The Deets

Tom Webb at the Pioneer Press reported that the Minnesota is reaching the end of an era when it comes to sales tax collection for online purchases. It was a good run, but it’s coming to an end July 1st, when the “Save Best Buy and Target from Amazon” bill becomes law.

I decided to look at my own exposure under this change to get a feel for how many meals my daughter is going to need to miss so I can maintain my Amazon habit. The state tax rate is 6.875%. How does that translate?

I looked up my recent purchases on Amazon. It turns out that I’ve spent $5,068 in the past 6 months on 180 transactions. When Carly says that it feels like an Amazon box arrives at our house every day, she’s actually understating the situation.

$5,068 * 6.875% = $348.42

Will I change my buying behavior over less than $1 per day? Am I going to start driving to Target to buy what I buy on Amazon today? No. Here’s why:

1. My actually tax exposure is far lower than that. Why? Because a lot of the stuff I buy on Amazon is tax exempt, such as baby diapers, baby food, baby clothes, adult food, adult clothes, and books.

2. Price competitiveness. The last hardware purchase I made on Amazon was for a kitchen faucet. Home Depot sells it for $349 with free shipping. Amazon sells the same faucet for $61.78 cheaper and ships it twice as fast for free. And, which site do you think provided better customer reviews to decide whether it was a faucet worth purchasing?

Best Buy doesn’t carry my favorite earbuds in their stores, but they do offer them online for 30% more than Amazon. Best buy takes 6-9 days to ship them (with no option to ship them faster) while Amazon ships in 2 days for free.

Richfield-based Best Buy has been particularly hurt by competition from online rivals, and this has led to layoffs and store closings. On Tuesday, CEO Hubert Joly noted that 50 percent of the U.S. population will soon live in states where Amazon’s no-sales-tax advantage will disappear.

This is a real-world example of sales tax not being the problem. Best Buy doesn’t carry what I’d like to buy, so they kick me out to a 3rd party site to buy what I want for 30% more than Amazon charges. I suppose this allows Best Buy to maintain the margins they’re aiming for while losing the sale.

Seriously, check this out:

Best Buy and Amazon are both selling the same product from Accessory Genie. Amazon charges $6 less and delivers in two days. Best Buy charges $6 more and delivers in 6-9 days. Even with sales tax, Amazon crushes Best Buy by $4.62 and 4-7 days on this product, and people can throw some Mac & Cheese into their shopping cart before checking out. Best Buy CEO Hubert Joly’s sale tax comments may temper a few frustrated shareholders but haven’t swayed this informed consumer.

3. Long tail. It turns out that I buy quite a few things on Amazon that aren’t stocked by big parking lot stores. For example, a 1lb bag of chamomile tea from Croatia.

Maybe I’m an outlier, but based on my purchase behavior I don’t think this new sales tax does much to level the playing field against a company that sells a ton of tax exempt products, has lower prices, faster free shipping, and a far larger inventory than our local big parking lot stores.

Perhaps that’s why Target’s year over year sales grew by 1% while Amazon’s grew by 22%?

As I see it, this may increase my costs by around $10/month, but the benefits of shopping Amazon over big parking lot stores are still obvious to me.

If Target or Best buy borrowed the Byerly’s online model, that might interest me. Byerly’s has online ordering with online payment and drive-up pickup. As in, you never have to enter the store. Just drive up and they’ll load your car up with what you purchased. That’s convenient. In fact, it’s more convenient than postal packaging. Moms with a carload of kids would love this. Under the status quo, Amazon will continue to chip away at Target and Best Buy with or without sales taxes.

I’m impressed that the Vikings managed to create enough fear in face painters to get them to take time off from their jobs to lobby, for free, on behalf of a for profit corporation. And, it’s doubly impressive that the face painters lobbied for a stadium plan that essentially eliminates tailgating.

Parking lots will be replaced with a stadium that achieves the same task as the Metrodome with twice the space, a park, and new developments. The Vikings got their subsidies thanks to purple painted Vikings fans wandering the halls of the state capitol, but no one thought preserving parking lots for purple RVs, vans, trucks, and motorcycles was a priority.

