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?

Filed Under: california, charles calderon, digital goods, infinite goods, itunes, tangible goods, taxes


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  1. icon
    Mike (profile), 9 Apr 2008 @ 10:23am

    Re: Infinite Goods/Internet Tax

    "Infinite goods" is a truly misleading concept. There is no such thing. Read here for explanation
    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.

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