As we turn the page on the year 2011, there is no shortage of topics about which the entire world seems to be debating. One that interests me the most is the renewed debate on the role of government in the energy sector, specifically in the United States. Budget shortages, deficit increases, front-page analysis of public-backed private enterprises, and a particularly bitter political climate have combined to push this topic to the forefront more so in 2011 than in recent years. It’s as though we are back in the smoky classrooms of the University of Chicago in the ‘50s and ‘60s where economists engaged in frequent Keynes Vs. Friedman (Milton not Thomas, mind you!) debates.

Energy is always a popular topic in the U.S., given its strategic importance to national security. All this recent debating has been interesting to follow but a bit confusing. Economists, reporters, business folk, and politicians do not seem to agree on what constitutes a government subsidy, let alone which sub-sector is the recipient of how much. While I do not want to take any sides, I thought it would be worthwhile to examine what constitutes a government subsidy, and what subsidies and how much were provided by the U.S. government historically.

As I began to think about what sectors to focus on, it made sense to examine those that have been of significant strategic importance to U.S. economic growth in the past. The rise of the U.S. to be the largest economy in the world was driven to a large extent by what some refer to as the second industrial revolution constituting the rise of the railroad, steel making, telecommunications, petroleum, and the automobile industries. This article attempts to capture the subsidies provided by the U.S. government to some of these industries at different stages of their growth cycle.

What is an energy subsidy?

I am no economist, but it seems to me that we can all agree on what constitutes a government subsidy without too much debate. Table 1 (below) attempts to summarize the different forms that energy subsidies can take. Most of these subsidy types are immediately recognizable. The “type” that has generated much debate so far is the “Failure to include Externality Costs.” No matter where you stand on the climate change debate, it is not that hard to see that pollution has at the very least caused smog and acid rain—ask the residents of the Los Angeles from the ‘80s and, more recently, those from Beijing. There has not been a worldwide accepted externality cost measure yet, but as we move forward the chances of that happening are higher.

Regardless, it is safe to say preferential tax treatments and price controls are as much a government subsidy as a cash grant or a low-interest loan. The U.S. government wallet is a bit lighter in both cases.

Historical U.S. government subsidies

The growth of the U.S. economy after the Civil War to become the world’s largest economy was driven by increasing commercialization of technologies including the railroad, iron and steel making, petroleum, and the internal combustion engine. Besides private capital and resources, an important catalyst behind the development and growth of these industries were U.S. government subsidies at different stages. Table 2 summarizes the amounts, types, time period, and stage at which government subsidies were provided to these industries.

Railroad and transportation

U.S. railroad companies laid more than 35,000 miles of track between 1867 and 1873—more than three times that laid in the previous 30 years. Congress gave the railroad companies more than $64 million ($8 billion in 2011 US$ at 3.5 percent inflation) in loans and tax breaks and more than … Next Page »

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In the long-running debate over online sales tax laws, one of the most laughable ideas has been that calculating sales tax rates all over the country is somehow a difficult job for big e-commerce companies like Amazon.com.

You know, the same company that adds enough servers every single weekday to run a circa-2000 version of itself. The same company that knows every item I’ve ever perused, and can tell me what fellow shoppers bundle and buy. The same company that gives away streaming movies and takes a loss on full-color touchscreen tablets just to get people in the buying mood.

But that’s been the basic argument against various cash-starved states’ attempts to pass “Amazon laws” deputizing online retailers as new tax collectors. A longstanding U.S. Supreme Court decision, enacted before the Web was a force in retail, held that figuring out sales tax rates for thousands of jurisdictions nationwide would put a burden on interstate commerce. And that is something only Congress is allowed to do.

That could be happening sometime soon. As we’ve discussed, Amazon is putting its weight pretty heavily behind a new online sales tax system being debated in Congress. The latest evidence of the Seattle company’s dedication was on display today, as VP Paul Misener testified at a U.S. House committee hearing on the issue.

In his prepared remarks, Misener acknowledges the obvious fact that software has solved the problems with national sales tax collection: “With today’s computing and communications technology, widespread collection no longer would be an unconstitutional burden on interstate commerce, and Congress feasibly can authorize the states to require all but the very smallest volume sellers to collect.”

He also shouts out Avalara, the Bainbridge Island, WA-based company that has been a leader in supplying online sales tax software to retailers, particularly small and medium-sized sellers. As CEO Scott McFarlane recently told me, all the talk of sales tax collection being some kind of unfathomable dark art is frustrating for the entrepreneurs trying to solve the problem.

“What chafes me is when people say that there’s not a solution out there, it’s too hard. The reality is, it isn’t. It’s a statutory requirement. We have the technology,” McFarlane said.

It’s encouraging to see so much progress being made on an issue that’s lingered, probably needlessly, for so long. Amazon’s sometime foe at the National Retail Federation, which represents a lot of the big brick-and-mortar retailers, also is behind the recent push to enact a national online sales tax system.

The fight for now seems to be over which businesses to exempt from such a system. The bill Amazon’s supporting gives a pass to sellers making less than $500,000 a year in revenue, and Misener’s testimony calls out $150,000 as an even better figure. eBay, in its own testimony today, wants a much bigger small business exemption—eBay’s Tod Cohen threw out several suggested thresholds, from $5 million up to $30 million.

There is the matter of a little election about a year from now, which could see big changes in who’s in charge over in the other Washington. It’s not clear whether this issue will be resolved before the political climate gets hot and heavy—if you were running for re-election, would you want some opponent running ads about how you voted for an Internet sales tax?

