Microsoft Tax Dodge At Issue In Washington State 681
newscloud writes "With Washington State facing a billion-dollar biennial budget deficit, the spotlight again shifts to Microsoft's software licensing office in Reno, Nevada. 'Although the majority of its software development is performed in Washington State, Microsoft records its estimated $18 billion in licensing revenue per year through a corporate office in Reno, Nevada where there is no licensing tax. Just by enforcing the state's existing tax law from 2008 onwards, we could reduce Washington's revenue shortfall by more than 70 percent. Alternately, we could pursue the entire $707 million from Microsoft's thirteen years of tax dodging and cover most of the expected deficit going forward.' We have discussed Microsoft's creative capitalism in the past."
Dodgy statesmen (Score:5, Funny)
Way to blame microsoft for the state deficit.
Re:Dodgy statesmen (Score:4, Insightful)
Re:Dodgy statesmen (Score:5, Insightful)
Re:Dodgy statesmen (Score:4, Interesting)
Re:Dodgy statesmen (Score:5, Insightful)
Well, I've not seen anywhere on the article, nor on this forum, a listing of what laws were broken.
I mean, corporations do this all the time...many companies incorporate in Delaware for the tax breaks they get, even while most of their manufacturing/business/warehouses are in other states. While you might rightully bitch about the 'moral' aspect of this...if they really broke no laws on the books, then they did nothing wrong legally.
Would Washington be a better place if MS just pulled up roots, and moved to another state? Another country?
I'm just curious...why are tax revenues so bad in the state where a company like MS is employing what I could guess is a good number of people and what I would guess were pretty good salaries/bill rates? What is the state income tax like there? What is the sales tax there? What is the property tax there?
Most states get most of their money from many or (in the case of my state ALL) of these.
I'm just saying...if MS (and I can't believe I"m defending MS here) actually broke no tax laws, then you really can't accuse them of tax evasion. It is not against the law to work within the law. If you don't like the tax laws as they are, change them. Just don't be pissed if they then leave the state. Other states would be thrilled to have the high paying jobs within their borders.
Re:Dodgy statesmen (Score:5, Informative)
What is the state income tax like there?
I can't speak to any of your other questions, but Washington state has no income tax (yet).
Re:Dodgy statesmen (Score:5, Informative)
As the Supreme Court has made clear:
tax avoidance != tax evasion
The first is legal. The second... not so much.
Re:Dodgy statesmen (Score:4, Interesting)
>>>I'm not sure what to think of the situation
I think taxing corporations is pointless. For example if Washington State pisses off Microsoft, then they will simply move somewhere else - like Detroit. I bet the politicians in Michigan would be thrilled to offer MS a brand-new building, taxfree status, and other benefits in order to hire their ~15% of unemployed citizens.
A wiser is course is not to collect the taxes from the corporation itself, but from the corporate employees and stockholders. Tax the people not the entity.
Re:Dodgy statesmen (Score:4, Insightful)
I bet the politicians in Michigan would be thrilled to offer MS a brand-new building, taxfree status, and other benefits in order to hire their ~15% of unemployed citizens.
You seem to be assuming that the unemployed of Michigan are instantly interchangeable with the existing MS employees. Something tells me that that probably isn't the case for the majority of their employees. Looking at just code monkeys, does Michigan even have residents with the right skillsets? Nevermind the intimate knowledge needed in order to immediately jump into one of MS's projects. If MS were to move, it would probably be far more cost effective to pay for the relocation costs of the current employees, than to retrain new employees from scratch.
Ya no kidding (Score:5, Interesting)
The problem with the "Well they are using resources," argument is that you should be getting money for those resources through your taxes on the things they use. Yes, I agree that they need to help pay for thing in the state. That is why you tax their property, tax the electricity they buy, tax their payroll, etc. You tax the things that actually represent their usage. If they have a 100,000 sq ft plant, they should pay property tax on that. It clearly uses resources, land not being the least of those, so you tax them for owning it, much like all of us who own houses pay property tax.
The only reason Washington is bitching is because they have a big budget shortfall. Part of that might be because they don't have an income tax. Ok well I'm sure that is popular with your voters, but it isn't a good way of running things. A state income tax is a reasonable way of making sure that people who use state resources pay for them. You earn money living in that state, you pay out some of that money in tax.
I really don't see they have any room to bitch about this. You don't like that a multi-national does business in different places? Well too bad, that's how it works. They can always leave, and then you'll get nothing.
The trick is to find a good way to tax people and companies such that they pay for the things they use in the state, will not making it too onerous to any group, so that they are tempted to leave. However it seems legislatures sometimes look at big employers as just massive money pits. "Oh we'll just charge them more, they can afford it." Well, maybe they'll leave if you do that.
Rainbird did that to California. They had their headquarters there but it was getting prohibitively expensive. So they relocated to Arizona (where they had a big manufacturing plant). Their employees were generally happy too since cost of living was less.
