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Amazon Poised To Get Cut of CA Sales Taxes 295

Posted by timothy
from the unfettered-free-market-free-of-cronyism dept.
theodp writes "Eager to host Amazon warehouses and receive a cut of the tax on sales to customers statewide, the LA Times reports that two California cities are offering Amazon most of the tax money they stand to gain. After agreeing to collect California sales taxes beginning in the fall, Amazon is setting up two fulfillment centers in San Bernadino and Patterson, which will gain not only jobs but also a tax bonanza: Sales to Amazon customers throughout California will be deemed to take place there, so all the sales tax earmarked for local government operations will go to those two cities. The windfall is so lucrative that local officials are preparing to give Amazon the lion's share of their take as a reward for setting up shop there. 'The tax is supposed to be supporting government,' said Lenny Goldberg, executive director of the California Tax Reform Assn., of the proposed sales-tax rebate. 'Instead, it's going back into Amazon's pocket.' Sen. Mark DeSaulnier added: 'It seems like the private sector finds a way to pit one city against the other. You can't give away sales tax in this manner.'"
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Amazon Poised To Get Cut of CA Sales Taxes

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  • by bigdavex (155746) on Monday May 21, 2012 @08:12AM (#40063079)

    Special tax deals for individual companies is a recipe for corruption.

    • by mwvdlee (775178) on Monday May 21, 2012 @08:27AM (#40063145) Homepage

      It's not like a small start-up competitor for Amazon wouldn't get these same tax cuts in these same cities, right? Right? Please tell me I'm right.

      • by N1AK (864906) on Monday May 21, 2012 @08:38AM (#40063235) Homepage
        A company comes to you and says you can have 5,000 jobs and $20,000,000 as long as you give them $15,000,000 back. That's a tempting offer and you can hardly blame the towns for considering it. Someone comes to you offering 10 jobs and a worn out $5 it's not worth the effort. It's not corruption it's the cost of allowing internal variation in tax and rebates.
        • by KingSkippus (799657) on Monday May 21, 2012 @08:53AM (#40063351) Homepage Journal

          Yeah, it sounds like a good deal except that a lot of towns are ignoring the hidden costs of these deals. That huge company is going to require a lot of extra government services in the forms of things like electricity, water and sewer, roads, etc. Plus with the extra people, it's going to require more of things like fire nad police services, welfare benefits, unemployment benefits, public parks, postal services, yadda yadda yadda. What looks like a $5,000,000 bonanza, when all is said and done, ends up costing the taxpayers a crapton of money.

          These deals ought to be illegal, period. Government at all levels, from federal all the way down to local, should be prohibited from making sweetheart deals to one company without making them for all companies. It would have to be a federal law, since there's no way in hell that cities or states would make such laws on their own. That's the only way that the playing field could be leveled for everyone. Maybe now that corporations are "people," some small companies should get together and sue using the Equal Protection Clause, under the theory that government is prohibited from offering Company X a sweetheart deal that Company Y, Company Z, and every other company doesn't have access to. It's a little like selling bus tickets to the Smiths for $2 each and selling the same bus tickets to the Johnsons for $8.

          There is no telling how many trillions of dollars aren't being collected from companies because of deals like this, how much money is being sucked out of local municipalities' and states' coffers and being paid by people who live nowhere near where the money eventually ends up.

          • by dkleinsc (563838)

            Government at all levels, from federal all the way down to local, should be prohibited from making sweetheart deals to one company without making them for all companies.

            Well, here's the problem with that: Congresscritters are very very good at drafting legislation that only applies to 1 company even though in theory it applies to everybody. For instance, they might pass a law that gives a sweet deal to all business that run search engines in Mountain View, CA - for legal purposes, that isn't specific, but in practice it is.

            • In cases like that, the courts would have to step in and strike such laws down, kind of like how they do now when a state tries passing some law that is unconstitutional. Someone would have to say, "Hey, that law is obviously designed to give a sweetheart deal to Google," and sue.

            • by characterZer0 (138196) on Monday May 21, 2012 @09:52AM (#40063849)

              There is a simpler solution. Get rid of property taxes and corporate taxes and tax capital gains as income. This will break the argument that corporations are citizens and make governments pay attention to where the money is coming from - the people.