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In a remarkable test of will, I’m going to avoid any Thanksgiving-related puns and just dive straight into this wrapup of the past week in Xconomy Seattle’s tech headlines, covering everything from Black Friday shopping apps to the latest rumblings of possible doom from a local wireless company.

—The crew at Seattle startup Decide made the obvious leap into a full mobile app, released just as bargain-hunters were warming up for the holiday shopping frenzy. Decide is among several sites that help consumers decide whether to buy electronics, or wait for a better price. But the company, co-founded by University of Washington search expert Oren Etzioni, takes things a significant step further by employing a sophisticated price-prediction technology.

—I profiled Avalara, a Bainbridge Island-based company that sells web-based software to help merchants calculate and pay sales taxes. That’s a complicated task, with some 11,000 taxing districts of all shapes and sizes littered around the country. Avalara’s been posting impressive growth numbers, and the trend could continue as Congress, Amazon, and traditional retailers try to hash out a deal over charging sales tax on more online purchases.

—Xconomy’s Greg Huang brought us the scoop on a speech by all-star investor Brad Feld, who told entrepreneurs and angel investors at Microsoft‘s NERD Center in Cambridge, MA, that product and people should be their main focus. Feld is the co-founder of TechStars, a startup bootcamp program with a branch in Seattle. He’s also a board member and investor, through the Foundry Group, in Seattle startups BigDoor Media and Cheezburger Network.

—I looked at a recent tactical shift made by MiNeeds, a Seattle-based site that pairs users up with local service providers who bid for their business. It’s a relatively active area for Web companies to target, but MiNeeds thinks it found a significant edge in the wedding market when it decided to break those services out from the plumbers and carpenters and house painters on the main site. That was something the co-founders resisted—but, as good data geeks, they changed their minds after testing showed it was the right move.

—PaperShare opened up its doors to the public—or at least the cloud computing and virtualization slice of the public. The startup, headed by longtime server computing consultant Doug Brown and former Microsoft virtualization director David Greschler, is a new twist on the sometimes ancient websites that many professionals still use to spread technical info and industry insights.

—And finally, we had some contrasting bits of news: Clearwire, which is trying to simultaneously slow its losses and raise money for a network overhaul, publicly said it would consider delaying a big debt payment. Shares, of course, took a beating. On the other hand, Ignition’s Frank Artale led a $15 million investment in ServiceMesh, a cloud platform company in Santa Monica, CA.

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After a year of epic battles with politicians and brick-and-mortar competitors, Amazon.com has made sales-tax policy a relatively sexy topic in the business world. But another Seattle-area technology company has been working for years to navigate complex sales tax systems—and it’s growing like a weed.

That company is Avalara. Started by an accountant/developer and based on Bainbridge Island, WA, the company provides web-based software that helps businesses automatically calculate and pay sales taxes with precision, no matter where the sale takes place.

How big a problem is that? There are about 11,000 different taxing districts in the U.S. alone, with overlapping boundaries, shifting rates, and long lists of exemptions. Selling the same item to two homes in the same neighborhood could actually mean charging two different amounts for sales tax, if they’re on opposite sides of a tax boundary. And retailers are deputized as the tax collectors, taking in all the revenue up front and sending the government its cut.

It’s the kind of complex, constantly shifting set of data that has been practically begging for a software solution for years. But even businesses that were already using accounting software to keep their books traditionally had to punch in the nitty-gritty details of sales tax data manually.

Avalara makes it automatic by tracking the sales tax zones nationwide, tying them to a sale’s location, and plugging in the information exactly where it’s needed in accounting or e-commerce software. And since the Internet has expanded the sales footprint of virtually any business, making it possible for even a small retailer to find customers nationwide, making those calculations has become increasingly necessary.

It’s also downright fun, if you ask the Avalara guys. Even though their particular island is of the more frigid San Juan variety, the company embraces a pretty lighthearted culture that counters the potentially dry subject of sales tax policy. The executive team donned tropical shirts for their official headshots, and when we met recently at the company’s Seattle office, CEO Scott McFarlane’s shirt stripes, watch face, and laptop skin were all being employed to display Avalara’s signature bright-orange color scheme.

“Some people want to put a computer on everybody’s desktop. I just want to calculate everybody’s transactions,” McFarlane says with a powerful laugh.

Avalara got its start in 2004, and now has about 250 employees worldwide. The company, which has raised $21 million in financing this year, is led by three co-founders: CEO McFarlane, technical chief and board chairman Jared Vogt, and tax chief Rory Rawlings, the accountant-developer who has also been instrumental in helping to develop national sales tax policy through the Streamlined Sales Tax initiative.

Avalara’s rise has been quick enough to land it on the Inc. 500 list of fast-growing companies in 2010. It made the larger Inc. 5,000 list this year (No. 682), with last year’s revenues pegged at $16.7 million. This year, the business will grow again by 50 to 75 percent, McFarlane says, putting Avalara’s sales in the neighborhood of $25-$30 million. … Next Page »

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This week’s wrapup of Xconomy Seattle tech headlines features two great entrepreneur/investors who will be featured at Mobile Madness Northwest, our action-packed half-day forum Dec. 6 at F5 Networks. We’re pairing up two people whose experiences span big-company products and proto-company startups: Wesley Chan of Google Ventures, and Charlie Kindel, formerly with Windows Phone (and a bunch of other products over 21 years at Microsoft).