I don't have a lot of sympathy if a state does something like eliminates an income tax to panders to voters, and then tries to make it up with company taxes. If the companies then leave, well that's what you get. Have to try and make taxes fair to everyone, because in a free country, they always have the option of packing up and moving somewhere else.
Re:Ya no kidding (Score:5, Interesting)
Actually, Washington has been bitching about this for years (when they've had a surplus). Every year they bring it up MS threatens to leave and they back off. Personally, I think they should say "fine, pay us what you owe us and leave - but you'll never be permitted to sell your products in this state again." They've been extorting the state for years and it needs to stop.
Not to mention their is no goddamn way they would leave. The investment in their campus structure alone would not fly with Shareholders. This is a PUBLIC COMPANY and such threats are laughable, at best.
No chance in hell. There's no conceivable way they could find a buyer for their campus without selling at a massive loss. And there's no conceivable way they could tell their employees to take their kids out of Washington schools and tell them to move to some low-rent state like Nevada without having severe turnover in the process.
Up until now, I'm sure the state of Washington has been too afraid of losing Microsoft to lean on them. But I think now they may be desperate enough to do what they should have done all along, and make Microsoft pay what they owe to maintain the infrastructure that their employees use.
Re:Dodgy statesmen (Score:5, Informative)
...many companies incorporate in Delaware for the tax breaks they get, even while most of their manufacturing/business/warehouses are in other states.
This is a common misconception. Delaware was attractive not because of tax breaks (there is a DE corporate tax), but laws that shield large corporations against lawsuits from shareholders. That is the reason big corporations incorporated there. And they kept offices elsewhere to avoid the taxes :)
This has been changing though as other states (such as Nevada) have adopted similar laws.
Re:Dodgy statesmen (Score:5, Insightful)
"I'm just curious...why are tax revenues so bad in the state where a company like MS is employing what I could guess is a good number of people and what I would guess were pretty good salaries/bill rates?"
Because Washington has no income tax which is a major reason Microsoft is based there and Bill Gates lives there. They depend on property taxes among other things, which are probably having a substantial shortfall in a crashing real estate market.
Corporate taxes are a lot like the Internet, no one wants to pay for anything, they just want a lot of cool things for free, you know like highways, schools, universities, prisons(so there isn't so much crime). Not sure if they still do but there was a time Microsoft was using prisoners as ultra cheap labor to pack products.
Not versed on tax law enough to say if Microsoft is breaking the law but its a given they are bending it to the absolute limit if they aren't out right breaking it, like most big corporations. They want the middle class working people to pay all the taxes.
I'd seriously like to see Washington put the smack down on them and see Microsoft pull up stakes and move to the nice repressive one party dictatorship that is China and see how Microsoft's execs really like it there if they actually have to live and work there. Or move to India and live in a tiny high tech pocket of affluence in a country with otherwise grinding poverty, serious ethnic and religious tensions and a near perpetual state of war with Pakistan.
Re:Dodgy statesmen (Score:4, Insightful)
You're not versed on tax law so wtf makes you think you can even state they are pushing the bounds? It is either illegal or it isn't, and given that thousands of companies big and small do the same thing MS is doing I doubt its legal status is particularly contentious.
An individual or company is doing nothing wrong by minimising it's tax liabilities in a legal way. If the tax system is either poorly thought out or full of 'loopholes' then get those fixed. Generally, one of the biggest problems with western tax systems is complexity. Simpler taxation tends to be fairer.
In the UK we have an incredibly complex tax system, we get taxed on savings (except ISAs which can only have so much paid in per year, and that quantity varies depending on whether you want to save only cash or cash/shares). If you own sufficient assets it can be worth creating a corporation and gradually transferring ownership to your children to avoid inheritance tax etc. This complexity virtually always benefits the rich, as only experts can understand enough to play the system well.
Re:Dodgy statesmen (Score:5, Insightful)
Sorry, but it's pretty naive and, as you say, short-sighted, to think that the previous administration was any better, or that the future one will be.
Re:Dodgy statesmen (Score:5, Insightful)
Can we get an administration in office that understands some economics?
So you mean encouraging imports over exports, removing corporate personhood, supporting cooperatives and small scale businesses and breaking up large monopolies? Or do you really believe the last 8 years haven't been completely dysfunctional, too?
Re:Dodgy statesmen (Score:5, Insightful)
Actually, the studies that I have seen are looking at expenditures on care, and resulting outcomes of the patients that received the care. The outcomes are largely uncorrelated with variations in spending across the US, which vary by almost 100% from lowest to highest, and are universally somewhat worse than similar outcomes from the Canadian, British or French systems for similar cases. They're not horrible, but they aren't the best despite radically higher spending on a case by case basis in the countries with the evil commie plans.
GP talks about government waste. Medicare, the US government run health system for the elderly, has about half the administrative cost load of private insurance companies, and aggressive negotiates for lower treatment costs. It could have been a force for lowered drug costs, but Congress specifically prohibited that. The government waste tends to come from Congress, not the rank and file.
