Creative Capitalism Gets Microsoft $528M Tax Break

NewsCloud writes "Microsoft makes products in Washington but records software sales to PC makers and high-volume customers through an operation in Nevada, where there is no corporate tax. So Washington has missed out on more than half a billion in taxes; revenue it could use for badly needed infrastructure needs — such as the needed replacement of the 520 bridge which connects Seattle ... to Microsoft. Reported by Slashdot in 2004, the numbers have increased with the company's growth to approx. $76M in savings last year alone. The author questions the legality of the practice given Microsoft's 35,500+ employees and 11.2 million square feet of real estate in Washington state."

"small government"

[Anonymous Coward]

Do I hear someone call for "Small government" ? This is what happens when the sheeple are being led by corporate hacks calling for small government: no checks on the corporations, while people are starving on the streets.

So...

[EastCoastSurfer]

Would Washington rather MS move their operations to Nevada and lose the tax base of all the employees? This situation is actually a good argument for getting rid of corporate taxes. Corps wouldn't just sit on the money they saved. They would invest it by hiring more people and spending more money where they are actually based.

Rock and a hard place

[huckamania]

The 35k plus employees pay taxes in state and Washington State is certainly aware of that fact. If they make too much of a grumble about the corporate loop hole, they could lose the much larger 35k plus employee tax base. Those 35k are probably just the people who work for M$. There are probably lots and lots of other Washington residents whose primary income derives from Redmund.

Re:So what?

[ceoyoyo]

I guess Microsoft should maintain their own bridge then.

Nevada may have lesser public services than Washington, or higher non-corporate taxes. Either way, Microsoft and it's employees are enjoying privileges in Washington that they've skipped out of paying for, placing more burden on Washington's other residents.

If Nevada is such a great, efficient state then I see no reason why Microsoft shouldn't move their actual operation there, instead of just maintaining a front for tax evasion purposes.

Re:why is this news?

[Pojut]

You must be new here.

So?

[roggg]

I hate Microsoft as much as the next guy (okay, maybe not around here, but I really really hate them!), but why shouldn't they structure their corporation to reduce the tax burden? Just be glad it's Nevada and not Belize.

Stop the Presses!

[jandrese]

Large corporations exploit tax loopholes? Who would have thought?

Re:"small government"

[Anonymous Coward]

Ok, so where are the employees educated before they get into MS service? I hate people claiming that the profits corporations make are entirely made on efforts of the corporation.

Re:"small government"

[The Aethereal]

People starving in the streets is not an economic problem; it is a mental health problem.

No taxes!

[Tony]

Let's do away with taxes. And, we can do away with all the things taxes pay for: the education system that trains Microsoft's employees, the roads that allow the employees to get to work, the police that help protect Microsoft from the roving bands of rabid cats, the standing militia that protects Washington from invasion by Canada. (Those bastards covet Washington, and are just *waiting* to invade.)

Corporations benefit from -- nay, depend on! -- public infrastructure. Public infrastructure costs money. It's been proven time and again that private interests cannot provide neutral, equitable infrastructure at a reasonable price. Taxes are necessary.

Now, taxing both corporations and individuals seems a bit of double-dipping, I agree. Tax the corporations, and let the individuals keep their wages. Politicians would end up with a lot more votes that way (though a lot less money through corporate sponsorship and whatnot).

Capitalism

[Arthur B.]

is generally defined as the use of private mean of production on a free market. Regardless of one's opinion on the news, the title of the news is inaccurate, and let's say it stupid.

I for one cheer for anyone protecting money from the prying hands of the State.

Re:So what?

[Actually, I do RTFA]

God forbid that profits might for once be kept by the people who created it, rather than leeched off by various governments in order to waste on all sorts of irrelevent crap.

Even the Lauffer Curve, beloved of Reagan, says that taxes lead to more productivity. While 100% is bad, 0% is also bad. The right number is in-between.

Re:Rock and a hard place

[necro81]

Microsoft isn't going to leave Redmond - just accept it. Consider what it would take to relocate to someplace else: you'd have to build an entirely new campus for 35k+ employees, then you'd have to convince them all to come with you sight unseen, then you'd have to hire thousands of new employees to replace the ones who didn't come with you.

If taxation and cost of doing business were the deciding factor of where a company locates, Silicon Valley would not exist, and the World Trade Center would be in rural Idaho.

