Creative Capitalism Gets Microsoft $528M Tax Break 545
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."
Re:So what? (Score:2, Interesting)
REALLY bad title (Score:3, Interesting)
When I had my retail store, we moved literally 3 miles across a State line because of a sales tax differential of nearly 4%. That's significant, when many of our items were $500-$1000, meaning a savings to the consumer of $20-$40 in taxes. Even funnier, the county/state with the lower tax rate had BETTER public facilities and police attention (the store in the old State had regular robberies and theft), and my customers had a 5 minute longer hop to get there.
We've talked repeatedly about moving out of our State and leaving some customers behind if our State decides to start a labor sales tax. It's a terrible idea, as more taxes don't mean more income (and neither do less taxes necessarily) for the State. It's a VERY complicated "invisible hand" situation.
I appreciate when companies find loopholes, because it gives me hope that I can use them, too. I hate W2s, as 1099s offer many more tax benefits. I've seen many friends give up their stable W2 jobs to move into 1099 contracting, and see their income double, but their tax share not move up as much. When I heard Haliburton was moving offshore, I investigated it and found that there are tons of savings to do so, even if your primary business is still in the States. It makes sense.
Yeah, Microsoft will take heat for this, but the reality is that small and medium sized business owners should do everything in their power to find the least-regulated economies to operate out of. I love seeing companies move out of California, employees and all, and hitting States that so far have not shut down the engine of business, thinking that the State can help the poor when in fact it is jobs, not entitlements, that help the poor.
How about Boeing? (Score:5, Interesting)
Washington, the "soak the company" state... (Score:5, Interesting)
Ignore this story - Washington is taxing itself into oblivion. Boeing moved their corporate headquarters - and most of their taxable profit - to Chicago over the taxation and treatment of business in this State. The ONLY things that is keeping Washington alive right now are:
1. Agriculture. Hard to move a farm, so they're stuck. Of course, our State wants to breach all the dams and eliminate the irrigation systems, which would kill these businesses.
2. Boeing. Already moved their corp headquarters, and unfortunately for Boeing, the physical assets here - buildings, equipment, and people - are so huge that you can't afford to move them. But more and more work is shifted outside the State...
3. Microsoft. Faces the similar situation with Boeing, because of the size of the campus and people. Stuck for now, but does more and more outside the State.
Washington is screwed. It has the highest gas tax in the nation, and still hasn't repaired road damage from the 2001 Nisqually Earthquake. The legislature and governor raised the State budget by 33% in 3 years, and now projects deficits left and right, yet it's also decreased MANDATORY funding of the State employee's pension fund. And now it wants to put the screws to Microsoft...
Washington is dead, it just doesn't know it yet...
GAAP (Score:2, Interesting)
as others have pointed out - this is about corporate taxes
calling it "creative accounting" might be valid but misses the point
accountants set the "rules" through generally accepted accounting principles http://en.wikipedia.org/wiki/GAAP [wikipedia.org] - which appears to be what the article is complaining about
Microsoft has a history of being big and mean, but apparently GAAP allows Microsoft to do whatever it is they are doing (or the SEC/FTC/acronym of your choice would be jumping down their throat even more)
maybe the rules should be changed, but it might simply lead to companies moving out of that state. i.e. If it is unprofitable to do business in a specific area, then companies won't do business there very long
the recent hot button examples (sure to get me called an capitalist/fascist/idiot by someone) are Michigan and Ireland. Michigan has "increased tax regulation" and also seen a lot of industry leave for more "business friendly" areas (the "1 state recession" we kept hearing about during the Michigan primary). Ireland on the other hand has "rewritten their tax codes" (read "cut taxes") and seen an economic turnaround (maybe it is unrelated ...lol)
in my little part of the world it is also common practice to give corporations all kinds of tax breaks - the underlying idea being to keep/create jobs in the area (from which the local municipalities collect income tax)
That's like saying (Score:1, Interesting)
you could be working 100% for your employer! If you weren't alive, maybe there'd be room for someone more effective to live!
As another early poster said, is MS going to build its own bridge? How about the roads? What about the pylons carrying phone, internet and electricity?