Obviously, the face painters could get organized and pool their money to purchase a downtown parking lot in order to preserve it for tailgating. They could, but they won’t because that would involve them spending their own money to pay market rates for their entertainment. Based on how hard they lobbied for public subsidies for their private entertainment, it’s clear that they’d rather see tailgating die than open their own wallets to cover the true cost of their 10 day per year hobby.

Sadly, Governor Dayton decided to raid the General Fund to take money from schools and bridges to make up for e-pulltabs shortfalls. He did this by redirecting the first year of the new cigarette taxes to cover the first year of shortfalls from e-pulltabs. His justification was that the project – like some of our state’s schools and bridges – could fail without the funding. Sadly, he didn’t seem to realize that less than a year into a 30-year commitment is a great time for a project to fail. When you make a mistake it’s great to fail fast.

The new park and proposed development near the new stadium look promising. One of the cool things about visiting Central Park in NYC is looking at the condos surrounding the park and imagining living there. Imagine hanging out in the proposed park on one of the 42 weekends the stadium will be sitting empty, two corporate towers, the backside of Thrivent, and the architecturally uninspired HCMC to view. I’m not sure it has the same effect. That’s why the Minneapolis 2025 plan (PDF) called for moving the Vikings stadium over by the Twins stadium. The land where the Metrodome sits is more valuable today for new residential and business developments than it is as a taxpayer subsidized and property-tax exempt NFL subsidy monstrosity. We could have done this far better if the city and state hadn’t negotiated from an irrational state of fear.

Perhaps I missed it, but did you hear of any Vikings stadium design options that would have saved the public money? While the huge glass doors are indeed huge, I imagine quite a few Minnesotans would say “8 feet high is high enough for the doors. Let’s put $50 million toward new HVAC systems in some of our state’s schools so kids can pay attention in class instead.”

It’s funny that the NFL doesn’t endorse gambling unless they directly profit from the exploitation of people living in some of the poorest communities in Minnesota. In that case, they’ll take the money.

It’s also funny that the NFL doesn’t run tobacco ads, but they’re cool with Minnesota taxing the crap out of the state’s smokers in order to provide corporate Wilfare to the Vikings.

Any word on whether the stadium will support running and rollerblading? This is the “People’s Stadium”, right?

This picture isn’t the greatest since it was taken by me in a moving car at night on a cell phone after a few beers. Still, check out how cool this stadium looks at night:

That’s Vancouver’s BC Place stadium. That’s the stadium that used for the Opening Ceremonies of the Winter Olympics, for the BC Lions CFL football team, for the Vancouver Whitecaps MLS team, and for the largest concert tours in the world, including Taylor Swift & Jay Z + Justin Timberlake. This is a first class venue both inside and out, both day and night.

And, the truly innovative part of it is that they managed to build a world class venue for half the price Minnesota is spending to tear down the Metrodome to build a slightly larger stadium on the same footprint. Vancouver decided to be take a far cheaper and greener approach when they came to the conclusion that their Metrodome-equivalent stadium was due for an upgrade before the Olympics.

They managed to add better seats, better concessions a retractable roof, open the stadium up with more natural light, keep the football team playing in the stadium by doing the upgrades during off-seasons, and did it on half the budget being used to tear down and rebuild a stadium in Minneapolis. If Minnesota had taken a similar approach there wouldn’t have been a need to come up with a creative way to finance the stadium through questionable gambling exploitation tactics.

Functional world-class cities aren’t judged by the amount of taxpayer money they can spend to subsidize private corporations. If they can solve a problem with less money, they do. That’s good government. New York spent nearly nothing on the NFL stadium that’s shared by two teams in their market. Los Angeles profits from not having an NFL team draining their city’s tax base. Then there’s Cincinnati, where NFL subsidies have become a higher budget priority than local hospitals. It’s no wonder that they’ve lost 5% of the county’s population over the life of the current stadium. People with marketable skills have options.

Earlier this month, I created some unintentional confusion with the title of this chart of attendance data for Twins home games:

@Rat seemed to think I was referring to the ballpark’s architecture, but that was a reference to the company who slapped their logo all over the ballpark, and seems to expect us to use their brand every time we talk about the publicly financed stadium they sponsored.