          • It's not a cost on the cities/towns that take the deal. They got to negotiate (with the entire state's tax revenue) how much they'll need to make it worth their while. Plus the jobs are always a big plus these days. I highly doubt the little costs you mentioned are going to cause it to be a loss for them.

            On the other hand, it is a huge net loss for the state as a whole. Every other city is losing out on tax revenue, despite still providing roads and such that Amazon needs for deliveries. (And infrastructure

            • by KingSkippus (799657) on Monday May 21, 2012 @10:31AM (#40064351) Homepage Journal

              It's not a cost on the cities/towns that take the deal. They got to negotiate (with the entire state's tax revenue) how much they'll need to make it worth their while. Plus the jobs are always a big plus these days. I highly doubt the little costs you mentioned are going to cause it to be a loss for them.

              I don't agree. Most towns these days are pretty strapped for cash and are cutting WAY back on basic infrastructure services. In my city, we've had budget shortfalls in the millions for years, and debacle after debacle of basic infrastructure failures because there's just not enough money to go around. Yet when I turn on the news, I'm hearing about yet another sweetheart deal that the city officials have made with some business to get them to come here. I can't help but think that we're just a few more sweetheart deals away from being completely bankrupt. (And indeed, many cities and counties around the country really are literally bankrupt.)

              This also neglects an issue that the OP mentioned above: corruption. I also can't help but think--and this has been proven in a court of law in a few cases--that the city officials who are making these sweetheart deals are getting kickbacks for them. In those cases, it's not just entirely possible, but I'd argue that it's probable that they're not negotiating in good faith for the city's best interest, that the costs I mentioned really will result in a net loss for the city.

              • by Cederic (9623)

                So these extra infrastructure costs.. to support extra people. You don't think the town will tax the extra people too?

                There's more than one source of revenue..

            • by Sentrion (964745)

              Good point. If the cities were not competing against each other, Amazon would have eventually had to pick one of them and pay full state sales tax. It's like two salespeople at the same company dropping their price two or three times, bidding against each other, so they can win a sale from just one customer. Most well-run organizations have systems in place to prevent "bidding against yourself". Cities are not for-profit organizations, so there's no anti-trust regulation to prevent them from organizing

            • by tsotha (720379) on Monday May 21, 2012 @05:27PM (#40069843)

              The tax money in question is only the part of the tax that goes to the local municipality. They cities in question can't bargain away the state's portion of the tax, so other cities aren't losing out on tax revenue. And we're not talking about a lot of money here - of the $316m Amazon is expected to pay in taxes only $8m apiece was slated to go to the cities in question. Now, you could argue that the sale actually happens wherever the customer is clicking away on his computer and therefor that city should get the money, but that's not how sales taxes are collected for brick-and-mortar sales. If I drive to another city and blow a bunch of money at the mall my sleepy burg doesn't get any of the tax money.

              These kinds of deals are done all the time by cities and states. Whenever a company decides to build something that's going to employ a lot of people or generate a lot of tax revenue it typically will shop around for the best deal. Nothing wrong with that, IMO. Cities and states aren't losing money when someone comes in and employs a bunch of people, some percentage of whom who would otherwise have been on the dole. All those employed people pay income taxes (which are quite high in CA), and they pay sales tax every time they buy something (well, in CA it doesn't apply to staple foods and clothes, but still).

              This happens at the country level as well. Multinational corporations have options when it comes to siting a factory, and what kind of tax deal they can get is always going to be considered along with the normal stuff like infrastructure and labor costs.

              What would be shocking is if Amazon didn't shop around. Anyway there isn't anything California could do to force Amazon to collect sales taxes as long as Amazon didn't have a presence in the state, so presumably they ground out all the numbers and decided the supply chain advantages outweighed the tax liabilities.

          • by iceperson (582205)
            Time to get a job at Amazon because apparently they don't pay any taxes...
          • by mu51c10rd (187182)

            Those government services will be covered by the added sales tax and property tax revenues brought in by the extra employees. These new employees will also buy from local merchants, increasing more sales tax revenues, and will rent/buy housing in the area. Compare the economies in areas that do these deals versus areas that do not. See which one you would rather be living in.

      • Re: (Score:2, Informative)

        by Dcnjoe60 (682885)

        It's not like a small start-up competitor for Amazon wouldn't get these same tax cuts in these same cities, right? Right? Please tell me I'm right.