More power to Microsoft!

[TrebleJunkie]

Good for Microsoft! If I could do the same to avoid paying the portion of my taxes that go for welfare-state bullshit (which is pretty much EVERYTHING except for the Military and Law Enforcement budgets), I would. In a heartbeat.

If Washington state makes a move to try to get this income, MS should pick up and move it's entire operation to Nevada. What would Washington State do then?

Re:So what?

[tjstork]

Even the Lauffer Curve, beloved of Reagan, says that taxes lead to more productivity. While 100% is bad, 0% is also bad. The right number is in-between

The problem is that a lot of leading political figures on the left believe that 50% is the right mark, and we Reaganites believe that's a bit too high!

0% being useful assumes investment in useful things like roads and bridges that actually improve the business climate. If it doesn't improve business, which does actually include quality of life and nationalistic branding stuff, then, it shouldn't be there. That would automatically chop a lot out of the budget, for sure.

Question I have is, why do rates need to go up at all? Population is increasing, GDP is increasing.. shouldn't government spending increases be constrained, at least, to GDP? Unfortunately Bush has been absolutely terrible on this one, but no President will do actually the right thing here either. I mean, why should Medicare ever go up more than GDP?

Who owns my education? Who owns my mind?

[qbzzt]

I didn't realize that the education I got from the government, for which my parents paid by taxes, made me the property of that government (since I cannot be parted from that education without killing me). It's only a short logical jump from saying that the employee's education obligates the employer to saying that it obligated the employees themselves and therefore they may not leave the jurisdiction that paid to have them educated. I seem to recall the USSR, may it rest in pieces, used that argument.

The fact is that having a well educated workforce does benefit the state of Washington. It means a workforce that makes more money (= state income tax), spends more money (= sales tax), and gets more expensive houses (= property taxes). This is true, and pays the state of Washington for the costs of educating the children who grew up to work in Microsoft, regardless of how Microsoft runs its business.

There are other taxes to pay to WA state

[cenonce]

It is not like Washington isn't getting a cut out of MS. With 11.2 Million square feet or real estate, think of the property taxes? With 35,000+ employees, think of the payroll taxes?

Seriously, please don't tell me everybody on Slashdot is naive enough to think that companies like Red Hat, SUSE and Ubuntu aren't working the tax system either! Companies from a one man show to an MNC use this system to pay the least amount of tax they can. Nevada and Delaware have long maintained favorable tax treatment of corporations exactly for this purpose. If Washington wants in on this action, they can offer the same incentives to encourage MS to claim those profit in WA.

You eat the food, you pay the bill

[spun]

There is no valid contract for you to pay for your food when you go into a restaurant, yet few people dine and dash. No one would assume the restaurant is just giving you the food for free. What there is is an implied contract. You eat the food, you pay the bill. With government services, there is the same implied contract. If you don't want to pay the bill, don't make use of the services. If you don't agree to pay taxes, go live somewhere else, you have no right to live here.

Consider for a Moment

[asphaltjesus]

That Microsoft's behavior isn't unique in any way, shape or form. That what microsoft does is standard operating procedure for all mega-corporations.

Paying taxes in the state with the lowest corporate tax rate and forming corporations in Delaware is done for the same reason. It's the best deal.

If this is outrageous to the submitter, then I hope he never discovers how most electronics firms with an office in the U.S. work.

As an FYI, they are set up as subsidiaries that "buy" their product from the most attractive exporting/manufacturing office from some other part of the world of the same corporation. The U.S. office then operates at a perpetual loss (paying less tax) by hiding the income generated as the cost paid to "buy" the goods from some other part of the world.

Minimize tax, maximize profit!

Re:No taxes!

[erlenic]

Corporations never pay taxes. Their customers do, and they don't even realize it. That's why I believe we need to eliminate ALL corporate taxes at all levels. Each individual person should be able to calculate to the penny how much they pay the government. How much of the cost of your last Windows license went to Uncle Sam? Don't know, do you?

from whom does the benefit come?

[BorgCopyeditor]

So, in other words, only workers should have to pay taxes.

Re:So what?

[nick_davison]

If Nevada is such a great, efficient state then I see no reason why Microsoft shouldn't move their actual operation there, instead of just maintaining a front for tax evasion purposes.

