The Netflix side of this tax is technically on consumers so Netflix has no real legal obligation to include it on their bills. So it seems to follow the same rules of any other local tax.
eli 11y ago
The tax seems like a bad idea to me as well, but in what way is it going to kill jobs? Doesn't it apply to Chicago-based and non-Chicago-based companies equally?
- ccleve 11y ago
  It does, but companies that are not located here cannot be compelled to collect the tax. Instead, citizens are supposed to voluntarily pay a "use tax". No one does.
  - eli 11y ago
    OK, I can see that. Seems like a bit of a stretch though. Are you aware of any companies threatening to relocate?
  - anigbrowl 11y ago
    This is the same argument that was made against requiring companies like Amazon to collect sales taxes, but that has been going on for a while now (including in Illinois as of this year) and the forecast layoffs and economic disaster have failed to materialize.
JoshTriplett 11y ago
> I work out of 1871, a Chicago incubator, and I'm surrounded by several hundred companies that are all going to have to implement this tax in their software if they want to sell locally. Making it even less likely that a new company would want to start there. > We're going to kill this thing. Thank you. This kind of thing needs a rapid response wherever it crops up, lest it spread elsewhere. "This was tried elsewhere and quickly repealed" is an argument that makes it far easier to vote down such measures elsewhere.
rayiner 11y ago
The Internet is taking things that were traditionally taxed (cable TV) and moving that activity to things that aren't taxed (content delivered over the Internet). Television is just the tip of that iceberg. What's the general solution to that problem? And while I'm probably on the same page as you re: Chicago's profligacy, let's face it: Chicago needs to raise money. Economically, aren't consumption taxes better than raising the same money from income or property taxes (or head taxes or corporate taxes)? I'd argue that instituting a city income tax or raising property taxes will move more people out of Chicago than taxing Chicago consumers[1] for internet services. [1] The effective incidence of sales taxes is complex. But I imagine most Internet services will be able to pass most of the cost onto consumers.
- nullrouted 11y ago
  Solution: Smaller government
  - anigbrowl 11y ago
    That's a slogan, not a solution. Purely at the local level, I like things like street lights, roads without holes in them, public parks, libraries, functioning emergency services and so on. So do a lot of people who live in cities, and they get upset when those services are cut. Now those things involve a cost, so the problem we have is how to minimize that cost and distribute it equably and efficiently. 'Starve the beast!' is no more of a viable plan than 'Eat the rich!'
  - rayiner 11y ago
    Fun fact: Chicago has a budget of about $9 billion for 2.7 million people, plus Cook County has a budget of $4 billion for 5 million people. San Francisco City and County has a budget of $7 billion for under a million people. Fairfax County, where my parents live, has a 3.7 billion budget for about a million people. Chicago and Illinois are not high-tax high-spend jurisdictions. The top income tax rate in republican Virginia is almost double the historical income tax rate in Illinois. Their fiscal problems are the result of being low tax jurisdictions with moderate expenditures.
  - 11y ago
sosuke 11y ago
It never ceases to impress me who I find here on HN. Very cool!
biot 11y ago
To play devil's advocate: > This tax is an job-killing... > ... several hundred companies that are all going to have > to implement this tax in their software... Implementing the tax sounds like it's going to take a fair bit of effort. These several hundred companies may need to hire a bunch of engineers and accountants to implement the tax code. What jobs are being killed? Given that any change to the tax code involves many businesses having to implement support for the changes, can you detail exactly how you determine whether to support or oppose a specific tax change?
- yincrash 11y ago
  I suspect the jobs being 'killed' are the ones that will be moving away from Chicago to avoid paying the tax, such as any business that would use AWS. edit: Also the ones that sell the services can't be compelled to collect the tax and as such, moving offices away from Chicago saves the cost of tax collection implementation[1] [1] https://news.ycombinator.com/item?id=9822009 https://news.ycombinator.com/item?id=9822009
- ccleve 11y ago
  For an answer, see the broken windows fallacy: https://en.wikipedia.org/wiki/Parable_of_the_broken_window https://en.wikipedia.org/wiki/Parable_of_the_broken_window
  - biot 11y ago
    Sure, making changes solely for the sake of creating jobs is the broken window fallacy. However, if there is an otherwise legitimate need for changes to the tax code, I don't see how this applies. I'm guessing you're not advocating that the tax code be set in stone, never to change ever again, lest someone have to do work. Back to my original question: how to you determine which tax changes to support and which to oppose?
- TrevorJ 11y ago
  Almost none of those companies are IN Chicago though.
anigbrowl 11y ago
That's great, but what are you going to do about the larger problem of a declining local tax base? Fewer Chicagoans, apparently, are employed in building network infrastructure and data centers than in things like video rental and so on, and the more people who are happy to use Netflix the more money flows out of Chicago's local economy. Meanwhile the cost of providing services within the city presumably remains about the same. I gather Chicago has massive unfunded pension obligations due to union lobbying and so forth, but for all practical purposes those are like any other unwanted financial obligation, they're not going away unless you can come up with a good reason why those secured creditors should give up the property interest they negotiated. several hundred companies that are all going to have to implement this tax in their software if they want to sell locally Well, this isn't very logical. First, there are 3 million people in Chicago which is a significant market, so it's very unlikely that any firm is going to suddenly refuse to do business with anyone in Cook County even though the administrative cost of said business is due to rise. Where a business is located is wholly irrelevant in this case because it's a consumption tax, so how is it going to kill any jobs in Chicago? Also, why would you expect these companies to implement the tax in their software? That would be absurd. There are lots of software-as-a-service companies that take care of calculating sales taxes and suchlike so that other companies don't have to, just as there are companies that specialize in administering payroll or other business tasks so that firms can focus on their core competency. From a startup's point of view the additional administrative overhead is likely to be marginal. We're going to kill this thing. Oh stop. It's easy to stand up and say you're going to be against some unpopular measure, but that doesn't address the deeper problem. What is your better alternative solution? Forgive me for touching on national politics, but I'm reminded of the national Republican effort to kill Obamacare; I understand what your party dislikes about it, but after 50+ votes to repeal it and endless speechifying there's no results and no concrete alternative on the table. The repeal argument depends on a nostalgic argument that everything was working great before the unwanted policy came along, but the reality is that the previous systems were deeply unpopular and dysfunctional. It's not that you shouldn't be against this proposal, I share your belief that casting around for new things to slap taxes on is a bad way to shore up public finances. But your arguments are shallow and being against things isn't a real economic program. What positive proposals do you have?
- 11y ago