Re: (Score:3, Interesting)
See "Nevada Corporation" or "Delaware Corporation".
There's nothing illegal about what Microsoft is doing. They're simply incorporating in a state that gives them the best tax breaks.
This is part of their accounting department's JOB.
Thousands of corporations, from behemoths like Microsoft, down to little one-man shops incorporate in Nevada and Delaware.
Why?
It's cheap, the state keeps their hands off your income, and the state makes up the monetary difference in quantity.
Qualifying this as "Microsoft's Cheat
Dodgy businessmen (Score:4, Interesting)
You want to show us how patriotic you are, corporate America? Pay your fucking taxes like you are supposed to.
Re:Dodgy statesmen (Score:5, Insightful)
Microsoft has to pay other taxes, just not this one, to Washington. There are a slew of taxes that corporations have to pay.
The act of licensing a product doesn't actually use state resources.
If Microsoft licenses 2,000,000 $250 copies of Vista, it doesn't utilize any more state resources than if they had licensed 200,000 copies of vista, or if they had licensed 2,000,000 $100 copies instead.
You might think it implies they hire more support people in Washington, and thus further use state infrastructure... but it doesn't, thanks to outsourcing and call centers in India.
And most copies of Windows licensed are OEM, and volume licensed, which doesn't generate additional support demands.
Re:Dodgy statesmen (Score:5, Informative)
Only a couple of problems with that. (Score:3, Insightful)
#1. Sales taxes are the most regressive form of taxation.
#2. The state does not get a cut of the money that you spend out of state. Which is an issue when you're talking a large number of millionaires or better.
Re: (Score:3, Interesting)
Sales tax is regressive? Is that a problem?
Who should be taxed more? A businessman (lets call him Warren) who earns a huge amount of money, but invests it back (creating more jobs), and lives a normal life; or a rich heiress (lets call her Paris) who earns a moderate amount, but spends a huge amount on consumer goods?
I like consumption tax, because it encourages people to live a balanced life.
If you want to help poor people, there are other ways. Improve buses. Fund public schools and hospitals. Etc.
Re:Only a couple of problems with that. (Score:4, Insightful)
Sales tax is regressive? Is that a problem?
Who should be taxed more? A businessman (lets call him Warren) who earns a huge amount of money, but invests it back (creating more jobs), and lives a normal life; or a rich heiress (lets call her Paris) who earns a moderate amount, but spends a huge amount on consumer goods?
I like consumption tax, because it encourages people to live a balanced life.
If you want to help poor people, there are other ways. Improve buses. Fund public schools and hospitals. Etc.
Apples and oranges. Try comparing one of those people to a poor person (after all, that's supposed to be what makes a tax progressive or regressive...).
Re:Only a couple of problems with that. (Score:4, Informative)
Income tax = progressive
Sales tax = regressive
There is no 40% of people who don't pay sales tax
Re: (Score:3, Informative)
A businessman (lets call him Warren) who earns a huge amount of money, but invests it back (creating more jobs)
If a business will profit from expansion - it will go ahead and expand. Personal income tax rates on the owners are completely and utterly irrelevant to this equation, as anyone who's taken 6th grade economics should know.
Re: (Score:3, Insightful)
Warren doesn't fund companies from an altruistic job creation goal. He funds companies to get a return on his investment. The actual creation of jobs is far more demand driven than supply driven anyway. He increases his income by investing his money.
Regressive taxes such as sales tax will hit much harder on the poor. When you have to spend 90% of your income on housing & food you'll pay taxes on at least 90% of you're income with a sales tax.
So what you're doing is allowing those who make/have lots of m
Sales taxes are not 'regressive' (Score:3, Insightful)
Rarely do sales taxes cover things like rent, utilities, and food. Since these are most of the 'base load' for the poor, they are effectively only taxed on their bad habits, EG booze and ciggs, for which a strong argument can be made that they should be discouraged anyway.
Rich people buy fancy cars, boats, buy lots of gas, etc. that DO get taxed.
Re:Only a couple of problems with that. (Score:5, Interesting)
Who should be taxed more?
Allow me to propose better questions:
1. Who should be shot for spending the USA into a $12 trillion debt?
2. How do we start spending less?
Re:Only a couple of problems with that. (Score:5, Interesting)
Re:Dodgy statesmen (Score:4, Insightful)
And if you're seriously suggesting that a sales tax is better than an income tax of similar income, then you really need an economics lesson, badly.
Comment removed (Score:4, Insightful)
Texas has no income tax, just sales tax (Score:3, Interesting)
And when the mexicans run across the boarder and have babies in the closest ER, they pay taxes on almost everything they buy, except basic food, on the way there. If our tax was income based, the state wouldn't get a penny out of them.
I understand the arguments against a sales tax, but it sure is fair in that almost everyone pays them, not just those in the middle, because with an income tax, the rich and the poor get out of paying them.