And, as you file your own tax returns this year, I'll bet you carefully record each internet transaction from out of state, ensuring that you pay full taxes even though it would have been easy to avoid it? Of course, your charitable deductions will be paid at the lower rate you really know your junk was worth rather than the higher "standard rate" you know you can get away with? Similarly, when you realize your itemized receipts don't add up to as much as the standard deduction, you'll still take the lower amount you know you really deserve? You'll also stop using lower rate credit cards issued out of Delaware in favor of higher rate ones from your own state?

Sure, you could be saving money on your own taxes. But won't anybody think of the children in your own state who are in cramped classes because there aren't enough tax dollars. Thank God for people like you who make a point of paying every dollar they can, rather than looking for the best possible savings.

When an individual figures out ways to avoid paying taxes - or paying as little as possible - it's considered frugal. When a corporation does it, it's evil?

Textbook Tax Case

[sarlos]

This is a textbook case of high taxation modifying the behavior of the taxed. If Washington's tax rates weren't punitive for these sales, there wouldn't be any incentive for the company to be incorporated in Nevada. This is a common corporate practice, and demonstrates the necessity of small laboratories of democracy, aka, states. Washington is seeing how Nevada's tax code is modifying the behavior of Microsoft, and Washington has the choice to modify their tax code or continue pursuing their own version of it. It's not Microsoft's fault for playing by the rules to maximize profit.

Re:So what?

[Dachannien]

That's not what the Laffer Curve says. It says that tax revenues are optimized at a certain point. Taxes always* have a negative effect on productivity, and that has to be considered against the potential increase in tax revenue that an increase in the tax rate would otherwise bring.

* Specific uses for tax dollars can increase productivity, but that increase is usually not as much as the productivity that a firm could gain by just spending the money itself.

"prying hands of the state"

[EmbeddedJanitor]

Remember that statement next time you drive along a road. Where TF did that road come from?

Re:You eat the food, you pay the bill

[mgblst]

YOu make a good point, but consider this: would washington be better of without Microsoft rather than with? I guarantee you not. There would be a lot less people earning high wages, and they all pay taxes. Washington does pretty well out of Microsoft as it is.

There has always been an argument against corporations paying taxes.

Re:So...

[shma]

Corps wouldn't just sit on the money they saved. They would invest it by hiring more people and spending more money where they are actually based.

Or they would move the money offshore. Or they would move to give their top executives raises and stock options. Or they would throw it on the big pile of money they're offering to buy Yahoo. Or they would pass that money on to shareholders at the end of the quarter. Or any one of a hundred other things they could do which takes the money out of the state.

All moves which deprive the residents of Washington money they need for social services. Do you think that Microsoft is required to spend money in their home state? That they will do it out of the goodness of their hearts? Their job is to make money for the shareholders, and unless you specifically tax them, then there is no guarantee that any money Washington gives them will be reinvested back in the state.

Why is this news?

[kellyb9]

Last time I checked, Microsoft doesn't have a responsibility to the tax holders of Washington. They have a responsibility to their shareholders. Why shouldn't MS exploit a loophole in the system if it's been so easily provided for them by the state? Blaming Microsoft is easy, but how about you blame the real crooks, the politicians!

On a side note, this really isn't anything new. Don't shipping companies do this all the time. I've never seen a local truck with Pennsylvania license plates. Usually someplace out west like Montana or Wisconsin.

Re:No taxes!

[CodeBuster]

Tax the corporations, and let the individuals keep their wages. Politicians would end up with a lot more votes that way (though a lot less money through corporate sponsorship and whatnot).

Unfortunately, it is very difficult in practice to "target" a tax to hit a particular demographic group. This is the same reason why it makes no sense for the Social Security Administration to talk about the "employee's share" and the "employers share". Both shares are paid by the employees (i.e. their wages are lower than they otherwise would be if the employer wasn't paying "their share"). It is a frequent mistake here on Slashdot to ignore what economists call the incidence [wikipedia.org] of a tax. In fact, it is often the very people whom the tax advocates propose to help who are ultimately hurt the most by new taxes.

Re:Who owns my education? Who owns my mind?

[qbzzt]

Now, I am not a fan of taxes by any means, but I dislike free riders even more. Using your logic, it would be ok for all of Mircosoft's employees to declare themselve personal corporations in the state of Nevada, and then claim their wages as revenue of such a corporation.