As we found out in this profile, Chan led the projects that became Google Analytics and Google Voice—the latter of which prompted his move up to Seattle, where he’s still based today. But instead of working on big projects inside of Google, Chan is now a partner at Google Ventures, where his investments run all the way from consumer apps to life sciences.

Kindel left Microsoft earlier this year to devote more time to angel investing, mentoring and advising startups, and creating a new company of his own. The details of what he’s working on are still under wraps, but Kindel’s experience gives him an interesting and extremely informed perspective on the future of innovation in mobile.

Moderating the discussion with these two smart guys will be Chetan Sharma, the well-known mobile industry consultant and adviser. Get your tickets here—the clock is ticking on the special Saver Rate, our last discounted pricing promotion before the event on Dec. 6.

Other things catching our attention in the past week:

—Windows Phone has a lot of catching up to do if it wants to take the strong third-place competitor’s spot in the mobile platform battles. And critical to that task is getting developers to create a strong ecosystem of digital products and services. Brandon Watson, the developer team lead for Windows Phone, took a look back at the first year of WP7 on the market and reveals some of the specific steps his crew is employing to woo developers to Redmond’s side.

—The Clarisonic skin-cleansing device has been quietly piling up sales (and celebrity customers) by putting the sonic-wave technology behind Sonicare toothbrushes into a cosmetic application. And it’s paid off, now that cosmetics giant L’Oreal has acquired parent company Pacific Bioscience Laboratories for an undisclosed sum.

—Hackathons are growing up. Seattle-based Startup Weekend had quite a year in 2011, even if you don’t count the growing international footprint for its signature events. The entrepreneur education nonprofit’s potential has now been recognized by Google, which inked a new two-year global sponsorship deal. That will give Startup Weekend some cash, but it also allows Google to tap into the organization’s worldwide community of entrepreneurs, hackers, designers, and investors.

—Amazon has been getting a lot of attention in the public policy sphere for its resistance to state-by-state efforts to collect sales taxes online. The e-commerce pioneer has been staunchly, sometimes belligerently opposed to those efforts, and it may be paying off: A bipartisan group of U.S. senators is backing a new national law that would set a nationwide standard for sales tax collections online—something Amazon has long supported. Amazon and its sometime-foes at the National Retail Federation are both supporting this new bill.

—PopCap Games, the casual game maker recently acquired by Electronic Arts, sponsored a new survey that shows an increasing willingness by gamers on social networks to use digital currency and buy virtual goods. The survey shows a pretty significant change since last year, the kind of pace PopCap and others are looking for as they stake out new ways to make money in the free-to-play arena.

—Stockbox Grocers isn’t a tech startup, right? The company, a project of two entrepreneurs from the Bainbridge Graduate Institute, turns surplus shipping containers into mini corner stores stocked with cupboard staples and fresh produce. But in a profile, we showed how even something as low-tech as retail can be heavily influenced by cheap, powerful technology and “lean startup” methods.

—Meanwhile, down in Portland, the team at Urban Airship continues to make news. This week, we saw the mobile app infrastructure provider featured as one of the inaugural investments from Intel Capital‘s new $100 million app-focused fund. The deal also comes with a partnership that will make Urban Airship’s services available to developers working on apps for Windows-based notebooks powered by Intel’s processors.

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Looks like Amazon’s pugnacious bet on national sales tax reform is paying off.

The Seattle company (NASDAQ: AMZN) says it is strongly supporting a proposed national law that would force online retailers to collect local taxes on more of their sales, ending a longtime loophole originally meant to help catalog businesses. The National Retail Federation, which has battled with Amazon on the sales tax issue, also is on board with the bipartisan Senate proposal announced today (the federation represents lots of brick-and-mortar retailers).

So how’s that a win? Amazon has gone to some pretty extreme lengths to avoid being deputized as a tax collector for state and local governments, insisting that its shipping centers are different companies and even shutting down entire networks of third-party sellers when state lawmakers pass “Amazon tax” bills.

That behavior has caused a lot of turmoil for the ecosystem of smaller businesses that rely on Amazon. One example is the story of Shopobot, a comparison-shopping startup that relocated from the San Francisco Bay Area to Seattle earlier this year specifically because Amazon axed its affiliate program in California.

But Amazon has said for a long time that it favors a national solution, rather than a hodgepodge of different state rules. Specifically, the company has supported something called the Streamlined Sales Tax project, in which states agree to a common set of sales tax definition and practices.

The common standards are important because each state taxes things differently—sometimes wildly so.

Cue up today’s bipartisan Senate bill, which uses the Streamlined Sales Tax program as a centerpiece of any national tax system for online sales.

So, while any retailer would certainly enjoy the fact that it didn’t have to act as a big tax collector, and could price its products a little better to boot, Amazon clearly knew the days of tax-free Internet sales weren’t going to last forever. It placed its bet on a national system, and made some pretty belligerent moves to reinforce that preference.

And it looks like that strategy is paying off.

There’s no guarantee that this bill will actually become law, of course—the federal lawmaking process is both arcane and volatile, and any tax vote will be a tough one in this economic climate. But it’s got a lot of the hallmarks of something that could pass.

An interesting side note: Shoppers in Washington state already pay sales taxes on Amazon purchases, because the company’s headquarters are here. But the state also says it’s only collecting taxes on about half of the online and mail-order purchases by people living here, and that adds up to some big numbers.