by ccleve 11y ago

slg 11y ago

stephengillie 11y ago
I wonder how many of these companies are going to release a free update with the new tax data and formulae, and how many are going to charge for that update.
rconti 11y ago
Typically local taxes only affect those who have a physical presence in that jurisdiction. It seems easier for a store in Chicago to nudge the tax collection from, say, "5% for state, 2.1% for city" to "5% for state, 2.2% for city" Now, of course, if the COUNTY decides to implement a new tax, that's a whole new set of paperwork that has to be done. But it still only affects the businesses in that locale. To tax EVERY company that does any kind of business with any customer located in the city means that now tens of thousands (?) of companies have to price this tax in. Where do we end up when every streaming company has to separately track and pay taxes in hundreds of thousands of municipalities, counties, states across the country?
- slg 11y ago
  >Typically local taxes only affect those who have a physical presence in that jurisdiction You are only partially right there. The local presence requirement is for the obligation to collect the tax. If your company doesn't have a local presence, your customers are still required to pay the tax themselves. Very few tax payers actually follow that rule which is why local municipalities are so adamant about the taxes being collected by the business. The Netflix side of this tax is technically on consumers so Netflix has no real legal obligation to include it on their bills. So it seems to follow the same rules of any other local tax.

eli 11y ago

The tax seems like a bad idea to me as well, but in what way is it going to kill jobs? Doesn't it apply to Chicago-based and non-Chicago-based companies equally?

ccleve 11y ago
It does, but companies that are not located here cannot be compelled to collect the tax. Instead, citizens are supposed to voluntarily pay a "use tax". No one does.
- eli 11y ago
  OK, I can see that. Seems like a bit of a stretch though. Are you aware of any companies threatening to relocate?
- anigbrowl 11y ago
  This is the same argument that was made against requiring companies like Amazon to collect sales taxes, but that has been going on for a while now (including in Illinois as of this year) and the forecast layoffs and economic disaster have failed to materialize.

JoshTriplett 11y ago

> I work out of 1871, a Chicago incubator, and I'm surrounded by several hundred companies that are all going to have to implement this tax in their software if they want to sell locally. Making it even less likely that a new company would want to start there. > We're going to kill this thing. Thank you. This kind of thing needs a rapid response wherever it crops up, lest it spread elsewhere. "This was tried elsewhere and quickly repealed" is an argument that makes it far easier to vote down such measures elsewhere.

rayiner 11y ago

The Internet is taking things that were traditionally taxed (cable TV) and moving that activity to things that aren't taxed (content delivered over the Internet). Television is just the tip of that iceberg. What's the general solution to that problem? And while I'm probably on the same page as you re: Chicago's profligacy, let's face it: Chicago needs to raise money. Economically, aren't consumption taxes better than raising the same money from income or property taxes (or head taxes or corporate taxes)? I'd argue that instituting a city income tax or raising property taxes will move more people out of Chicago than taxing Chicago consumers[1] for internet services. [1] The effective incidence of sales taxes is complex. But I imagine most Internet services will be able to pass most of the cost onto consumers.