Here’s my justification for doing this from the comments of the previous post:

The private business who’s name is on the stadium didn’t put money into building the stadium, and the money they pay goes 100% to the single family rather than split among those who put money into building the stadium.

Mr Magoo put it more bluntly:

Walmart didn’t demand massive subsidies for a downtown Mpls HQ and Walmart didn’t demand massive taxpayer subsidies for three Mpls stadiums that will serve as Target billboards so shoppers can be reminded where they should buy junk food and cheap plastic shit from China.

That sums it up pretty well. When the public heavily subsidizes stadiums for the private owners private sports teams, then the private businesses sells naming rights to the public stadiums, I feel no obligation be a word of mouth marketer for the private sponsor or the private sports team.

As I understand it, many private sports businesses manage to negotiate lucrative deals with corporate welfare enabling legislators, so don’t even need to pay taxes on naming rights. And, I assume that sponsors take a tax deduction on the naming right.

This isn’t good government or corporate behavior, so I choose to avoid enabling it.

It’s possible that Norm Coleman might consider me to be a grinch for not speaking in coal burning power company terms when describing the arena he forced taxpayers to subsidize and subsidize and subsidize in St Paul. Oh well.

I’d consider making an exception for cases where the naming rights covered the public’s share, but what I’m really looking for are corporations who have the decency to work out deals to sponsor stadiums so the public doesn’t need to get involved in stadium financing. When one of our local big box retailers decides to lobby for subsidies from the state, subsidies from the city, subsidies from the county, and to exploit gamblers in order to build stadiums they can slap their names on – with the revenues going to the private owners or the pro sports teams – I lose respect for the big box retailer. Their corporate behavior is not in the public’s best interest.

This might do the trick. When Norm boasts in the glory of corporate welfare that he helped provide the Minnesota Wild. A company that continually tries to have get out of their end of the contract by requesting their loans be forgiven while simultaneously asking for public money to build a practice facility for the team:

Call him on it:

Then watch St Paul’s former mayor call me a grinch for opposing corporate welfare for the NHL:

Perhaps pointing out that Norm Coleman used the public’s money to subsidize his private entertainment went too far?

Apparently it was for @normcoleman because that’s when he blocked me.

I imagine that politicians like Norm Coleman would prefer that taxpayers forgot about the corporate welfare they gave away. Yes, we have the Wild. We’re paying for them every day. Even when they don’t make the playoffs. Even when they’re on strike. Even when there’s a lockout.

Money that taxpayers continue to pay to subsidize a private business that competes for entertainment dollars against other locally owned businesses that don’t receive hundreds of millions of dollars in public subsidies. If Norm Coleman had walked down Payne Ave as mayor and asked people what the city could do to make their lives better, subsidizing the NHL probably wouldn’t have been at the top of the list. Different priorities.

Perhaps Coleman wouldn’t be taking credit on Twitter on a Saturday night in 2013 for having made the streets safer or schools better on the East Side of St Paul in the year 2000, but that’s the kind of good government stuff we need more of from our politicians.

Maybe it makes me a fun-hater to think that NHL fans are perfectly capable of using their own money to pay for their own entertainment rather than rely upon corporate welfare with the help of Norm Coleman? The only thing better than paying full price to watch Derek Boogaard contract CTE is to pay a taxpayer subsidized price to watch Derek Boogaard contract CTE, eh?

This is worth a read. Governor Dayton on March 12, 2012 arguing that the e-pulltabs projections made sense. All it would take is a 142% increase in the popularity of pulltabs after the introduction of e-pulltabs (the icon on the lower-right of the document will let you go full-screen):

“I believe it is sound, reliable, and sufficient to finance the state’s share of this project.

Anyone who says otherwise is speaking without my authorization and is seriously misrepresenting my position.

As Senator Sean Nienow has been saying on Twitter, Dayton owns this debacle. The above statement makes it pretty darn clear.

Dayton goes on:

Furthermore, everyone trying to dismantle this proposal, without offering a better one, is clearly trying to defeat the bill.

That’s a ridiculous statement.

First, it’s perfectly legitimate to try to defeat a bill that provides corporate Wilfare to an organization that doesn’t need it but simply wants it.

It’s legitimate to argue that it’s not the state’s job to subsidize the NFL.