If the new Senate proposal becomes law, Washington officials estimate that state and local government treasuries could raise about $242 million annually. That comes at a time when the state has been cutting billions from spending on education, health care, and other expensive government programs.

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How’s the life of a billionaire? “Quite strange,” says Bill Gates, who fielded questions from University of Washington students on Thursday evening as part of a lecture on the future of computing.

Gates’ talk, at a packed hall in the UW’s computer science building, focused on some areas where he thinks cheap, powerful computing will have a major impact on society, including education, disease, and robotics.

Gates recalled spending time on the UW campus as a young man, back in the days when computers were huge, powerful machines locked up in big research facilities.

“At strange hours you could essentially break in and use computer time,” Gates said. “I never did get a degree here, or anywhere else. But fortunately for me, my addiction to computers became easier to satisfy.”

Given the chance to ask Gates about anything, students treated the evening like a visit with the oracle, asking the Microsoft co-founder to expound on problems with the political system and the tax code, predict the future of computer interfaces, and more.

Gates didn’t disappoint, giving long answers that included some glimpses at his personal life, such as meeting his daughter’s boyfriend’s parents over Skype and being such a bookworm as a kid that “I had to have a quota about how much I was allowed to read.”

The webcast will be archived online by UW, but here are the highlights from where I sat:

BEING RICH
A student from Beijing said her dream as a child was to be one of the richest people on Earth, so she asked Gates “what is one word of advice that you would give to someone like me to become someone like you?”

“I didn’t start out with the dream of being super-rich. And even after we started Microsoft, and the guys who ran Intel—Gordon Moore and those guys—were billionaires, I was like, ‘Wow, that must be strange.’ And so—it is, it’s quite strange,” he said to laughs from the crowd.

“But I think most people who’ve done well have sort of found something that they just are kind of nuts about doing. And then they figure out a system to hire their friends to do it with them. And if it’s an area of great impact, then sometimes you get financial independence,” Gates said.

“But wealth above a certain level, really, it’s a responsibility that then you’re going have to either, a.) leave it to your children, which may or may not be good for them, or b.) try to be smart about giving it away.

“So I can understand wanting to have millions of dollars, because there’s meaningful freedom that comes with that. But once you get much beyond that—you know, I have to tell you, it’s the same hamburger. Dick’s has not raised their prices enough,” Gates said to laughs. “But, you know, being ambitious is good. You just have to pick what you enjoy doing.”

MONEY & POLITICS
Asked if he thought there was a societal problem of wealth being concentrated in the hands of too few powerful forces with an outsized ability to influence politics, Gates pointed out that worldwide poverty is getting far better over time. But he also acknowledged … Next Page »

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—HootSuite, the Vancouver, B.C.-based social media company best known for its power-user Twitter interface, has raised $3 million in what it calls “debt bridge financing.” Millennium Technology Ventures is on board as a new investor in the round, which included return investments from Hearst Interactive Media, Blumberg Capital, and ubiquitous Seattle angel Geoff Entress.

In announcing the fundraising, HootSuite also disclosed that it has acquired TwapperKeeper.com, a Twitter data analytics company. More acquisitions are in the cards with the new financing round, HootSuite said, along with hiring, advertising, and product growth.

—Seattle cloud-storage provider Symform has raised another $1 million, which president and co-founder Praerit Garg says is an extension of the company’s previous Series A round of financing “based on exceeding business milestones.”

The money will help Symform keep up with what Garg says is rapid growth. “In fact, we are hiring and moving into a new building this week,” Garg writes in a statement. The new offices will be down on Western Ave., near the waterfront.

Symform’s also offering a new discount for customer referrals, with up to 200 gigabytes of free storage. Symform’s system is based around storage distributed among a large number of small nodes in a network, rather than in a big data center.

The company, founded by Garg and fellow Microsoft veteran Bassam Tabbara, had previously raised about $5.5 million in two rounds from OVP Venture Partners and Boston-area Longworth Venture Partners.

—Bainbridge Island, WA-based Avalara, a maker of sales tax software, has filled out a $21 million round of financing that the company first filed regulatory paperwork on in May. I couldn’t reach Avalara for comment, but CEO Scott McFarlane tells GeekWire that the new paperwork reflects an additional $7 million raised from Sageview Capital to cash out early investors.

—X2Impact, a maker of impact-sensing mouthpieces for football players, has added $350,000 in an equity round that could reach 10 times that size.

The Seattle company, whose existing investors include former NFL coach Jim Mora Jr., uses embedded electronics to measure the force of collisions on the heads of football players—a very hot topic among pros and amateurs alike, with new focus on the long-term effects of concussions.

USA Today recently covered X2 Impact’s participation in research tests of next-generation football headgear, and the site Ubergizmo says the mouthpieces will be tested in some college football games.

—Bellevue, WA digital-book startup Osprit has raised a total of $600,000 out of a potential $750,000 round. The company makes an interactive book technology that allows readers to share notes and highlights across platforms and with other readers.

The company’s first product is the ooBible (read: infinite Bible), which is the definition of a bestseller. The company is headed by CEO Colin Wong, an early Google employee, who says in an email that the company’s angel investors include Andy Liu, James Wong, Edward Yim and John Cunningham. The ooBible’s official rollout is expected before year’s end.

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Seattle has already birthed a couple of early stage companies trying to help shoppers track the price swings and model rollouts of expensive electronic gadgets. Well, add another one to the mix—thanks in part to the national battle between Amazon.com and big-box retailers over collecting taxes for online sales.