About the only way I know people get out of sales tax is to buy only fo
Re: (Score:3, Insightful)
The problem is these illegals ( rrr undocumented) workers are consuming alot more tax money than they put in which is bankrupting states like California. Especially if the tax payers are paying for each baby and hospitalization costing tens of thousands each.
The problem is poor people do not have that much money to consume and most money is just transfered to their home countries and is not taxed nor re-invested.
They make so little money that they can't be taxed. Sales taxes are part of the problem as I agr
Re:Texas has no income tax, just sales tax (Score:5, Insightful)
Or be the member of a board for a corporation and buy everything except basic food on the Corp credit card, buy a house through the corp then rent it off the corp, own nothing and take a tiny salary. Then send the corporations profits to a shell account in the cayman islands then claim your expenses back as a cost at tax time claiming the corp is not profitable, your offshore account unreachable by the tax man to see if your lying or not.
Effectively paying no tax.
As many thousands of the upper class do.
Oh I forgot, then have misguided middle class individuals argue for your right to continue doing this. While lobbying your mates in government to increase the tax burden on them because your corp needs infrastructure built and a solid and expensive society to exist to continue being profitable in your highly "unprofitable" venture (wink wink).
Then laugh all the way to the bank come retirement.
Re: (Score:3, Insightful)
Re:Dodgy statesmen (Score:4, Insightful)
Speaking of tax evasion, you're still required to pay State sales tax regardless of buying it online. The differernce is whether the company is required to collect it on your behalf.
Not claiming that on your taxes is tax evasion, but so far the States haven't cracked down on it, other than a few noteable examples. Search on Michigan going after folks buying mail order cigarettes. Yeah it was the cigarette excise tax they went after, but what's stopping them from pursuing other major retailers for a list of customers who dodged the sales tax?
Re: (Score:3, Funny)
I'm glad that Slashdot now has a chief economist with such well-considered and comprehensive solutions to the world's problems?
Thank you, sir. I wear my title with pride.
Re: (Score:3, Interesting)
Oh-kay, I'll be up front and honest. I enjoy bashing MS. Given a decent reason, I'll dump on them, 'cause I just don't like them. So, I really would feel good if the state went after all those lost revenues.
BUT - it isn't just MS. At least 70% of all corporations in the US are incorporated in a state that favors the corporation and/or use some very imaginative BS accounting procedures to make sure that no government gets any more than an absolute minimum of taxes.
I would really, really love to see taxes
Re: (Score:3, Insightful)
Perhaps they might look at cutting back on government?
Re:Dodgy statesmen (Score:4, Informative)
They've done a lot of that, too. For example, they cut the University of Washington's budget by 13%, which resulted in a 14% increase in tuition rates, and severe cuts to many graduate departments, etc., which necessitates a reduction in the number of classes taught. So, we're accepting fewer students and depressing the graduation rates of those who are already here. That provided the state with an extra $73M for their budget.
Similarly, King County is cutting almost all of the fat. County health is getting cut, county parks are getting cut, etc. So, in the impoverished unincorporated areas, we're cutting all public service, except for courts and police. I can't recall what that cut netted us, but it was on the order of a few million, and the County is still coming up short.
And we've got a case of blatant tax evasion to the tune of $700M. Yeah -- let's stick it to the poor people and the college kids and protect our holy corporations who do no wrong...
Re:Dodgy statesmen (Score:4, Informative)
On Washington State "thriftiness"... ... ... ... ... ... ... ... ... ...
http://www.washingtonpolicy.org/Centers/government/policybrief/08_guppy_piglet.html [washingtonpolicy.org]
Legislators work in a world of unending spending requests. When there is no countervailing pressure for tax-cuts, it is often easier for lawmakers to just say "yes" to the special interests. As The Seattle Times reports, "Since 2005, lawmakers have spent or allocated nearly $270 million on earmarks in the capital budget... That's more than the previous 15 years combined."[ii] The following chart illustrates the long-term trend.
Washington is one of the most heavily-taxed states in the nation. In all, residents pay more than 50 different kinds of taxes at the state and local level. The large number of taxes, combined with a growing economy, is why a record level of revenues is flowing into the treasury.
In historical terms, Washington's level of taxation is perhaps the highest ever. Today, Washingtonians pay more in taxes than they do for food, clothing and transportation combined.
Suquamish Inviting House, Longhouse and Museum
$2,550,000
Just one pork item, like $2.5 million to benefit the owners of a wealthy tribal casino, represents the entire yearly tax contribution of 1,059 Washington taxpayers.
The Ship Nobody Wants
$4.5 million
Battle Equipment the Army Can't Use
$6 million
Ending wasteful spending at Washington State Ferries
$9.6 million
Tacoma Narrows Bridge Lights
$1.5 million This earmark is to provide tax-funded night-time lighting decoration for the new Tacoma Narrows Bridge.
Hiawatha Artist Lofts, Seattle
$1 million
One million dollars is devoted in the state budget for 61 units of living/work spaces for artists, plus five commercial storefronts for artist-related businesses.[xix] ... ... ... ... ...
