Robert Casto Software Developer and Performance Engineer

I recently read this article on Yahoo that talked about how states are going after companies with affiliates in their states for tax revenue. This seems pretty stupid, as in killing the “Golden Goose.”

The Internet is responsible for the creation of a great amount of wealth over the years. Granted, it is also responsible for the elimination of many businesses as well. This is how “creative destruction” works in our economy. New ideas and progress make people rich while old ideas die and go away.

If only this were true of the government though. Every year it just gets bigger and bigger. It looks for more ways to generate income to satisfy its insatiable appetite. In lean times, it resorts to stupid ideas like this one. It changes, many times for the worse, how the economic game of progress is played. Governments do well when the economy is doing well. They should do everything they can to help the companies within their borders to succeed. Instead, this looks like a destructive way to fill a budget gap. I fear that this is going to kill eCommerce as we know it.

Currently a great number of people make money sharing their expertise on the Internet. They get paid by promoting good products and warning us about bad ones. They inform us of ways to better our lives, and in return we purchase the products they recommend and they get paid by those selling the products. This is no different than sending a letter through the mail to a friend saying the new car they bought is incredible and that they should get one. Just because a company is willing to pay a finders fee doesn’t mean it has hired a person to do any work. It is rewarding the efforts of people to share information about products. This is advertising at its core and has been the basis of our economy for other 100 years. Companies pay millions to get the word out using advertising agencies. Does this mean that they now have a business interest in the state where the the ad agency resides? Most decidedly not.

Companies like Amazon agree to pay someone for help in selling a product. It is strictly advertising revenue, and they have no business interest in any state except where they have a physical presense. Saying otherwise means that every business has a business interest in every state. Any company wants to sell its products and doesn’t necessarily care whether what state the customer lives in.

If I recommend to a relative some service and I get a discount as a result, does that mean the company now has a business interest in my state? That kind of logic just boggles the mind. I was not hired by the company to do anything. I was encouraged to share information and for that they are most grateful when a sale occurs. To encourage this sharing of information, they offer an incentive. It is just that simple. Affiliate programs are just the same except that people have made a business out of it. If they are a business, then they must pay taxes where they live. That is how the system works and that still doesn’t mean that the seller of a product has a business interest there. Only that the person creating the link and posting information has a business interest. It is they who should be paying income taxes on the money they collect. But they didn’t sell a product. They didn’t handle any money. They didn’t do any activity that would connect them with the seller other than mentioning where a product may be bought.

For decades traditional companies have sold items across state lines. The products were shipped to other states and no sales tax was collected. There was no legal right to it because the purchase was from a company in another state and so no tax was collected. Internet companies operate the same way except that with the Internet, it is now easier to find their products and make a purchase. Lots of technologies have converged to help make this simplicity a reality. Now the states are rushing in and crying foul. They want to collect taxes on sales to which they are not entitled.

Companies are not stupid and the best will survive. If they find it cheaper to shut down an affiliate program than to continue one, then standard business practice demands that it be shut down. The states have essentially pushed a logical decision in response to their illogical argument. It should be no surprise that the small business will suffer as a result.

I find it despicable that a state would even consider pursuing such a course. They stand to loose a great deal. Many small companies will shut their doors since their income has been cut off. Millions in taxes collected from these business and their workers will disappear. In its place will be people filing for unemployment benefits along with all the other welfare handouts the government has to offer. States should spend their time trying to figure out how to get people back to work. They should try to educate workers, helping them train for the jobs in demand today. Instead, they seem determined to look for the quick path to cash as a means to solve their problems. This is destined to end in failure bodes ill for the country. Millions of jobs have already been lost. Let’s stop looking for ways to eliminate even more jobs.

Posted under Economy, Rants

Having lived in Seattle, Washington for 2 years, one of the things I grew to love was their public transportation system. I took the bus mostly, but what really impressed me was their ferry system. Getting to and from the islands was fairly easy. Go to a terminal, pay your fare, and get on the boat. If you wanted to take your car with you, just drive it on and pay the extra fee. Once the ferry left you could leave the car and spend some time in their lounge. 30 minutes to an hour later, you walked or drove off the ferry and went to your destination. They even installed free Internet access while I was there.

I got to thinking that what the United States needs is a land-based “ferry” system. Just like the Seattle ferries, you go to the nearest loading point, walk or drive on, and then go up to the lounge and enjoy the trip. At your destination you walk or drive off, and head to where you are going.

What got me thinking about this recently is the need to take a few trips to Chicago, Illinois. I have the option to fly, but I hate having to get to the airport 2 hours early, walk forever to the gate, and then sit there waiting to board. The planes are small, loud, and full of people enjoying the situation as much as I am. At least I am able to get some work done, but the trip is anything but relaxing.