I’m talking about Shopobot, which just set up shop in the TechStars/Founder’s Co-op building in South Lake Union, right next door to Amazon. Shopobot crawls product and price data around the Web and helps shoppers decide where to get the best deal on cameras, laptops, TVs, and other products.

The company got started in January when co-founder Dave Matthews (no, not that one) left his job at Microsoft and moved to the San Francisco area to join co-founder and longtime friend Julius Schorzman, also a former Seattleite. They originally were targeting book shopping online, until Matthews’ passion for photography led to an experiment tracking the price of camera gear. Voila! Shopobot’s mission was clear.

Schorzman and Matthews

The startup got into the AngelPad accelerator program, and landed seed investments from Google Ventures, AOL Ventures, and others. The company’s public rollout was covered in the New York Times and other media.

With Seattle entrepreneur Dan Shapiro selling similar startup Sparkbuy to Google this spring, and Farecast co-founder Oren Etzioni now tackling electronics shopping with Decide.com, it was clear that this was now a hot area for startups to focus on.

So, everything seemed to be going fine—until the state-by-state battle over online sales tax collections re-emerged in California.

As I wrote in March, recession-hammered state governments are starting to eye online sales as a juicy source of revenue. That’s a problem because, until now, the national laws governing online sales tax collection meant that there was a pretty narrow set of circumstances in which officials could force a company to collect local taxes on its sales in a given state.

Amazon has been very aggressive in making sure the number of states in which it collects sales taxes is low, but bigger bricks-and-mortar retailers hate the price disadvantage and are pushing hard to make online sellers collect sales tax in more places.

In late June, California officials passed a law trying to force Amazon and other online sellers to collect sales tax on purchases from Golden State residents. Amazon promptly followed through with its threat to drop some 10,000 affiliate businesses, third-party portals that market Amazon products through their own sites.

That included Shopobot. Just like that, a major source of revenue for the little company was gone, stuck in a political battle between very big players. “All of a sudden, we were … Next Page »

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With a hot market for their skills and employers who offer top-notch salaries and benefits, should computer science students pay more for their bachelor’s degree than theater or history majors? In Washington state, the answer could soon be yes.

Historically, undergraduates in this state have paid flat tuition rates based on the number of credits they’re earning. For example, a Washington resident taking a full-time load of classes would pay $8,122 in tuition this year at the University of Washington, no matter which bachelor’s degree they’re pursuing.

Those flat rates were set under previous state law, which gave the Legislature the exclusive power to set tuition for in-state undergrads. But a new law approved this week by Gov. Chris Gregoire gives universities broad power to set tuition rates on their own for all students—opening the door for varying undergraduate tuition rates.

“I don’t expect the institutions to jump whole-hog into this model the first year. It will take a little bit of thought and study and reflection,” says state Rep. Reuven Carlyle, a Seattle Democrat who was the main sponsor of the tuition flexibility law. But he also says the old flat-rate model is “just wildly economically inefficient,” and doesn’t give policy-makers a good idea of what it will cost to improve education in particular disciplines.

“It’s extremely difficult from an efficiency point of view for us in Olympia to figure out how an institution should cross-subsidize programs,” Carlyle says. “One-size-fits-all, top-down, Olympia-centric is just not good policy anymore.”

With flat tuition rates, the less-expensive students are effectively subsidizing the education of their peers in more expensive fields. An English major, for instance, pays the same as a student studying engineering, chemistry, or computer science, which are much more expensive to teach because of higher faculty salaries, special equipment, and other costs.

Freshmen are also generally cheaper to educate than seniors, since the younger students take survey courses packed with other students, while the older ones are in smaller groups with more specialized subjects. It’s also assumed that the cost will be less of a burden for students entering higher-paid professions. Those factors already help drive the variability in tuition rates for graduate degrees in Washington.

While some university leaders have publicly discussed the issue, it doesn’t appear that any school is poised to imminently move to a “differential tuition” model for undergrads. Washington State University, for example, just announced that it was increasing next year’s resident undergradate tuition by a flat rate of 16 percent—the baseline rate assumed in the state budget.

But faced with back-to-back state budgets that were hammered by the Great Recession, it may be an attractive option to help sustain the highest-cost and highest-demand majors in the years ahead. The boards of Western Washington University and the UW are set to consider their new tuition rates later this week, although UW officials aren’t expected to make a decision until the end of June.

If Washington schools do eventually make the leap to differential tuition rates for undergrads, they would have plenty of company: One widely cited study found that more than half of U.S. public … Next Page »

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Help desk automation startup Zendesk said today that it has outgrown its South of Market digs at 410 Townsend Street and that it will move this summer to new quarters downtown, not far from the San Francisco Mart building that Twitter plans to occupy next year. As a new tenant at 989 Market Street, Zendesk will be part of a revitalization project granting payroll tax waivers to companies that locate in Central Market area. “Zendesk was founded in Denmark and moved to San Francisco in 2009,” CEO Mikkel Svane said in a statement. “We have been humbled by the wonderful way we have been welcomed to this city. In return, we are proud and happy to help invigorate this up and coming neighborhood.”

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Seattle-based ValueAppeal, an online service that helps homeowners challenge their property tax bills, has added $1.6 million in financing. The startup had raised two rounds totaling about $1.5 million last year, mostly from angel investors.
ValueAppeal says the new money is mostly from existing investors, but they weren’t named. Founder and CEO Charlie Walsh says the fresh capital will be used for hiring, technology, and moving to a larger office.
ValueAppeal charges homeowners a flat $99 to use the service, and says it refunds the fee if a home-value appeal is unsuccessful. ValueAppeal says its figures show that about a quarter of U.S. homes are assessed at too high a value each year. That sales pitch is probably music to the ears of homeowners who have survived the worst housing market in decades.