"SayWA" Tourism Campaign
$442,000
Money Stolen from the Crime Victims Fund
$431,376
Animal Massage Practitioners
$142,000
Medicaid Checks for Services to Dead People
$44,687
Pension Payments to Dead People
$254,694
Local Community Projects
$132,619,000
(long list of things like $130k for an opera house).
Governments always wave the baby in front of the budget cut gun. But the reality is, they are sitting on a rich leather $750 executive chair behind a $10,000 desk while they do it.
Disappointing though it may be... (Score:5, Insightful)
...I can't see how anyone could expect Microsoft to act differently.
There appears to be a legal loophole that has allowed Microsoft to hang onto $707 million over the years. Until a judge rules otherwise, they're going to exploit that loophole. When the loophole is closed, Microsoft is going to look for a new one. Can you say you'd act any differently?
What's that? You do act differently? You pay your taxes, you say? Well then... it sounds as though Washington would have better luck recouping its money if it simply raised the state income tax. Presumably all of the employees at Microsoft's Redmond campus file taxes in the state, yes?
Re:Disappointing though it may be... (Score:5, Informative)
Re:Disappointing though it may be... (Score:4, Insightful)
Re:Disappointing though it may be... (Score:5, Insightful)
Have you left yet?
Re:Disappointing though it may be... (Score:4, Informative)
I don't know about Washington, but my state, California has plenty of hits when you google "companies leaving California"...
Anecdotal information only goes so far.. personally, I know of a local printing company that has left my state, taking 28 jobs with it.
There are plenty of other stories. My brother in San Diego told me about Buck Knives leaving town a few years back, taking or losing hundreds or more California jobs.
Competition among the states was what the US Constitution once stood for - let each experiment and see what kind of environment produces the greater good. Taxes are way up there in perceived "badness", among the productive.
Re:Disappointing though it may be... (Score:5, Insightful)
In my experience, they aren't, and empirical evidence seems to suggest they're at least not the deciding factor, given how large a percentage of the productive live in high-tax states likes New York, California, and Massachusetts.
Re:Disappointing though it may be... (Score:5, Insightful)
There seem to be an awfully high number of people who commute from New Hampshire to work in Massachusetts because of the lack of personal income and sales taxes in NH. There are also a number going the other way to shop because of the lack of sales tax.
Washington keeps an eye on its borders because neither Oregon nor Montana have sales taxes. I've seen roving police patrols stopping motorists coming in who have what looks to be a vehicle full of new consumer goodies. Idaho, at that point, is more of a speed bump than a State. The panhandle is only about 85 miles across on I-90.
How many California companies actually incorporate in Nevada? How many companies from almost every other State incorporate in Nevada for just this purpose?
Lots of people cross the borders from Florida and Tennessee into Georgia to buy gasoline or cigarettes because of the drastic difference in taxes.
Taxes are a big factor when you start making decent money. It is the reason the various States have differing levels of property, sales, corporate and income taxes.
Re:Disappointing though it may be... (Score:5, Interesting)
Mmmmmmmmm....I don't agree, though I'm open to seeing data otherwise, if there is any.
There are a hell of a lot more options open to wealthy people than to the likes of you and me. Many of those that maintain homes in the high-tax cities have their *residence* elsewhere. One example is Ted Turner. His main business is based out of Atlanta, and he has a house or condo there. But his declared residence is the ranch in Montana, where taxes are cheaper.
Several movie stars and sports figures (John Travolta and Shaquille O'Neil come to mind) have their *residence* in income tax free Florida. Many celebrities have homes in Idaho, Washington or Florida where taxes are low, or non-existent. Texas is another haven, with no personal income tax.
Leona Helmsley once said "only little people pay taxes", and she was more correct than most people realize. The system is devised that if you have a lot of money, and know what you're doing, you don't pay a lot of taxes.
Re:Disappointing though it may be... (Score:5, Insightful)
The system is devised that if you have a lot of money, and know what you're doing, you don't pay a lot of taxes.
That's because the people that write tax laws are usually pretty wealthy. They write loopholes in for themselves to take advantage of. I'm personally of the opinion that dramatically simplifying the tax code to prevent this is more important than "fixing" health care.
Re: (Score:3, Insightful)
I don't know about Washington, but my state, California has plenty of hits when you google "companies leaving California"...
California is one of the largest economies in the world. Companies move around all the time. It shouldn't be surprising that you'll get a lot of hits if you Google for "companies leaving California", since California has so many damn companies in it already.
The more important thing to look for is the growth rate. Are jobs being created in California? Is California's economy growing
Re:Disappointing though it may be... (Score:4, Insightful)
Re: (Score:3, Insightful)
... and, in fact, Washington already drove Boeing (HQ) away with their high tax rates. Incentives matter. Companies aren't just a piggy bank to be raided at will.