        You are right. A small start-up competitor or any retail business, for that matter, would have access to this.

      • by nedlohs (1335013)

        Sure they would. If that small startup will bring as many jobs and as much revenue with them as Amazon will.

      • by bigdavex (155746)

        Talks with Amazon about a so-called sales-tax rebate are still in the early stages.

        Amazon is negotiating a special deal. If everyone gets the same special deal, it's not a special deal (just the law) and no one has to negotiate it.

        The fact that they are negotiating tells us that they are not applying the tax code uniformly.
         

    • Special tax deals for individual companies is a recipe for corruption.

      Not really. It's a hold over from the days when sales tax first started. States let businesses keep a portion of the sales tax to cover the costs of calculating it and remitting it. Back then, there were no computers and the like. However, the laws were never updated so, today, it is a windfall for them. But it isn't a "special tax deal." In the 40s, it made sense. Today, it doesn't. But then again, it does negate the notion that it is too expensive for online businesses to collect and remit sales/us

    • Well, no worries, then.

      The California state government is already completely corrupt.

    • by tompaulco (629533)
      Special tax deals for individual companies is a recipe for corruption.
      Deals like this happen literally all day every day. Any sufficiently sized company considering moving to an area will be courted by various towns with deals like these. In fact, my local WalMart Supercenter is located in my city because the city was willing to make a deal with them and the neighboring city was not. Walmart ended up building the outlet on a street which is the border between my city and the other city. So they effectivel
  • by JoeMerchant (803320) on Monday May 21, 2012 @08:13AM (#40063085) Homepage

    You can't give away sales tax in this manner.

    If Amazon were decent about it, they'd refund it to the customers.

    • by Dcnjoe60 (682885)

      You can't give away sales tax in this manner.

      If Amazon were decent about it, they'd refund it to the customers.

      Many would argue that the discount a business gets from collecting sales tax is already figured into the pricing of their products as it impacts their bottom line.

      • Re:Yes, you can... (Score:5, Insightful)

        by Trepidity (597) <<gro.hsikcah> <ta> <todhsals-muiriled>> on Monday May 21, 2012 @08:45AM (#40063289)

        As far as I can tell, empirically this doesn't really happen: when FAA taxes were suspended for a bit recently, due to a Congressional screw-up when it came to reauthorizing the agency to collect the fees, airlines didn't lower their fares, they just pocketed the savings as higher profit margins.

        Another way of putting it is that profit margins, like almost everything else, aren't completely fixed, so tax hikes and tax cuts don't necessarily get passed through to retail prices, but instead may modulate profit margins (or other things, such as employee pay).

      • by h4rr4r (612664)

        Many would be wrong. The price is already set at what the market will bear, why lower it?

        Costs have very little to do with price.

        • by gl4ss (559668)

          Many would be wrong. The price is already set at what the market will bear, why lower it?

          Costs have very little to do with price.

          ..dodging the tax was originally how amazon managed to do their market takeover in the first place. don't pretend it had no effect on pricing.

    • by gl4ss (559668)

      ..where do you think their lower pricing comes from, thus their competitive edge? it's bullshit for all amazon competitors though!

  • by John Jorsett (171560) on Monday May 21, 2012 @08:20AM (#40063109)

    I thought Amazon folded rather abruptly on the CA sales tax issue after having put up a big fight for years. Now I know why. Look for this deal to be cut in other states as well.

    • If CA Taxes work like they do in NY (I'm was a tax auditor) I still don't get why they folded.

      How it works in NY. Let's say the average county in NY is 8% (it's all over from 7 to 9), 4% goes to the state right away. The other % (besides NYC) goes to the county, in NYC the next 4% (at least it used to be 8.75) goes to the city, .75% goes to the MTA or something like that.

      So let's say the county is giving back 90% to Amazon, but that's only 3.6% going back to Amazon out of the 8%. And the county is only k

      • by aaarrrgggh (9205)

        The state gets 8% of sale the city gets 1%. The city is "giving back" nearly 100% of their 1% of sales.

        The summary is miserable, and I haven't read TFS, but usually this happens in the form of property tax breaks, and not a "refund" of collected taxes from other people. Slightly less corrupt... but only slightly.

