You won't believe this. It's likely that Seattle voters will decide in November whether to levy a 10-cent tax on espresso sold within the city limits. The money raised would support early childhood programs. Proponents of Initiative 77 expect the tax to raise $7 million to $10 million a year, though the Chamber of Commerce projects only $1 million to $3 million, according to Thursday's article in The Seattle Times.

Backers have sent the required signed petitions to the city council, which could pass, reject, or ignore it. But if the council does anything other than pass it, the Initiative apparently graces the November ballot. Polls reportedly reveal two-thirds of Seattleites support the tax.

To determine what's really going on here, check out the fine print. The tax is on any beverage containing espresso. Plain old drip coffee is exempt, as are businesses with under $50,000 in gross annual sales. So who do you think is the target? Espresso drinkers at Starbucks (Nasdaq: SBUX) and Peet's (Nasdaq: PEET), to start with. Backers target a class stereotype of the espresso drinker. They say, "We'll steer clear of the Jo or Joe who buys coffee at Dunkin' Donuts. But let's go after those latte-drinking (I can hear Groundskeeper Willie barking, "underpants-wearin'!") folks with all those stock options." Counterargument: Andrew Sullivan once opined in The New Republic that we all like our Starbucks because we can feel a momentary luxury. Note, "we all."

Could it be that the city of the well-meaning but misguided World Trade Organization protests is taking on another misplaced target? The big secret of American life is our class-consciousness -- just one reason we get away with luxury taxes. Yet last I heard, Starbucks was a model employer, offering health benefits to anyone working 20 hours a week or longer, among other things. Seattle is among my favorite places in the universe, with people and a zeitgeist hard to beat. But shouldn't voters be urging their elected city councilmembers to allocate public funds to early childhood programs and childcare, rather than pretend an espresso tax is a luxury tax? Please share your answer on our Starbucks discussion board!

Year-to-date returns:
Starbucks     +4% Yeah!
S&P 500      -21%
Nasdaq Comp. -33%

Amazon stays on Target
Two years ago, a top-level software engineer at i2 Technologies (Nasdaq: ITWO) told me that the nuclear bomb in Amazon's (Nasdaq: AMZN) arsenal was not its own retail business, but its software system -- its e-commerce technology platform -- that could power anyone else's retail businesses. This comes as no surprise to investors who know the company and those on our Amazon discussion board. They probably nod knowingly at today's news that Amazon and Target Corp. (NYSE: TGT), owner of Target Stores, Marshall Field's and Mervyn's and others, have teamed up for Target's new website offering. Target will still perform fulfillment (I love that term). This is the next phase of a five-year deal inked last fall.        

Year-to-date returns:
Amazon       +34% Yippee!
S&P 500      -21%
Nasdaq Comp. -33%         

Please pass the Butterfield's
(Nasdaq: EBAY) announced recently the sale of its Butterfield's unit to London's Bonham's for an undisclosed price, but undoubtedly less than the $260 million in stock eBay offered or $215 million it paid in 1999. CEO Geoff Iddison told Mercury News, "The traditional auction house community has been slow in using the Internet to sell high-end art. Buyers expect to touch the works of art in person." Without the better online margins, there's no justification for eBay to own a lower-margin offline auction house. Butterfield's will still reportedly have a place on eBay for some auctions. 

We've discussed the failure of eBay's foray into the high-end auction market through Butterfield's and the decision to form a new joint venture with With the Butterfield's sale, eBay apparently has ceded the offline high-end art auction market to those who own it. Management is certainly permitted to try opportunities and fail, but UsuallyReasonabl on our eBay discussion board notes that there was a cost to the all-stock deal. Please add your opinion.

Investors in eBay need to keep in mind that, no matter how bright the company's long-term prospects, the stock contains significant near-term valuation risk. It sells for about 66 times trailing 12-months free cash flow (FCF), with a year-over-year FCF growth rate for the first six months of about 31%. Which means it could be sliced in half tomorrow. Or more, or less, or not. Investors need to take their temperature. Could you handle such a drop, were it to come? And be able to wait while growth and valuation became more aligned? P.S A wildcard is growth that may be contributed when eBay acquires PayPal (Nasdaq: PYPL).

Year-to-date returns:
eBay         -13% Not bad!
S&P 500      -21%
Nasdaq Comp. -33%

AOL and Time Warner Entertainment
Rumors have been flying since Friday about AOL Time Warner's (NYSE: AOL) plans for its 25% stake in Time Warner Entertainment. To learn why and wherefore this deal matters to investors, read Goofyhoofy's post, "Maybe this is the silver bullet," and his thoughts on, "Why does AOL have to buy the other 25% at all?" on our AOL discussion board.

Year-to-date returns:
AOL Time Warner -66% Boo! Hiss!
S&P 500         -21%
Nasdaq Comp.    -33%   

Have a most Foolish week! Updated portfolio returns below. Our S&P 500 dividends-added return might have been a little out of whack last week, but its head is now screwed back on straight. 

Tom Jacobs (TMF Tom9) runs on caffeine and justified fear of deadlines. He can't imagine life without Starbucks. At press time, he owned no shares of companies mentioned in this column. He does own others, revealed in his profileThe Motley Fool is investors writing for investors.

Rule Breaker Portfolio Returns as of 8/12/02 Market Close:

            RB        S&P     S&P 500
            Port      500      DA*    Nasdaq
Week     +11.01%**   +8.29%   --      +8.36%
Month     +1.90%**   -0.86%   --      -1.61%
Year     -27.64%**  -21.28%   --     -33.00%
 8/4/94  +20.90%     +8.82%   +10.71%  +7.71%

*Dividends added.

**Please keep in mind that these figures will be distorted for the RB Port once a quarter when we deposit $12,500 in new cash. See next note! 

***Compound Annual Growth Rate using Internal Rate of Return. This performance measure accounts for the periodic deposits. Total return wouldn't be meaningful, because we started adding cash to the portfolio in July 2001. In a total return calculation, or (Current Value - All Cash Deposited)/All Cash Deposited, cash added shows up as returns.