Technically, yes. Of course, if they want to keep living in Washington, they probably own or rent property there. This property can be subject to property taxes. If they want to eat in the state of Washington, they probably buy food. This transaction, which takes place in the state of Washington, can be subject to a sales tax.

I'm opposed to income taxes because income is so easy to shift. Consumption is a lot easier to define, identify, and tax.

Re:You eat the food, you pay the bill

[B'Trey]

There is no valid contract for you to pay for your food when you go into a restaurant, yet few people dine and dash. No one would assume the restaurant is just giving you the food for free. What there is is an implied contract. You eat the food, you pay the bill. With government services, there is the same implied contract. If you don't want to pay the bill, don't make use of the services. If you don't agree to pay taxes, go live somewhere else, you have no right to live here.

Cute. Are you just trolling, do you really believe this drivel, or are you just hoping no one will call you on it?

There certainly is a valid contract when you eat into a restaurant. I can only assume that you meant there is no written contract. The fact that it's implied makes it no less valid.

When I walk into a restaurant, I do indeed agree to an implied contract that I will pay for whatever it is that I order. This is a contract between equals. I'm free to engage or not engage in the transaction. So is the restaurant.(1) If I don't like the prices on the menu, I can decide not to eat there. The situation is far different with government services.

I'm not free to refuse to engage in the transaction. Ask the many people who have either been fined or incarcerated for failure to pay the proper taxes or fees. I can't simply say "I don't want what it is you're selling, so I won't use it and therefore don't have to pay for it." I'd be more than happy to give up all rights to many government services, and to pay only my fair share of those services I actually use - such as public road construction and maintenance. That option doesn't exist for me, and it doesn't exist for Microsoft.

You state that I "... have no right to live here..." If that argument is valid, then I have no rights at all. Freedom of speech? Of Religion? Of anything else? "We don't like that kind of talk around here. If you want to talk like that, go live somewhere else. You have no right to live here." "We don't worship like that around here. If you don't want to worship our God the way we do it, go live some where else. You have no right to live here." Any right whatsoever can be trumped with "Do it the way we tell you to do it or go live elsewhere."

(1) For the peed ants, there actually is legislation which interferes with the right of the restaurant owner to practices his freedom of association. Refuse service to the wrong person and you may actually be facing a law suit. Such violations of freedom of association, while technically making the restaurant not entirely free to refuse to engage in the implied contract, doesn't really affect this situation.

personal vs. corporate tax share

[SuperBanana]

The fact is that it's a myth that corporations are pulling one over on the government

They're not pulling one over on the government- they're pulling one over on us.

In the 1950's, the corporate share of taxes was about 50%. Citizens paid half, corporations paid half.

Now? it is about 2%. And why is that?

Corporate lobbying. Corporate lobbying pays for all the toys and the re-election campaigns.

Re:"prying hands of the state"

[homer_s]

Where TF did that road come from?

Certainly not from a private company which would have built much better roads for a lot less *and* for which I wouldn't have to pay if I don't use it.

Re:So...

[downix]

Paper tiger arguement.

They are in Redmond because it has the infastructure to support them. The telecommunications, roadways and educational system to supply those tens of thousands of employees. Nevada, by contrast, cannot supply these (sorry nevada, you're a great state, but your infastructure is horrid). For microsoft to do such a move would be to cut off its nose to spite its face.

There is a reason why the top performing companies are found in areas with the highest tax brackets. Those territories, which tax for the needed infastructure, are the ones which can support businesses of Microsofts size.

Re:from whom does the benefit come?

[B'Trey]

...should Microsoft pay taxes on the profits they make in selling their software? If so, where? If not, why the hell not?

Leaving aside the issues of libertarian principles, of the legitimacy of taxation in general, and of how much obligation a public education places on the individual and anyone who hires him, we have the issue of traditional goods as opposed to those with near-zero margin costs. Do we really want to establish a precedent where every copy of software sold is taxable by the state where the code was originally written? What happens to open source, with many contributers from many states and countries? And if you say that open source generally isn't sold but only a fee charged for distribution and for support, are you sure the state will see it that way? And is it jake for MS to sell you a copy of Windows for $1 and charge a $199 distribution and support fee? Does the same taxation ability go for other goods of this type? If I record a song in a particular state, should it have the right to take a percentage of every copy of that song I sell? What about filming a movie?