  • by Overzeetop (214511) on Monday May 21, 2012 @08:23AM (#40063119) Journal

    If you want to know why your taxes are so high you only need to look at the deals which are given to major corporations to attract and retain their business. It's getting to be a bit like CEO compensation packages. Will the best ones make you money - sure. But that money is collected from everyone else - essentially a tax increase on the everyman.

    The fact that governments are pitted against one another just means that the downward spiral will continue, as each locality offers to unlevel the playing field to favor their locality.

    • by alen (225700)

      so why should people living hundreds of miles away pay your town's taxes?

      • so why should people living hundreds of miles away pay your town's taxes?

        Probably for much the same reason as a business based in another State should be required to collect your town's taxes...isn't that the argument that was made in order to get Amazon to collect CA sales taxes at all?

      • by Dcnjoe60 (682885)

        so why should people living hundreds of miles away pay your town's taxes?

        Well, it could be because the infrastructure to ship all of those goods people are buying from Amazon and other online retailers is supported by sales tax. I'm assuming that Amazon's warehouses and office need police and fire protection, schools for their employees children and roads for the trucks to drive on, but I could be mistaken.

    • If you want to know why your taxes are so high

      Taxes in the US are almost the lowest in the developed world [taxpolicycenter.org]. So, I don't really want to know more about something that isn't true.

      This doesn't look like a tax to me -- it looks like a government-imposed profit fee for Amazon. Perhaps they should dispense with the fee entirely.

      • by FlopEJoe (784551)
        And that profit fee is on top of the U.S. corporate tax rate being the 1st or 2nd highest in the developed world [huffingtonpost.com]. Does anyone think they eat those rates or don't try to offshore jobs and manufacturing?
      • by operagost (62405)
        It's highly unlikely that chart includes local tax data, like property tax. In fact, considering how much state income tax varies, I highly doubt that was taken into account.
      • Not surprising that taxation is different than in tiny socialist welfare states. But that doesn't mean it isn't too high by normal standards.
    • by crimoid (27373) on Monday May 21, 2012 @10:22AM (#40064199)

      I'm sorry, but the lions share of the tax money (at least in CA) is not going to major corporations in the form of incentives. Most of it goes to state employees' salaries and benefits, the latter of which is grossly out of whack in this state.

      I'm all for keeping a close eye on corporate/government activity, but saying that taxes are high because of it is just incorrect.

  • Don't blame Amazon (Score:5, Insightful)

    by gstrickler (920733) on Monday May 21, 2012 @08:23AM (#40063125)

    Blame the design of the tax laws, and the city officials who are willing to give huge tax breaks to major businesses. We see this type of thing all the time in the building of major sports facilities. It's welfare for billionaires.

    • by alen (225700)

      so make your town like most of fly over country. nothing. and a good job is considered working at wal mart

    • by thomasw_lrd (1203850) on Monday May 21, 2012 @08:48AM (#40063311)

      Its not really though. They will tax the employees. This is how the city makes additional tax revenue. That's what it really all about. Plus all the residual services that new job bring.

      People only bring up the issue at hand, they aren't considering what is really happening.

      It's much the same with the whole X amount of billionaires don't pay any taxes on their income. The news media doesn't report that's because they give 90% of the money to charitable causes, or what not. It's the residual effects of their money that makes the biggest difference, not the fact that they don't pay X amount of taxes.

    • by Trepidity (597)

      There is somewhat of a move in California towards removing local shares of tax collection, in part because of too many special-case deals like this where the money gets used like a slush fund. Although many are a lot more corrupt than this one; this is clearly special-case, but it's fairly transparent. Local redevelopment agencies were recently all-but-eliminated in last year's state budget, for example, partly to close the state's budget gap by taking back the money, but also partly because local redevelop

    • by Walterk (124748)

      Yes, your honour, don't blame me! She was asking for it, wearing a short skirt and everything..

  • by roman_mir (125474) on Monday May 21, 2012 @08:35AM (#40063213) Homepage Journal

    It seems like this story is trying to make Amazon look bad or trying to make cities that are hunting for Amazon's money look bad, because they are providing the most competitive environment to the other cities and government officials don't like it. It's a story that needs to be cut just like Gordian Knot.