It’s perfectly legitimate to argue that the Vikings, together with Vikings fans, could work together to come up with a private financing scheme if they really felt that a new stadium was worth the cost.

Second, it’s ridiculous statement because alternative financing proposals were offered. Many were proposed. Here are some examples:

Some called for the Vikings to chip in a far larger share.

Some called for paying for the stadium through taxes on sports related merchandise, tickets, and naming rights.

Some called for subsidizing the NFL by exploiting the state’s gamblers through slot machines at horse tracks.

And one offered to sell the current Metrodome to the Vikings for $1, then let them do whatever they’d like with it (Refurb? Tear down? That’s their business.)

But, all of those ideas were rejected by the legislators carrying the bills through the house and senate, who were clearly working with Governor Dayton to craft the bill.

I haven’t been to Target.com in a while, but decided to revisit. Target clearly doesn’t lack the brand recognition or marketing muscle to make this site great, but it seems like it has some shortcomings compared to online competitors. For example, I looked at Kitchen Gadgets. The #5 best selling kitchen gadget on their site today was a 1-quart measuring cup:

This product is a best seller, yet has only five reviews. Two of the five reviews were 1-star, stating that the markers wash off in the first use. Another one said it takes two years for the markers to wear off. And two people loved it. A measuring cup without markers isn’t particularly useful, eh? With only 5 reviews, it’s hard to say whether the experiences of 60% of reviewers are the norm. An online competitor to target.com, Amazon.com, offers a comparable product from Pyrex that has an average of 4.5 stars and 387 reviews. Personally, I would have more confidence in purchasing the Pyrex product based on reviews alone. Yes, it’s $4 more expensive, but measuring cups last forever (unless the markers wear off).

But, when ordering stuff online, the cost isn’t just the cost but the cost plus tax and shipping. Inconveniently, Target.com doesn’t offer a fully loaded cost on their property description pages, or hint at what shipping may be, or how one may be able to avoid shipping costs. Instead, I had to start the checkout process to figure out what it would cost to purchase this item:

Notice on the right where it says:

Shipping: not yet calculated
Tax: not yet calculated

As in, we demand that you tell us who you are, where you live, and your email address before we’ll tell you what it would cost to purchase something from us.

I complied, assuming that once Target.com knew my address they’d be able to calculate relevant taxes and shipping. But, I was wrong:

Here I am at the checkout screen and Target still hasn’t told me what I’ll be charged to purchase this item. They did accurately calculate the 7.775% sales tax rate I’d need to pay to subsidize the Vikings stadium, but didn’t tell me what it would cost to ship the product to my door.

I chose PayPal for checkout because I figured PayPal would probably give me an option to see the full price before Target charged me their mystery figure. Here’s what I found out:

The mystery shipping cost for the $5.54 item: $6.72. That hurts.

What’s even more strange about this is the sale taxes more than doubled from 7.775% to 17.148%. That makes no sense to me. Anyone know what that’s all about?

Between best seller products on a major retail site having only 5 reviews, 60% of reviews of a best seller product being negative, no transparency on shipping or tax before checkout, and jumping sales tax prices, it’s tough to have much confidence in the site.

Now, compare that to Amazon. Here’s Amazon’s most popular 1-quart glass measuring cup:

It’s $3.95 more expensive than Target’s best selling 1-quart glass measuring cup. But:

It has 22 images while Target offers one. Perhaps Target’s customers could benefit from a few pictures of measuring cups with missing lines so they could make more informed decisions?

Amazon’s 1-quart measuring cup has been reviewed 387 times with an average review of 4.5 stars:

Target’s reviews appear to be sorted by date, while Amazon’s are sorted by usefulness based on up/down votes from other Amazon users. The top review of this 1-quart measuring cup has received 154/162 useful votes. It’s more than 500 words long. In a nutshell, it says that it’s a nice measuring cup but not as nice as they used to be.

Amazon makes it clear that you can get this shipped for free if you’re willing to spend at least $25:

They also show that a 3rd party seller is willing to sell this product for $10.95 with free shipping.

Amazon also makes their upsell to Amazon Prime membership ($79 annual fee for free 2-day shipping on most purchases, plus unlimited movie streaming and other stuff) impossible to miss.