I live in Cincinnati, OH and my destination on the north side of Chicago is 338 miles one way. It is about a 5.5 hour drive but the only thing productive I can do is listen to an audio book on my iPod using a FM transmitter of course. The trip is not as stressful, but I have to watch the road all the time and driving that far makes me tired. If there were a land-based ferry though, I could go to the nearest loading station, drive on, and then do something productive during the trip to Chicago. Once there, drive off and head to my destination. I think demand would be huge since the benefits are so great.

• I can do anything I wanted for the next 5 hours. Sleep, read, watch a movie on my laptop, make phone calls, pretty much anything I could do on an airplane except with a lot more leg room and a lot less noise.
• My vehicle won’t rack up a bunch of extra miles. Less wear and tear so it should last a lot longer. I won’t have to rent a car once I get there. Just drive to wherever I need to go.
• This means fewer vehicles on Interstate highways.
• Fewer accidents from tired drivers trying to push themselves too hard.
• More productivity since there is no need to watch the road. Even if I just sleep the whole trip, I will be refreshed and ready to go instead of suffering from road fatigue.

In the news recently there has been a lot of talk about building a high-speed train connecting Cleveland, Columbus, and Cincinnati Ohio. I wondered if I would ever use such a train to get to Columbus, OH where my mom lives. Honestly, I doubt I ever would. A high speed train sounds nice, but how do I get to my mother’s house once I get to Columbus. She lives 17 miles from downtown, but is still within the city limits. I wouldn’t have my car with me so I would have to rent one. Now my trip has cost me more money, and it has become less convenient. One might suggest that she pick me up at the terminal. If it was just myself that would work, but there are 6 people in my family and there is no way we would all fit. I also have to have car seats as I still have little children. It just becomes a huge hassle, and not worth the time savings a high-speed train would provide.

Instead of spending tons of money on high-speed trains that just take people from place to place really fast, create a system that takes them and their vehicle from place to place in a reasonable amount of time. The cost to build such a system would probably be much more reasonable, and people would use it provided that trips were offered frequently or better yet, on demand. It would provide the opportunity of spending the time on better things. And it would cut down on fuel consumption, green house gas emission, and many other enviornmental benefits. I would be very happy to use such a system to get to the places I need to go. Although I wouldn’t get there as fast as a high-speed train, I’m saving in many other ways and I don’t have the problem of how do I get from the terminal to where I need to go.

I don’t think America will give up the freedom it has by driving cars. They are a necessity as much as they are a convenience. People’s lives are not predictable enough for them to loose the flexibility a car gives them. For trips between cities though, it makes sense to have an option besides flying. The drive from Cincinnati to Columbus takes 2 hours. This is shorter than a flight would be if you measure the time it takes to get from door to door. The drive is long enough though to be boring and justifies the expense of using a land-based ferry. Would I take a land-ferry to Columbus? Most definitely. I have better things to do with my time than to stare ahead at the road and making sure I stay between the lines. Would I use the system to go to Seattle? Probably not unless it could be done much quicker than the 55 hours projected by Amtrak. Spending 5 to 6 hours to get to Chicago without having to drive the entire way, and having use of my own car once I got there, sounds like a great deal and could be an enjoyable trip.

Posted under Economy, Technology

I have to side with the dealers when it comes to whether they should be in business or not. Why should a auto manufacturer headquartered in one location decide the fate of family-owned dealerships across the nation. Our free market should decide who lives and who dies. It is true that in bankruptcy all contracts are null and void. But that protection should only be extended to the company and not give it the power to bankrupt thousands of other businesses in the process.

When Encron and Worldcom fell years ago, they took down a number of companies with them. There was not much shouting, but in this case, we are talking about thousands of companies, many of which have been in business for decades, and deserve a fighting chance if they can make it work.

Posted under Economy

I read an article Sunday in my local newspaper about how a bad dealer is being kept by GM while a dealer they liked is being let go. I thought about this for a minute and realized that it makes total sense. GM is going to keep the dealers that sell lots of cars. Those dealers that sell fewer new cars are not as good for GM. It turns out that the good dealer does great repairs, has good people working the used car lot, and lots of customers like them. They make plenty of money and do a great job for their customers. But because they don’t sell as many cars for GM, they will be let go. Whenever I see something that doesn’t make sense, I always look for the money reason. In this case, the money reason is simple. GM wants dealers that sell lots of new cars. Customers want dealers who take care of them. So it is safe to assume that a number of great dealers are not going to make the cut.

Posted under Economy, Rants