    Yes, governments require money.
    Yes, private enterprise creates money, so governments require private enterprise.

    So governments competing for money of private enterprise makes sense. Some argue that this is wrong, they want 'one government' even 'world government' and 'world taxes', etc., all just to KILL competition (and majority of the mis-educated public believes that government increases competition, not that it destroys it in every way possible).

    But of-course the real issue needs to be distilled here just like the Gordian Knot needed to be cut to be solved:

    1. Sales taxes and income taxes should not coexist. Income taxes are illegal and collected illegally [slashdot.org] and sales taxes, excise, import taxes are legal and they are the preferred way to run governments, because they can be moderated by the people's purchasing and saving behaviour, and we shouldn't believe in propaganda that we exist to support the government structure and that individual rights are secondary to collective.

    2. Governments SHOULD HAVE TO COMPETE for money. Governments that compete for money are governments that are much less spending happy and are aware that their financial situation wholly depends on the financial situation of the actual market and not on their ability to ENSLAVE people through taxing their labour, DESTROY competition by creating, supporting and bailing out monopolies/oligopolies and STEAL liberties and freedoms from people through growth of government offices due to all of the laws and regulations governments come up with.

    People must be free to choose between different governments and governments must be local, not global.

    Global government above you is a single point slave owner that you cannot escape.

    • Re: (Score:2, Insightful)

      So what you're really saying is that you refuse to contribute financially to the society which helped you achieve your current station in life.

      I'm assuming that you live a relatively comfortable, perhaps even wealthy lifestyle. Yet you refuse to pay taxes and contribute, like the scum-sucking libertarian festering leech-like boil on society that you are.

      Got it.

      • by dkleinsc (563838)

        My solution to this problem: Let GP pay no taxes, but have no access to anything the government has built, or any businesses where government regulation has had demonstrably beneficial effects.

        In other words, he gets a homestead in the middle of nowhere with no electric grid, no bank account, no credit card, no car (not that he could drive it anywhere anyways), no Internet access, and (for the sake of argument) put him right next to the Mexican border where the drug cartels like to hang out with semiautomat

        • by Jiro (131519)

          That's not a fair response because not only has the government built things using tax money, it has distorted the market and prevented those things from being built without tax money. He can avoid using those things, but he can't avoid *not* using the things that the government's presence drove out.

          Furthermore, even most libertarians believe that the government has a role in national defense, so border patrol isn't objectionable anyway.

      • by couchslug (175151)

        Government does what it will, so if I am breaking no law anyone who dislikes my preferred method of compliance can get stuffed.

        Let's not confuse paying taxes with social contribution.

        Most of your taxes in the US either go to war, war-related costs, or other waste like the War on Some Drugs. The rest merely ENABLE those operations by providing minimal funding for others.

  • Apparently, you can give away sales tax in that manner.
  • Two cities get to decide what to do with state sales tax?

    This kind of deal just shouldn't be legal.

    • by a90Tj2P7 (1533853)
      No. Even the summary explains this:

      all the sales tax earmarked for local government operations will go to those two cities

      They're giving Amazon the money that would go to the city. Not all of the state's tax.

  • 'The tax is supposed to be supporting government,' said Lenny Goldberg, who, despite being executive director of the California Tax Reform Assn., sucks at economics and would rather be "right" than increase the tax base of either of these communities.

    FTFY. However, in defense of his position if not his actual reasoning, it is shitty that these cities are offering Amazon a deal when presumably they haven't offered local brick-and-mortar businesses the same. No doubt in a few years when Amazon is perceived to have monopolized some business (the "selling everything for a reasonable price while providing good customer service business," perhaps), everyone will blame the evil free market.

    • by BenJeremy (181303)

      Lenny Goldberg is upset that the laws he's worked so hard to enact (funny how a "tax reform" organization wants MORE taxes imposed, too) are being "perverted" by the cities' sweetheart deals with Amazon. He's using an argument he doesn't actually believe in.... because his "side" has no problems opposing this deal, but conservatives need a different argument than "they are ruining our internet tax bill!!!"

      The tax deals are nothing new. I live in the Flint, Michigan area, and that sort of thing is still done

  • by Anonymous Coward

    Corporations play one state or city against another to extract tax breaks. They threaten to move the plant here or there, and get different localities to bid against each other with tax reductions. The burden falls on the rest of us.