I skipped the Prime membership (I’m a Prime member, but I logged out for this demonstration) and took a look at my shopping cart. It turns out that Amazon lets me calculate the shipping/total cost for purchasing this item before I tell Amazon who I am:

A rational person wouldn’t spend $15.98 or $13.21 with shipping on a measuring cup. Especially when Amazon makes it blatantly clear that you’ll get nearly half off on the next $15 worth of stuff you add to the cart to round up to $25 and avoid shipping.

Target does offer free shipping to certain customers, and a 5% discount. All you have to do is ding your credit applying for their credit card, which carried a 22.9% APR:

Amazon also offers a credit card with a lower APR, and points for purchases not only at Amazon, but for anything purchased with the card including bonus points for certain popular categories like gas stations, restaurants, and drug stores.

And, if we’re comparing shipping based on membership, Target’s RedCard users are eligible for free Standard Shipping (3-5 days) while Amazon Prime members ($79 annual fee) receive free 2 day shipping. If I order something on a Tuesday night and it may not show up until the following Monday, it may be free but it’s not exactly awesome compared to having it before the weekend for free.

So, it looks like Target’s a bit behind on reviews, reviews of reviews, transparency on shipping, calculating sales tax, free shipping offers, delivery speed for free shipping offers, and benefits offered to members.

Personally, I think shipping policies can make or break online retailers. If e-commerce sites can’t satisfy the:

- I need something for a birthday party this weekend
- I plan to cook something this weekend
- I’m running low on diapers
- Christmas is almost here

crowds with cost-effective, reliable shipping, there are companies that do it on a daily basis and are winning a lot of loyalty through shipping that traditional marketing can’t touch.

How could anyone predict that the Vikings stadium e-pulltabs projections would fall short? Well, one could have listened to Rep Gruenhagen back in May 2012, who explained that only one state had previous tried exploiting their citizens through e-pulltabs, and the numbers fell far short of projections. That state was Iowa:

The topic on the floor at time of Rep Gruenhagen’s speech was to amend the stadium bill to fund the state’s share through user fees. As in, the Minnesotans who claim to want a new stadium would have an opportunity to actually pay for it through taxes on merchandise, seat fees, concessions, parking, among other taxes.

This, of course, did not pass. Obviously, Zygi didn’t want Vikings fans paying for the Vikings stadium when the state was willing to exploit gamblers instead. That leaves more money in fans’ wallets for Zygi to extract through higher seat prices, personal seat licenses, parking, concessions, and merchandise.

Fans will pay whatever Zygi can extract from them, yet didn’t have enough pride to say “hey, shouldn’t we be offering to help the state with this so the state doesn’t need to exploit gamblers through questionable gambling schemes?” But, fans together with Governor Dayton and the state legislature, lead by Senator Rosen and Rep Lanning, decided to protect Zygi’s access to Vikings fans’ wallets by exploiting gamblers instead.

And, if I understand this bill correctly, the state will be selling PSLs to Vikings season ticket holders on Zygi Wilf’s behalf. Why? Because, in addition to paying for half of a billion dollar stadium, paying to maintain the stadium, and letting Zygi pay no property taxes on valuable downtown Minneapolis land, we’re also going to sell hit PSLs for him so they can be sold tax-free. In each of those cases, the taxpayer’s lose for the benefit for the richest sports league in the United States. They’re rich for a reason: corporate Wilfare.

The Center for Neighborhood Technology has an interesting map where they compare the affordability of neighborhoods and cities based on percentage of income. Here’s a look at the greater Twin Cities metro:

To me, this helps illustrate the challenge with driving until you can afford more home. In real estate, the term “drive until you qualify” is used. As in, you decide that you want to have 2,000+ sq ft, 4 bed and 3 bath while spending less than $170,000.

Currently, one house in Minneapolis meets that criteria (if you count the finished basement). But there are dozens in the greater Metro if you include Farmington, Cannon Falls, Zumbrota, MN or Roberts, Wisconsin:

But, if work if found in the urban core, driving in from the extreme exurbs comes at a cost, as the right pane in the CNT map illustrates. It turns out that people living further out are spending a larger percentage of their income on housing + transportation than people who drive hundreds fewer miles per month.