Re:You eat the food, you pay the bill

[mpcooke3]

I think that Microsoft should pay. However, I doubt anyone will make a fuss for fear Microsoft will take the jobs elsewhere.

Re:So what?

[Dante333]

But you do have a sales tax. 8% if I am not correct. And those employees buy stuff, they pay property taxes, gas taxes and I bet they are even allowed to vote. I would bet these are high paying jobs who's money trickles down to the retail sector and pays for those jobs there as well.

Re:personal vs. corporate tax share

[RightSaidFred99]

Nonsense. Who do you think benefits from this? You seem to have a ...questionable grasp of ecomonomics. Note, for example, that the wealthy in this country pay the majority of the taxes. Now, since corporations are paying "less" and we still make more tax money than ever before, guess who's paying? Right - the people at the end of the chain. You don't seem to understand that a corporation is just a legal entity, in the end the money gets paid buy the people who profit from said entity.

If anything, it's better to tax the end-user than the corporation. Corporate money rolls over into R&D, manufacturing, capital costs, and employees. The "corporate greed" rabble rousers really don't seem to grasp that a corporation isn't a person. It can't "profit". Until the money gets into a person's hands, it shouldn't be taxed.

Re:Hippie socialist sheeple

[Anonymous Coward]

Smaller government also means that corporations become more powerful

Depends on which part the government-carving knife slices off first. Whoops, I think I just lopped off the entire arm of the government that supports and protects the corporate fiction. Aww, now the employees and directors of those companies are going to have to be personally responsible for the decisions they make and the actions they perform instead of taking their golden parachute and bailing out when their toy poisons kids or their drug doesn't work.

Re:Rock and a hard place

[LynnwoodRooster]

I'd argue that businesses locate in low-tax areas, and as those areas attract and grow new businesses, they increase the taxation, assuming that if they keep the rate of increase low enough, the business will simply suck it up and pay the higher rate than pick up and move.

Check out Idaho - businesses are relocating there like mad. Likewise Nevada and Wyoming. High tax areas like California, Massachuessets, and Michigan are leaking businesses because the taxation has gotten too high.

Washington is unfortunately following the CA/MS/MI model, not the ID/NV/WY model. It's already caused Boeing to relocate their headquarters (taking with it a substantial chunk of change)...

Looking at the Microsoft employment opportunities/open recs, there's no question in my mind why growth out-of-Redmond is much greater than in-Redmond. Cost of doing business - hire your employees in other areas where it's more affordable and let the local employment stagnate or fade away. That's how you move a massive high-tech information company.

Boeing is in a tougher place - they have physical plants and tools that are expensive to relocate. But Microsoft? Give it 10 years and you'll find the majority of Microsoft employees will be OUT of the State of Washington. Bet on it.

Re:Textbook Tax Case

[shdragon]

This is a textbook case of high taxation modifying the behavior of the taxed. If Washington's tax rates weren't punitive for these sales, there wouldn't be any incentive for the company to be incorporated in Nevada. This is a common corporate practice, and demonstrates the necessity of small laboratories of democracy, aka, states. Washington is seeing how Nevada's tax code is modifying the behavior of Microsoft, and Washington has the choice to modify their tax code or continue pursuing their own version of it. It's not Microsoft's fault for playing by the rules to maximize profit

I must disagree. All other things being equal, given the choice between incorporating in a state where there is no tax, and one where a tax exists, the rational option would be to setup shop where one is able to keep more of one's income. Any tax rate is likely to be considered punitive, and does provides a strong incentive for a firm to look elsewhere to shelter their income. However, MS is headquartered in Washington, uses plenty of Washington's scarce natural resources, but has opted to not pay full value for this. I fail to understand why anyone (outside of those who stand to gain financially from transactions like this) would believe this type of behavior is desirable.

Re:You eat the food, you pay the bill

[B'Trey]

First, I haven't advocated anyone disobeying the laws. Whether to obey or disobey an immoral law is a personal decision. I've made a personal decision to pay my taxes, despite the fact that they're largely unjustified.

Second, I don't mind paying my fair share of those services I consume. The issue isn't a free ride. The issue is what's just to impose on another person, and the optimum way of paying for services.