Re:Disappointing though it may be... (Score:5, Insightful)
Note that Obama's own budget guys are expecting to run deficits in his first four years (excluding the Stimulus package and bailouts, mind you) that will be larger than the total deficits of Bush's eight years.
Yeah, actually including two wars in your budget will do that.
Re:Microsoft does great things for Washington (Score:5, Insightful)
"The Bill & Melinda Gates Foundation broke ground Tuesday on its new $500 million headquarters, which the world's largest charitable foundation hopes to occupy in late 2010."
Just how much do you think a nearly million square foot complex in downtown Seattle should cost, capable, as you said, of supporting 1200 employees.
The headquarters are being paid for by the Gates' directly, not out of the $38B endowment they've set up.
Yeah, "using its $37.3 billion endowment to fight diseases like AIDS and malaria, start a green revolution in Africa, improve American high schools and provide Internet access at libraries throughout the world" at a minimum mandated level of $1.5B/year sounds fucking horrible and selfish of them, if you ask me.
MSFT will bully the state... (Score:3, Insightful)
... and threaten to move out. If MSFT leaves or even reduces force, greater Seattle's retail and real estate would be crippled, not to mention sales tax and property tax revenues. I'd like to see those taxes paid too, but unfortunately MSFT has the greater bargaining chip here.
Re: (Score:3, Insightful)
The government simple cannot and should not "roll over" for business. That has simply got to stop. If Microsoft had to move, it would be EXTREMELY painful and it would probably be an active news story for the next months following that. Government needs to finally and at last stick to its guns and push for it. Let'm go...if they actually would go. Other states will see this and, if they manage to grow a pair, will also tax them... though they'd probably end up in Texas where the law says all you have t
Re:MSFT will bully the state... (Score:4, Insightful)
No. Other states will see this and say "gee, I'd love just 1% of Microsoft." And lower the tax rate just to attract them.
If you don't think they would move, then riddle me this. Why did they set up the Nevada shop in the first place? If not motivated by tax.
Re:MSFT will bully the state... (Score:5, Insightful)
Re: (Score:3, Insightful)
I'm dubious about the concept that Washington state deserves a slice of a cool billion dollars or so from the-rest-of-the-world just because they have developers in the state.
And if you're a Microsoft exec or a major shareholder. If you're not, why do you want to pay more taxes so a corporation with more money than God can dodge their taxes?
Re:MSFT will bully the state... (Score:5, Insightful)
The government simple cannot and should not "roll over" for business. That has simply got to stop.
Okay. Please name several instances where the Washington state government has "rolled over" for Microsoft; please provide references so I can check up on them.
I am not aware of any "rolling over" by the state government. Microsoft is a Washington company. It pays its Washington business tax, its various real estate taxes (and those are freaking huge because Microsoft drove up all the property values remotely close to its headquarters), and the employees of Microsoft live and shop in the state, thus paying real estate taxes, sales taxes, and restaurant taxes. In short, Microsoft has brought a whole bunch of money into Washington state's coffers. I'm sure the state would like some more, but Microsoft is not illegally evading taxes, as far as I know.
And I don't hold it immoral for Microsoft to game the system in exactly the same ways that every other company does. As others have noted, how many companies are incorporated in Delaware?
If Microsoft had to move, it would be EXTREMELY painful and it would probably be an active news story for the next months following that.
You cannot use that particular threat forever; eventually the company gets tired of it, and actually moves.
Case in point: Boeing. Boeing did finally get fed up with Washington state, and they moved their headquarters to Chicago. Airplanes are still assembled in Washington, at least for now. Boeing executives publicly claimed that they wanted to be in a different time zone, but I don't believe that; for years, Boeing had been negotiating with the Washington state government, trying to get a better deal, without success; Illinois offered them enough to make it worth the move.
http://money.cnn.com/2001/03/21/companies/boeing/ [cnn.com]
Boeing actually moving their headquarters was a big shock here, and I would not be surprised if Washington state would be willing to do a certain amount of "rolling over" if Boeing threatened to move the airplane assembly as well. That also goes for Microsoft: I'll bet the state government would do quite a lot of "rolling over" if that is what it took to stop Microsoft from leaving the state.
Let'm go...if they actually would go. Other states will see this and, if they manage to grow a pair, will also tax them...
I'm afraid that's not how it works. Other states would go "OMFG we have a chance to get freaking Microsoft in our state" and they would start thinking about all the tax revenues that would be shifting from Washington to their state. They would start offering deals to Microsoft.
And it is just as legal for Microsoft to shop around for the best state to move to, as it is for you to shop around for where you want to live. I, and no doubt many other people, prefer living in Washington state rather than Oregon because Washington doesn't have a state income tax, and Oregon does. Am I a bad person for not moving to Oregon and paying Oregon income tax? Am I somehow cheating Oregon out of the taxes they could have had if only I had moved there? Is Microsoft a bad company for legally shifting money to another state where the tax situation is more favorable?
steveha
Historically, that's untrue (Score:4, Insightful)
"Other states will see this and, if they manage to grow a pair, will also tax them"
They won't. Delaware has been a haven to corporations forever. Florida and Delaware are considered low tax states and thus they benefit by attracting lots of people who pay a little bit of taxes.