Which makes me wonder: Who complains the most about gas prices? I have a hunch that it’s not people living in the urban core since the percentage of their income spent on gas is far lower than those who live further out. They may even drive more fuel efficient cars, making their fuel costs even lower. Anecdotally, I can say that gas prices are not a big topic of conversation among friends of mine who live near their jobs.

I wonder if there’s a feedback loop at play here, where people living further out end up justifying spending even more on vehicles since they know they’ll be spending an 1/8th of their waking hours or more in their cars? Which leads to higher insurance rates, which leads to more financial frustration they can ponder while listening to talk radio hosts explain to them that it’s all Obama’s fault (or, is it still Clinton’s fault?).

High gas prices seem to be a popular topic on talk radio during commute times when people with long commutes are tuning in to hear people complaining about a cost that’s built in to their budget due to their commuting distances. So longer commutes increase costs, increase wasted time, and increase the time spent listening to talk show hosts complain about the increases costs and wasted time. Is that healthy?

Tim Nelson at MPR’s Stadium Watch blog has published a breakdown of the projected construction worker hours for the Vikings stadium construction project. It turns out that it takes a lot of hours to build a billion dollar stadium with bathrooms in every suite and a VIP parking ramp so corporate types don’t have to go elbow to elbow with the face painters.

The Minnesota Sports Facilities Commissions numbers claim that the stadium will take 4,525,935 worker hours, during which 23,331 workers will be on site for an average of 194 hours each. It will take around three years to build the stadium, so that comes out to the equivalent of 725 full time jobs for three years at a cost of around a million dollars per job between state and city subsidies once interest on the borrowed money is factored in.

The state’s share, as we know all too well, is supposed to be funded by exploiting gamblers with e-pulltabs devices. Let’s suspend reality for a second and assume that electronic e-pulltabs are as popular as the Harlem Shake was for around a week last month, and would be for the next few decades. If we do that, we can calculate how many gamblers would need to be exploited over thirty years to employ 725 full time equivalent construction workers for three years. Here’s how I see this:

Here’s how this breaks down: E-pulltabs have an 85% payout, which means that people lose an average of 15 cents on every $1 bet. Around 20% of that 15 cents in losses (three cents for every dollar bet on average) goes toward the state’s share of the Vikings stadium debt. If the average e-pulltabs gambling rate is one hand every 10 seconds, they’ll lose an average of $54/hour. Approximately $10.80/hour would end up going toward the stadium.

How many hours does it take to lose enough money at e-pulltabs to cover the state’s share of the Vikings stadium mortgage? A sinking Vikings ship load.

Vikings stadium construction worker hours over 3 years: 4.5 million
E-Pulltabs gambling hours over 30 years to subsidize those workers: 94.4 million

At $10.80/hour in e-pulltabs losses, Mark Dayton, Julie Rosen, and Morrie Lanning, and John Kriesel decided that it would be in the best interest of the State of Minnesota to dedicate the equivalent of 1,514 Minnesotans to tapping e-pulltabs screens 40 hours per week for the next 30 years. That’s 3,148,148 hours of Minnesotans’ time devoted to tapping e-pulltabs screens every year for the next 30 years to subsidize the state’s share of NFL subsidies.

Let’s talk about jobs. Labor likes to inflate jobs numbers by discussing how many people will spend time on the job site rather than talk in terms of full-time equivalent positions. Let’s use their style of math for a comparison.

Vikings stadium jobs: Averaging 194 hours each, 23,331 workers employed over 3 years
E-pulltabs Gambling “jobs”: Averaging 194 hours each, 486,827 gamblers losing money at a rate of $54/hour over 30 years

When Governor Dayton talks about the jobs the Vikings stadium creates, he shouldn’t focus solely on construction workers. He should also consider the 21 gamblers he created to subsidize each of those construction jobs. For example, to cover the state’s share of employing 84 full-time equivalent electricians for three years, approximately 10.8 million hours hours will be wasted by Minnesotans tapping e-pulltabs screens, causing them to lose $586 million.

As Governor Dayton has stated to defend Vikings stadium Wilfare financing, there’s plenty of blame to go around. Still, it was Governor Dayton who pulled on a Vikings jersey and held rallies in favor of this disaster, and put his signature on the bill.