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On Tuesday, May 10, 2011, I had the opportunity to participate in a hearing convened by the U.S. House of Representatives Committee on Oversight and Government Reform. This was an incredible honor as an entrepreneur to sit on a distinguished panel and speak directly to leaders in the House of Representatives and from the Securities and Exchange Commission on matters that impact startups.

The hearing was called “The Future of Capital Formation” and was designed to discuss ways that the government could reform existing rules and regulations to help entrepreneurs, small businesses and startups better gain access to capital. As a former startup lawyer that worked with lots of entrepreneurs and startups, and a current entrepreneur here at Zaarly, I know firsthand how important this issue is. And that’s why I felt it was important to share some lessons from the front lines of the startup world.

One of the most important lessons that Zaarly has taught me is how crucial it is to have access to funds in order to build a business and build it quickly. I consider us extremely fortunate to have presented our idea at Startup Weekend Los Angeles and quickly used our success that weekend to raise funding to help build the business. That initial capital helped Zaarly build its prototype for South by Southwest, make our first hires, open an office and ready our product in record speed. All of that fast-success is thanks to having available funds to grow the business and not to have to spend time and energy fundraising.

If anything, the story of Zaarly is a perfect example of why streamlining the rules and regulations for raising money is so crucial. And that’s why I’m so thankful for this opportunity and passionate that it is our duty and responsibility to help others in the startup ecosystem.

My Recommendations to Congress and the SEC

I don’t begin to say that I’m an expert on anything, but I have spent a significant portion of my career helping entrepreneurs think about raising capital. And what I know is this: raising money is not easy; rules governing raising money are complicated and working with a lawyer to decipher them is expensive; and we need to rethink the rules that limit the ability of startups to raise money.

With those things in mind, I came up with four key recommendations for Congress and the SEC that I presented to the leadership. While these are not a silver bullet nor will they necessarily help all entrepreneurs, I think that these are part of a package of reform to help:

—Private Company Fundraising and Financing Regulations:

In general, I believe that regulations governing private company financing be thoroughly examined with an eye to decrease the regulatory scope, simplify procedures, and ensure that the cost-benefit of regulations for raising funding for small investments be met. Investors continue to be in the best position to protect themselves in their investment decisions. This may include contractual requirements for audits of financial statements, seats on a board of directors, or the receipt of regular financial statements.

First, I encourage the removal of the Ban on General Solicitations, which limits the ability of private businesses to locate and identify prospective investors.

Second, I encourage the creation of regulations to extend/expand the concept of accredited investors to individuals that are deemed to be sophisticated based on their knowledge, experience, … Next Page »

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I’ve been flat-out for the past week or so. Here are three pieces of Boston-area tech news that are worth catching up on, and a few thoughts on each:

—Fig Card, the mobile payments company that just started last year, was acquired by eBay, via its PayPal division, for an undisclosed sum. Co-founders Max Metral and Hasty Granbery (one of the better names around town) have joined PayPal’s mobile division. My colleague Wade profiled another one of Metral’s and Granbery’s creative projects, Povo, back in 2008, introducing it thusly: “Mix one cup of Wikipedia with one cup of Google Maps, add a generous dollop of MIT-bred geekdom, and bake for about 14 months. Serves 600,000.” These guys look like a great addition to PayPal, which is increasingly focused on mobile commerce (see its recent acquisition of Boston location-based services firm Where).

It’s a fairly small deal, but it raises a couple of big questions on both coasts. Is PayPal getting ready to split off from eBay? And who’s the next mobile company to get bought in Boston? (I have my guess, but I’m not telling yet.)

—Eons, the social networking site for baby boomers launched in 2006 by Jeff Taylor, was scooped up by San Francisco-based Crew Media for an undisclosed price. Eons has been shrinking in recent years, and it spun off its more successful obituaries business, Tributes.com, in 2008. Former Eons employees have told me that the company failed for a number of reasons, ranging from “50 year olds are not viral” to classic startup mistakes like “taking too much money and hiring too fast before you get traction.”

—Audio firm Bose announced on Friday that founder Amar Bose has given MIT the majority of the stock in the company, in the form of non-voting shares. Financial details weren’t given. Professor Bose is an MIT “lifer” who served on the Institute’s faculty for 45 years, retiring in 2001. MIT, which is now the majority owner of Bose Corporation, will receive annual cash dividends on those shares, but has no control over the company and its operations and cannot sell the shares.

A story in the New York Times raised tax questions about the gift, but didn’t resolve the issue. The Times quotes Nate Nickerson, an MIT spokesman (and a former editor at Technology Review), as saying the gift was “very significant” and that the dividends will be “used broadly to sustain and advance MIT’s education and research mission.”

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Thanks to a vote by the San Francisco Board of Supervisors earlier this month that capped Twitter’s payroll taxes at current levels, the company won’t have to relocate to Brisbane or any other city. In fact, Twitter said in its blog today that it has signed a lease to move its headquarters to Market Square, the building at 1355 Market Street also known as the San Francisco Mart. It’s part of a deal aimed at bringing big more big tenants (and their employees) into the city’s beleaguered Central Market area. In the post, the company thanked local politicians for “spearheading legislation that will help revitalize an area of San Francisco where office space has sat vacant for decades.” Twitter, whose offices are currently at 795 Folsom Street, said it expects to relocate to the San Francisco Mart by mid-2012.