Re:So what? (Score:5, Interesting)
I for one will not stand for good paying jobs in the USA. Any candidate that encourages more tech jobs to move to India has my vote!
Re:This is rabble rousing. (Score:2, Interesting)
To say that the money has been taxed before (with the implication that it shouldn't be taxed again) is crazy talk.
Say I worked in a phone shop. When someone buys a phone they will pay a sales tax. When the shop pays me (from the money made by selling phones), I will pay income tax. If I then go shopping, should I able to go into a shop and say:
"I'm not paying any sales tax! This money has already been taxed"?
As far as I can see, taxes are applied for two main reasons:
* Anyhow, the economics of software production don't fit with a free market economy as the marginal cost of production is effectively zero after the first copy. This means that for an efficent market to exist, the price should be zero, resulting in no commercially produced software (as no company can survive on zero income). i.e. Microsoft couldn't exist in a true free market economy.
Re:tax break? (Score:3, Interesting)
Most jurisidictions' tax codes have rules which are designed to prevent this (most commonly by requiring goods to be sold between subsidiaries in different jurisdictions on arm's legnth terms and by assessing tax on the arm's legnth price if this was not charged). I'm surprised that Washington state doesn't have anything like this (or, possibly, it does and MS' tax counsel have figured out a way to avoid the rules applying to IP).
Re:So what? (Score:5, Interesting)
The MSFT employee base does a hell of a lot more for King County than the other way around.
WA politics are horribly corrupt and stupid.
Former Redmond resident, Current MS employee (in Fargo, ND, where the local government is much less stupid)
As an MS employee and shareholder, I hope we continue to diversify away from the Redmond campus. It is extremely expensive and the business climate in WA is unstable and increasingly hostile. The overwhelming majority of MS employees are transplants from elsewhere.
The nice thing about markets is that socio-economic conditions are a market also, and as US cities get stupider and stupider, they'll lose business and "lose" in the market place. Hopefully corrections occur before there is too much uncomfortable displacement for all parties.
Re:Who owns my education? Who owns my mind? (Score:4, Interesting)
Re:Hippie socialist sheeple (Score:3, Interesting)
First: Paragraphs. Please.
Second: So-called "democratic" governments are only "accountable" to the majority vote, which is merely a form of "might makes right", this time in the form of numbers. The GP was clearly referring to accountability to justice, e.g. under common law, where anyone who causes another person harm is liable for the damage. No government, of any sort, considers itself accountable in this fashion; in fact, the definition of "government" can essentially be summed up as: the one group which is somehow not considered liable for the damage it causes.
Third: Power is not a zero-sum game. Among other factors, power is limited by the willingness of those not in power to be governed by others. Eliminate the false sense of legitimacy they feel for the government and the total amount of power will decrease.
Re:No taxes! (Score:3, Interesting)
Tax funded infrastructure is a way to tax the working poor in order to provide for the needs of the middle class and rich.. not that I am complaining - A lot of poor single mothers had to take on second jobs so that the government can subsidize my dirt cheap 100mb internet connection. Tell those suckers to flip some more burgers, I want to download mp3s and do online gaming at the same time, god-damn-it! I am not poor, I pay low taxes, and my public services are great, so the whole tax-funded infrastructure thing is definitly working to my advantage! Not so much for people living in the ghetto though.
But on a more serious level, how much tax revenue do you think is wasted? It is one thing to defend taxes, but have you ever looked into how much money the government wastes on things? I would say it isn't a stretch of the imagination that the government could provide the same infrastructure at 1/3 the cost, or less. There is so much corruption and graft, that it is suprising that any infrastructure gets built at all.
Yes, small government, not lip service. (Score:3, Interesting)
Look at your city, your county, your state. Almost all corporations.
People like you need to realize that it isn't the "big business" mentality, it is the fact that government provides special immunities and benefits to corporations through the use of the corporate charter itself. Step one in effecting positive change in big business practices is the elimination of corporate charters. Period. You can even start by using it as a punishment for braking the law: revoke the charter.
If the companies lacked the protections afforded by the corporate charter much of people's gripes about them would be actionable.