Third, you have a funny idea of "force or coercion." Taxes are no different from any other form of protection racket. "Hey, you pay me a little bit of money, I'll take care of you. You don't, who knows what sort of unfortunate occurrences could happen to this wonderful business you got going here?" But that's not force or coercion because you can always move your business to somewhere else? Accepting a contract has to do with deciding whether or not to enter into a mutually agreeable business deal. When the choice are accept or flee in fear of your live or liberty, it's isn't a free choice, and all of your misguided and uninformed moral indignation doesn't change that one little bit.

You do have a contract

[Migraineman]

Contracts require three elements: offer, acceptance of offer, and consideration. All three are in-place when you go to a restaurant:
Offer: The restaurant provides you with a menu, which includes prices
Acceptance: You reviewed the menu and placed an order for specific items.
Consideration: The restaurant provided you with food, expecting you to exchange cash.

Don't gimme any of this fictitious "implied contract" or "social contract" crapola.

Re:Who owns my education? Who owns my mind?

[Lemmy Caution]

The problem with taxing consumption over income is that it puts a heavier burden on the poor. The poor have little choice but to spend most of their income on goods, almost as soon as they earn it. The middle classes are usually not much better off, though they can sometimes squirrel away savings. The wealthy have a lot more flexibility with their money, and can defer consumption indefinitely, move money off-shore or into other currencies, etc. It is also easier to adjust an income tax so that the poor don't have to pay it: this kind of adjustment is nearly impossible with consumption-based taxes.

Re:So what?

[ceoyoyo]

Actually, I live in Canada, Alberta to be exact, and when I order things from out of the country I DO pay taxes on them. Every single item. When I buy items outside the province I often have to pay other province's sales taxes as well, even though technically I'm exempt.

I can assure you that if I managed to somehow creatively avoid declaring a third of my taxable income and the government found out about it I would at the least be assessed some massive fines. If I'd done it for ten years I expect I'd just be thrown in jail.

When an individual avoids paying a large chunk of his or her taxes it's considered a crime (unless you're rich, but then you're probably a corporation anyway). When a corporation does it's considered "creative capitalism."

Oh, really?

[danaris]

Aww, now the employees and directors of those companies are going to have to be personally responsible

And with government crippled, how do you expect to actually hold them responsible?

Dan Aris

Re:Capitalism

[GodfatherofSoul]

I for one cheer for anyone protecting money from the prying hands of the State.

Ah, the refrain of all Libertarians. Never mind that there are legitimate responsibilities for both tax payer and government. Does Microsoft build and maintain the roads to-and-from their employee's homes and their distributors. Does Microsoft pay for the infrastructure that pushes electricity, cable, and water lines for them? Does Microsoft provide police and fire protection for them? Nope, that's what your taxes are for. Go ahead and cheerlead every time you hear of some tax cheat pushing their share of the responsibility on the rest of us.

Re:So what?

[dkleinsc]

There are a couple of other serious issues with the Laffer Curve:

1. There's no evidence that the curve is actually smooth. e.g. Martin Gardner's response [wikipedia.org].
2. Even if the curve is smooth, there's no clear evidence on where the optimization point would be.

It is true, however, that any production that goes into government finances can't go anywhere else at the same time. That doesn't mean it's necessarily a bad thing to have taxes, it's just that the government has to use the money for something worthwhile.

Re:You eat the food, you pay the bill

[cayenne8]

"There is no valid contract for you to pay for your food when you go into a restaurant, yet few people dine and dash. No one would assume the restaurant is just giving you the food for free. What there is is an implied contract."

Err...bad analogy. There is no 'implied contract' if you dine at a restaurant. If you do a 'dine and dash' and get caught, you'll be charged with theft, not with 'breach of contract' I can assure you.

:-)

Microsoft broke no laws here, in fact they were operating fully within the laws. MS does pay taxes in WA, and they employee a large number of people working in that state, so they do contribute a great deal to the economy there I'd dare say, but, it would be irresponsible for them to NOT try to save as much of their own money as legally possible. It is like the reason I incorporated myself as an 'S' corporation. Now, when I work, I bring in my full bill rate to the 'company'...I only have to pay myself a 'reasonable' salary (according to the IRS0, I only have to pay SE taxes (FICA, Medicare, etc) on that reasonable salary, the rest of the money at EOY, falls through on my personal taxes as extra income, but, I only have to pay state and fed taxes on it...so, I save a good bit of $$ not having to pay SS and Medicare on my full income. If I brought in $150K total, but, I only pay myself about $40K 'salary', I only owe SE taxes on that $40K, the remaining $110K is not.