nullrouted 11y ago
Solution: Smaller government
- anigbrowl 11y ago
  That's a slogan, not a solution. Purely at the local level, I like things like street lights, roads without holes in them, public parks, libraries, functioning emergency services and so on. So do a lot of people who live in cities, and they get upset when those services are cut. Now those things involve a cost, so the problem we have is how to minimize that cost and distribute it equably and efficiently. 'Starve the beast!' is no more of a viable plan than 'Eat the rich!'
- rayiner 11y ago
  Fun fact: Chicago has a budget of about $9 billion for 2.7 million people, plus Cook County has a budget of $4 billion for 5 million people. San Francisco City and County has a budget of $7 billion for under a million people. Fairfax County, where my parents live, has a 3.7 billion budget for about a million people. Chicago and Illinois are not high-tax high-spend jurisdictions. The top income tax rate in republican Virginia is almost double the historical income tax rate in Illinois. Their fiscal problems are the result of being low tax jurisdictions with moderate expenditures.
- 11y ago

sosuke 11y ago

It never ceases to impress me who I find here on HN. Very cool!

biot 11y ago

To play devil's advocate: > This tax is an job-killing... > ... several hundred companies that are all going to have > to implement this tax in their software... Implementing the tax sounds like it's going to take a fair bit of effort. These several hundred companies may need to hire a bunch of engineers and accountants to implement the tax code. What jobs are being killed? Given that any change to the tax code involves many businesses having to implement support for the changes, can you detail exactly how you determine whether to support or oppose a specific tax change?

yincrash 11y ago
I suspect the jobs being 'killed' are the ones that will be moving away from Chicago to avoid paying the tax, such as any business that would use AWS. edit: Also the ones that sell the services can't be compelled to collect the tax and as such, moving offices away from Chicago saves the cost of tax collection implementation[1] [1] https://news.ycombinator.com/item?id=9822009 https://news.ycombinator.com/item?id=9822009
ccleve 11y ago
For an answer, see the broken windows fallacy: https://en.wikipedia.org/wiki/Parable_of_the_broken_window https://en.wikipedia.org/wiki/Parable_of_the_broken_window
- biot 11y ago
  Sure, making changes solely for the sake of creating jobs is the broken window fallacy. However, if there is an otherwise legitimate need for changes to the tax code, I don't see how this applies. I'm guessing you're not advocating that the tax code be set in stone, never to change ever again, lest someone have to do work. Back to my original question: how to you determine which tax changes to support and which to oppose?
TrevorJ 11y ago
Almost none of those companies are IN Chicago though.

anigbrowl 11y ago

That's great, but what are you going to do about the larger problem of a declining local tax base? Fewer Chicagoans, apparently, are employed in building network infrastructure and data centers than in things like video rental and so on, and the more people who are happy to use Netflix the more money flows out of Chicago's local economy. Meanwhile the cost of providing services within the city presumably remains about the same. I gather Chicago has massive unfunded pension obligations due to union lobbying and so forth, but for all practical purposes those are like any other unwanted financial obligation, they're not going away unless you can come up with a good reason why those secured creditors should give up the property interest they negotiated. several hundred companies that are all going to have to implement this tax in their software if they want to sell locally Well, this isn't very logical. First, there are 3 million people in Chicago which is a significant market, so it's very unlikely that any firm is going to suddenly refuse to do business with anyone in Cook County even though the administrative cost of said business is due to rise. Where a business is located is wholly irrelevant in this case because it's a consumption tax, so how is it going to kill any jobs in Chicago? Also, why would you expect these companies to implement the tax in their software? That would be absurd. There are lots of software-as-a-service companies that take care of calculating sales taxes and suchlike so that other companies don't have to, just as there are companies that specialize in administering payroll or other business tasks so that firms can focus on their core competency. From a startup's point of view the additional administrative overhead is likely to be marginal. We're going to kill this thing. Oh stop. It's easy to stand up and say you're going to be against some unpopular measure, but that doesn't address the deeper problem. What is your better alternative solution? Forgive me for touching on national politics, but I'm reminded of the national Republican effort to kill Obamacare; I understand what your party dislikes about it, but after 50+ votes to repeal it and endless speechifying there's no results and no concrete alternative on the table. The repeal argument depends on a nostalgic argument that everything was working great before the unwanted policy came along, but the reality is that the previous systems were deeply unpopular and dysfunctional. It's not that you shouldn't be against this proposal, I share your belief that casting around for new things to slap taxes on is a bad way to shore up public finances. But your arguments are shallow and being against things isn't a real economic program. What positive proposals do you have?

11y ago