We can argue this all day long, but the results are there in front of you. It's already happened.
Re:MSFT moving. (Score:5, Insightful)
They thought the same about Boeing. It's now in Chicago.
You want to keep the seat of leadership where you have some hope of seeing a benefit. (Consider Bentonville, AR.) They can move anywhere, anytime they want to. And they have the fiduciary responsibility to do so, or will be sued into oblivion by their own shareholders.
Prepare for the usual comments (Score:3, Insightful)
Among my favorite are "but Microsoft will just move outside of the U.S." Like hell they will. You think all those C-levels, VPs and billionaire executives will want to move? And the interruption of process? The huge shift in culture? And the public opinion of Microsoft will surely enable any Microsoft competitors. And finally, if they moved out of the U.S., they wouldn't stop selling to the U.S. and you can bet there would be LARGE tariffs imposed on the import of Microsoft Software and could you imagine the new problems they would have to face being a "foreign business" selling critical systems software and infrastructure products to sensitive areas of government? Bad enough they are local, but a foreign company selling the US government crappy software?
The various problems and changes that would result are too many to imagine.
Probably best that Microsoft pay their damned taxes like everyone else.
Re:Prepare for the usual comments (Score:5, Insightful)
As though all of their competitors aren't essentially doing that already. Even MS has development in India now (and other countries, not all of which count as third world). We (on slashot) got all up in arms over IBM offering employees the chance to keep their jobs by moving to india, the main architecture for intel desktop CPU's was developed in Israel. Sure, moving out of the US would get them bad press in one place, but it would get them really good press elsewhere. Everywhere outside the US assumes the US is using MS to spy on them (which it probably is) and the US assumes everyone else is trying to inject people into big companies to spy on them (they are).
The nature of the modern world is that at least half of anything worth having is made somewhere other than where you are. Want to buy fighter jets? Good luck getting electronic control systems and displays that aren't made in east asia. Want to buy software? There are developers contributing code from all over the world.
As it is RIM (blackberrry) is a foreign company selling critical systems infrastructure in the US. And the US has a plethora of free trade agreements, MS could very smartly move its official HQ to somewhere cheap (Switzerland), with free trade to the US and watch the government cringe as it has to fight through years of losing court cases on whether imposing tariffs are legal.
As the guy above says, they could just move to a more tax advantageous state too rather than jump ship entirely.
Re:Prepare for the usual comments (Score:5, Insightful)
Or they could just move 140 miles north to Canada. Very minor shift in culture, no language barriers, no tariffs, and the US government already uses a proprietary Canadian OS on some of their devices [rim.com].
Or they could just move to Nevada.
In any case, the article doesn't provide any evidence that Microsoft is doing anything illegal, though they heavily imply it. The article links to a couple of other sites (written by the same author, how original!) that basically spew the same nonsense, but there is no indication why Microsoft can't do exactly what they are doing.
Re: (Score:3, Interesting)
I must have missed something in the thread... what extra services is the state of Washington providing Microsoft to account for the additional billions of dollars of cost their governance structure provides? If we're paying for governance and one state is many times more expensive than another, is that extra cost due to it being a really high quality state or simply a problem due to mismanagement, inefficiency, corruption, misguided spending of funds on ineffective purposes and theft?
And specifically, shoul
Re: (Score:3, Insightful)
Microsoft has already started moving/building data centers out of Washington state, which is both perfectly legal and bound to hurt the shortsighted WA state govt that thought it could just start changing tax laws on companies without any repercussions.
I agree with a previous poster that trying to blame Microsoft (a company that is probably one of the biggest sources of economic growth in the Seattle metropolitan area) for their budget problems is idiotic. All companies by nature will look for ways to get
You sound unbelievably greedy (Score:3, Insightful)
How much of Microsoft's software did the state of Washington write?
There are plenty of places to do business where you don't have to pay a huge tribute to satisfy the greed of the local warlords. Some of them are even in the United States.
The State of Washington should try being less greedy. They should do less and ask the dependent class to do more for themselves.
As always, my first suggestion is for anyone on government housing assistance to be required to live with a roommate to share housing expenses.
You're projecting. With a cannon. (Score:3, Interesting)
If you live in Washington, you have to pay more taxes because Microsoft is avoiding theirs. Your attitude only makes sense if you're a Microsoft exec or major shareholder. If you're not, you're cutting of your nose to spite your face.
Re: (Score:3, Insightful)
You're absolutely right. Microsoft won't be going anywhere. They'll just continue laying off the residents of Washington state.
Then by your logic, Washington state will raise taxes to pay those laid off employees to be unemployed, rather than Microsoft pay them to be productive.
This is brilliant.