That's the way the law works. Am I doing anything wrong? NO. I'm working within the system to try to keep as much of my hard earned money as I can....and I invest that saved money into IRA's and the like that will benefit me MUCH more in retirement that SS, which may not even be in existance when I'm through working.

Same type scenario...have I done anything wrong?

Re:from whom does the benefit come?

[SETIGuy]

Corporate taxation is merely a form of double taxation, which is counter-productive to the state anyway.

You've been taken in by right wing propaganda. Republicans trot out the "double taxation" argument any time they see a tax that might make rich people slightly less rich. They do it for the estate tax and corporate income tax. There is no dividing line where flow of income starts and ends. All income taxes, capital gains taxes, sales taxes, gift taxes, and estate taxes are taxes on transfers of wealth.

I earn a salary and pay income taxes. I then use my income to buy a toaster and pay sales taxes. Double taxation! Then the store pays taxes on its income. Triple taxation! Then the store employees pay income taxes. Quadruple taxation! And then the store employees pay sales taxes on their purchases. Quintuple taxation! And so on. It's a totally meaningless argument.

Re:You eat the food, you pay the bill

[Herby Sagues]

Competition. That's the key. But between states. When a business decides to raise prices unjustifiably, what do you do? You go and buy from someone else. When a state decides to charge taxes that are above what's reasonable, what do you do? You normally have only one recourse: move your operations to some other state. If the states complain that companies can move around their operations, it's because it is the loophole in their abusive scheme. It is the only safvety valve in the system and they would like to see it closed. But as it is it is a valid option. Microsoft is doing what anyone would do when charged too much for something. Don't "buy" there, buy somewhere else. And before you complain that Microsoft isn't "moving" because it is leaving their employees in WA, those are the employees that develop the products, not the ones that make the deals. Nothing prevents them from splitting both parts of the business. And demanding that they move all their employees in order to find greener pastures is exactly the sort of loophole seal the states would want.

Re:You do have a contract

[spun]

You can look at the services provided by the US, and the amount it will cost you in taxes, and if you don't like it, you can leave. Exactly like the restaurant scenario. It is the same situation, except in the minds of people who would rather reap the benefits of living in a first world country without paying for them.

Re:What, are you guys comunist or something?

[sm62704]

Hogwash. The corporations aren't paying any more in salaries than they have to. It's their customers who pay their taxes, not their employees. Did you get a raise the last time your employer got a tax cut?

And they're going to charge their customers as much as they possibly can as well.

We do NOT have the highest taxes. Have you seen what they're paying for gasoline in Europe? That's mostly tax.

As to "paying more than 100%, well gee, I thouhgt I was bad at math! A 100% tax rate would mean that all gross reciepts would go to the tax man.

I know, it's Monday. Me too.

Re:You eat the food, you pay the bill

[skuzzlebutt]

Very true...corporation management in Nevada is a huge business down here in Vegas...I have friends who are "Presidents" or "Officers" of dozens of corporations who bounce from empty office to empty office throughout the month, because there is some kind of requirement around having to spend so much time per month on site. It's not unique to MS by any means. All above board, just jumping through weird loopholes created by Carson City.

In addition, I would bet that Microsoft is also not a Washington State corporation as an entity: most large entities are incorporated in DC for other tax/regulatory reasons.

Fair to Washington State residents or not, there is nothing remotely illegal about what they are doing; in fact, I would argue that if they didn't take advantage of the opportunities available to them and their competitors to make/save money, they aren't doing their fiduciary duty to their shareholders.

Time to first flame...in three...two...one...GO!

Re:You eat the food, you pay the bill

[inKubus]

Yeah, so what. Why is every big bank in the U.S. run out of South Dakota and Delaware? Because those states have lax banking laws. Why are movies made in California? Low tax on entertainment. Duh.

If Washington State decided to levy M$FT they would be driving out one of the largest employers, and those employees DO pay income tax. Not to mention sales tax on everything they buy. Lots of companies are in Nevada to not pay tax. Guess what, there wouldn't be SHIT in Nevada if they had the tax! So, states do things that help them out, and companies do also. This is a NON STORY.