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The Seattle area’s longstanding prominence in the wireless carrier sector was thrown into question this weekend with AT&T’s announcement that it was purchasing Bellevue, WA-based T-Mobile USA for $39 billion. It will take months to see how the feds handle this proposed acquisition.

But at least in the meantime, AT&T is saying all the right things: The combination will drive better broadband coverage, competition won’t be diminished, and of great interest locally, that it will maintain a significant presence in the Puget Sound region. It’s worth revisiting a great interview that Xconomy’s Greg Huang did with Tom Huseby for some of the history behind this big news.

—Another of this region’s tech heavyweights, Amazon.com, continues to make news for reasons it surely doesn’t like: The ongoing drive by state officials to make hay with the public by targeting Amazon’s reluctance to become a sales-tax collector. But a bit of news from Olympia points out that bringing Amazon to heel isn’t the salve politicians may be looking for. As illustrated by the state’s chief economist, even though Amazon collects sales taxes here in Washington, the state Revenue Department is still missing out on probably half the sales tax revenue it should be getting from Internet retail. Think about that: Even with the behemoth of online retail doing its bit, Washington state’s strapped budget is still not able to collect some $370 million each year—a figure that looks to continue growing at a steep pace.

—I had a chance to interview business consultant, author, and venture capitalist Geoffrey Moore (of the book “Crossing the Chasm”) ahead of his speech to the Technology Alliance’s Washington Innovation Summit, and he stirred up all sorts of interesting ideas. Check out the whole thing for Moore’s take on why middle managers are key in a flattened-out … Next Page »

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[Updated at 4:10 p.m. with more statistics and a correction, see below] Washington is one of the few states where Amazon.com collects sales taxes and sends the money to the government. But Washington is still losing hundreds of millions of dollars each year to sales tax “leakage” from online retail sales.

In Thursday’s forecast of public finances, Washington’s Economic and Revenue Forecast Council said state government is missing about $740 million in uncollected sales taxes during the next two-year budget cycle, which runs from mid-2011 to mid-2013. (Here are the relevant slides.) That represents about 5 percent of projected retail sales tax collections in the budget cycle. It’s also equivalent to about 14.5 percent of the projected $5.1 billion budget deficit over the same period. [Added percentage of projected sales tax collections.]

As we’ve previously written, Seattle-based Amazon (NASDAQ: AMZN) is currently engaged in a multi-state game of chicken with officials in other states who want to get a bite of the online sales taxes they’re missing under the current national sales-tax rules. The Wall Street Journal had an update on the situation Thursday, looking at the role that brick-and-mortar retailers have played in the political campaigns to press Amazon toward collecting taxes in more states. Amazon has largely resisted.

Amazon does have a clear obligation to collect taxes on its sales within Washington because its headquarters are here, and the company fulfills that responsibility. But even with that presumably significant stream of sales tax (the state can’t discuss individual taxpayer information), Washington’s Revenue Department estimates that it’s missing out on about half of the revenue that should be collected for online sales.

If a shopper buys something online and doesn’t pay sales tax, they’re still technically required to pay the equivalent “use” tax. Individuals are supposed to fill out a form and send in a check, but almost nobody does. The state performs audits on a slice of businesses to enforce use tax payments on that half of the equation, but there are surely some businesses that aren’t paying use tax on the things they buy online or out-of-state.

The issue for online retailers, however, isn’t whether they pay the sales taxes themselves. It’s whether they collect sales taxes from the consumers and send that money back to the state. Long story short: Federal law says a retailer has to have some presence in a state before the government can deputize that retailer as a tax collector. This policy generally pre-dates online sales—think catalogs.

Thursday’s state revenue report also says the pace of Internet purchasing in Washington is on a steady climb—it’s responsible for about a fifth of the nation’s overall retail sales growth in the past year. You can see the entire forecast from the state’s chief economist, Arun Raha, at the council’s website—it’s usually a good high-level review of where the state’s economy is headed. [Corrected that online retail purchasing growth statistic is on a national basis, not state.]

In Washington, one of the few states without an income tax, government basically lives on sales taxes. Sales taxes are the biggest single stream of state tax revenue in Washington—projected at about $14.8 billion over the next two-year budget, a little less than half of all tax revenue, according to the state Office of Financial Management. The state’s other two main tax streams are property taxes, which voters have slapped limits on, and a business-and-occupation tax on the gross receipts of businesses. [Added specific statistic about projected state sales tax collections over the next biennium.]

The latest effort to establish a personal income tax—as many readers surely remember well—was shot down last year, after notable disagreements among major tech-business figures like Bill Gates, Nick Hanauer, Jeff Bezos, and Steve Ballmer. It will be interesting to see if state officials here try to get more aggressive about a national-level solution for collecting more online sales taxes, as lawmakers seek ways to plug some gaping budget holes.

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Competition in the crowded daily-deals market got a little more pugnacious recently with an acquisition by group discount site BuyWithMe. The Boston- and New York-based company purchased LocalTwist, boosting BuyWithMe in San Diego and putting the company in a new market—Seattle.

The latter city, of course, is the home base of competitor Tippr, the Martin Tobias-led company that is currently suing BuyWithMe in federal and state court over two different issues. As my colleague Greg Huang notes, it’s all part of the “life-and-death struggle for third place” in daily deals.