    I have a proposal for how to solve this problem. I think the states should increase their bargaining power against companies by forming a union. We could call it the "United States of America."

    Here's how it would work. All the states would agree to be bound by a rule that when a

  • Leaving aside the question of how morally wrong this is (very), isn't it completely illegal?

    • by gl4ss (559668)

      it's not illegal for a city to bribe a company, apparently. I guess it depends on who has the initiative.

  • nothing new (Score:5, Informative)

    by Charliemopps (1157495) on Monday May 21, 2012 @09:17AM (#40063515)
    They report on this like it was a new thing, just invented for amazon. It's not. Whenever a large employer has plans to move into a region they negotiate with several potential local governments to find themselves the best deal. In some cases one city might have an advantage like a rail line or a port, and can offer less of a deal, while another may have negatives... poor roads, bad zoning, etc... and they need to offer a lot more.

    My father was VP of a company for years and they set up several factories. The local governments would give them free water, electricity, sewage, etc... You may think that's just a give-away by the city, but what the city would get in return is 1000-2000 employees all paying income taxes... Those same employees would then spend the money they earned, usually in town, and generate sales taxes. The money they spent would bring in other smaller businesses that wouldn't get the same breaks as the larger employer. By far the city profited more from the deal than they lost. That was the point of the deal.
    • Re:nothing new (Score:4, Insightful)

      by Hatta (162192) on Monday May 21, 2012 @09:45AM (#40063761) Journal

      In the absence of such a deal, the company would still have to make a factory somewhere. That means those jobs would still exist, and still contribute taxes to the economy. The sweetheart deals only ensure that it's your city that gets the jobs.

      So what we have here isn't a situation where everyone's a winner. These deals make your locality a winner at the expense of others. When looked at it from the perspective of society as a whole, these deals are zero sum or worse. They should not be allowed.

  • Now we know why Amazon has been pushing so hard for taxes, because it gets a slice.
    Hey Amazon? You're not the only online retailer. Start pulling this and I'll just stop using your service.
    • if the Critters in question were smart then they would work a few details into the deal.

      So we are giving you a cut of the tax money then you need to have the employment security commission office on SPEED DIAL so they can send you folks that need jobs. Do a good enough job saving us in the city money and we may be able to talk further.

  • by a2wflc (705508) on Monday May 21, 2012 @09:36AM (#40063659)

    Cities, states, and countries are constantly competing to be the government to vouch for a business entity's credentials (i.e. incorporation services) or to provide other government services for a business (e.g. water, sewage, roads, police, courts to settle disputes).

    For these services, sometimes the government wants direct taxes. Other times they are primarily concerned with jobs. These jobs provide residents with money to pay other types taxes (individual income, sales, gas, property, etc) as well as helping other businesses (e.g. restaurants, stores) and decreasing the need for public services (i.e. food stamps).

    Sometimes there is corruption in the process. More often than not, the government has decided that having the business is an overall benefit. The government may be incompetent and make a poor decision that doesn't necessarily mean corruption is involved. In any case, you need to look at the total effect (direct + indirect taxes + services that increase + services that decrease) to see if it was a good deal.

  • "Sales to Amazon customers throughout California will be deemed to take place there, so all the sales tax earmarked for local government operations will go to those two cities."

    In California, there is often a local city or county percentage added to the state sales tax. The cities can do whatever they want with *their* portion of the sales tax. The state's portion goes to the state.
  • by J'raxis (248192) on Monday May 21, 2012 @09:59AM (#40063947) Homepage

    I hope all you people who were whining about Internet retails back when they were untaxed, not "paying their fair share" and having an "unfair advantage" over brick and mortar stores, are happy with the results. Now one of the retailers turns around and buys privilege from the government, actually benefiting from these taxes.

    I'd write more, but I'm laughing too hard. :)

  • 'It seems like the private sector finds a way to pit one city against the other. You can't give away sales tax in this manner.'"

    52 counties in California and each has its own way of doing business. They do it on purpose so that they can divide us and fuck us. You never know when you drive over a county line what the laws are going to be like. It's supposed to preserve the interests of locals and that's true; privileged, entrenched interests that are continuing to carve California up into ever-smaller pieces for their own profit at the cost of everything that makes California great save location.

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