Other stories that made the rounds at Xconomy in the past week or so:

—Amazon.com (NASDAQ: AMZN) had another confrontation with state government over the company’s extreme aversion to being deputized as a sales-tax collector. Illinois Gov. Pat Quinn signed into law that state’s version of an “Amazon law,” trying to make the sales in Illinois subject to sales tax by targeting Amazon’s marketing tie-ins with affiliate websites.

With a steady drumbeat of regulation attempts happening in the states, I took a look at why these efforts are really a side issue in making a big national policy change. Long story short: More aggressive state regulations aren’t likely to make Amazon heel, but they could serve as another prod for Congress to finally act on a broader solution.

—Kirkland, WA-based wireless provider Clearwire (NASDAQ: CLWR) saw more top names hit the bricks, just a few months after founder and local wireless legend Craig McCaw left his post as chairman of the board. Chief Executive Bill Morrow, Chief Information Officer Kevin Hart, and Chief Commercial Officer Mike Sievert are out in the latest shake-up. As The Wall Street Journal’s Russell Garland noted, Sievert’s last public words on Clearwire’s behalf were very likely at our big Mobile Madness event, where he sounded optimistic: “We lack for nothing except cash.”

New board Chairman John Stanton, another titan of the Seattle-area wireless landscape, was immediately tapped as interim CEO while the board searches for a long-term replacement. Asked whether he’d take over as CEO permanently, Stanton gave The Seattle Times’ Brier Dudley an unequivocal no. Clearwire also said that it believes a resolution is near in a dispute over wholesale pricing with majority owner Sprint (NYSE: S).

—The center of gravity in the tech world shifted temporarily to some college town in Texas for the interactive portion of South by Southwest. Plenty of well-known names from the Seattle tech scene were … Next Page »

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Revenue-hungry state governments are licking their chops. Stuck with declining tax collections and soaring costs for services, they’re chasing Amazon.com around the country in a series of attempts to make it collect sales taxes.

That’s led some to wonder whether this high-tech round of whack-a-mole might be the front edge of a viral political movement that spreads across the country, wiping out tax-free shopping for millions of consumers and dragging down profit margins of Amazon.com and other e-retailers.

Fat chance.

The volley of lawsuits, rhetoric from fired-up tax collectors, and Amazon’s hardball response tactics are certainly entertaining to watch from afar. But any real resolution will almost certainly come from a much more boring, slow-moving effort to get state sales taxes on a common source code, and then change the federal laws.

Here’s why:

—It’s not clear that the newly popular approaches to wringing more sales taxes from Amazon customers are legally enforceable. That means potentially long court battles, such as one under way in New York.

—Amazon has shown no real signs of giving up its fight, even if that means cutting jobs. Some politicians are already knuckling under.

—Others are already working on a comprehensive fix. It’s the realistic vehicle for national online retail taxes, an approach that Amazon has supported, and everyone knows it.

The question here is not whether Amazon and other online retailers should have to pay taxes. It’s whether they have to collect taxes for the government.

In states where a retailer doesn’t have an office, the answer is generally no. The U.S. Supreme Court said so in a 1992 case, ruling that forcing a company to navigate the thousands of different … Next Page »

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Republican Gov. Rick Snyder’s top economic development official defended a controversial plan to eliminate certain tax credits in favor of a flat corporate tax rate, arguing the state’s economy would better benefit from broad tax reform than tax breaks aimed at specific industries.

The best way to lower the state’s 11 percent unemployment rate is to “position Michigan in the minds of people as a place to do business,” Michigan Economic Development Corp. (MEDC) CEO Mike Finney told Xconomy.

“Business people want [ to operate] in a stable business environment,” Finney says. “They see that as the top priority.”

Snyder’s budget calls for a flat six percent corporate tax rate while eliminating a litany of tax credits meant to spur development in specific industries like medical devices, biotechnology, batteries, and clean energy.

Eliminating tax breaks can be politically dicey, as Snyder discovered when Michigan’s prominent film industry loudly decried the potential loss of the state’s generous film credit. The program allows companies to claim up to 42 percent of expenditures of movies, television shows, digital media, and video games produced in Michigan.

Finney admits the administration was a bit surprised by the blowback from the industry but insists Snyder will not waver on his budget proposals. Under Snyder’s budget proposal, the state can spend up to $25 million a year on film incentives—a perfectly “reasonable” figure, according to Finney. But if the industry wants more, they will have to petition the legislature to raise the cap, he says.

Though Snyder is a former venture capitalist who invested in new startups, he believes that any economic recovery depends on “helping existing businesses grow,” Finney says.

“If we had more of that growth in the state, we would be much more effective,” he says.

Tax credits, on the other hand, often fail to promote long- term economic development, Finney says.

He thinks Michigan boasts several promising high tech industries, including medical devices, IT and software. So instead of blindly doling out tax credits to specific industries, Michigan needs to be smarter about where to invest its limited economic development dollars, Finney says.

“Michigan has a lot of upside potential and we need to take advantage of it,” Finney says. “We want to be opportunistic, look at opportunities and go after them as they make sense to Michigan.”

One of Finney’s top priorities at MEDC is to boost Michigan’s exports. Currently, less than one percent of America’s 30 million companies sell their products overseas, according to International Trade Administration, a unit of the U.S. Commerce Department.

“Imagine what could happen if [Michigan can] double or triple that,” Finney says.

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