Re:Prepare for the usual comments (Score:5, Insightful)
> " Like hell they will. You think all those C-levels, VPs and billionaire executives will want to move?
And I'm sure the locals said the same thing about Boeing as they happily taxed the crap out of them to fund their left coast utopia. Of course they did move their headquarters out of the state. And are building a big non-union plant down south.
Microsoft doesn't have to just pick up it's ball and leave. Just keep building out facilities in multiple States and countries like they have been doing and play each of them against the other for the most favorable tax and regulatory treatement. If Washington gets too aggressive on this issue threaten to move the official headquarters. There ARE a lot of nice places just in the US and many are actually pretty nice to live in. The current location wasn't even the first one ya know.
Even better leverage, especially in this crappy economy, is to just threaten to push all new hiring to more favorable business environments. I.e. threaten the politicians with a terrible press release about a new thousand headcount shop that won't be opening in the state because of the bad business climate. And if they think it is a bluff, do it and do it over until they either get a clue or the center of mass has actually moved to a better place and then really relocate the HQ.
For a company like Microsoft where they are doesn't really matter much so long as it is the sort of place key personnel wouldn't be demoralized living in. They have no ties to a natural resource, no major transportation needs, etc.
Re: (Score:3, Insightful)
Tax and Jurisdiction (Score:3, Insightful)
Well, I guess the Washington government could try to pass a law that taxes a company for a subsidiary whose primary location is in a tax-free zone. If it stood up to the inevitable legal challenge, I have no idea what the unintended consequences would be for the tax landscape.
Re:Tax and Jurisdiction (Score:5, Insightful)
The word is "Value Added Tax" boys and girls. This is why states like Michigan have them. Companies can "move the cheese" all they want, but each organizational unit has to account for it's "productivity" i.e. the added value of their step, not just whether they made "cash profit" in order to satisfy SEC and GAPP rules. Manufacturing states learned long ago that the parent company will always make manufacturing into "cost centers" that always lose money on their operations because they don't "sell anything", both to stiff workers and the taxman. They learned to make each part of the company rate the "value" of it's incoming raw goods versus the "upstream" items. The numbers have to add up on "somebody's" books so it's easier to get the tax money where the work is done.
VAT is closer to what we plebs pay as "income tax" rather than just pure "profits tax".
It WOULD be nice, would probably help most states. (Score:3, Insightful)
2. I single out Microsoft because it's, by far, one of the biggest offenders, but I would like to see the uniform enforcement of state tax law to all corporations using out of state facilities to minimize tax payments.
I definitely agree. Would be great. But as someone stated above, you can't expect one company (in this case Microsoft) to be forced to follow a rule and then not force the rest of the companies. Well, I suppose you could, but in all fairness, should Washington, or any other state, be able to single out one offender, leaving others to get away with the same? Uniformality in this would be best.
more of the same, apparantly (Score:5, Interesting)
I don't think the guy who writes this article really understands tax law. Neither do I really, but atleast I'll admit it. It seems to me that I remember Tax Avoidance being perfectly legal and accepted. I really think he misunderstands the idea that there's some existing tax law to be enforced that applies to Microsoft's actions. The software is licensed out of NV, hence, NV law applies. There are major jurisdictional issues inherent in taxation law and so far as I can tell as a layman, there's nothing afoul of any regulation going on here.
If there were, you can be sure Washington State would have their hands in Microsoft's pockets already.
That's kind of why most corporations are incorporated in Delaware, too. There's jurisdictional issues being blatantly ignored by this person in order to make a point and that is not justified.
That all said, I did some more reading and it looks like this guy has barked up this tree before.
http://crosscut.com/2008/02/02/microsoft/11167/ [crosscut.com]
which was posted to Slashdot back then
http://slashdot.org/article.pl?sid=08/02/04/1520219 [slashdot.org]
and a followup with his anti-arguments to the posts from Slashdot back then.
http://www.idealog.us/2008/02/top-reader-excu.html [idealog.us]
Oh and 2004 too:
http://slashdot.org/article.pl?sid=04/10/01/2137228&tid=109 [slashdot.org]
You'll notice, a year ago, he supposedly already addressed all the issues everyone here could possibly present. Unfortunately, he's also completely ignored the one about the constitutionality of taxation and jurisdiction and focuses more on wishy washy sort of justification arguments made that appeal more to a sense of right or wrong, rather than the case law regarding jurisdictional tax issues.
Career campaigner on this issue, hey Jeff? Too bad you've wasted 5 YEARS on this subject and you're never going to get anywhere because Microsoft is DOING NOTHING WRONG.
Re:more of the same, apparantly (Score:4, Insightful)
Microsoft is DOING NOTHING WRONG
They're doing nothing illegal, which is quite a different thing--as you pointed out earlier in your post.
If you want to tax software development... (Score:3, Insightful)
...why don't you just do so?
Microsoft Is the Epitome of Evil (Score:3, Insightful)
If these companies are so hell bent not to pay taxes--then why don't they move to Russia? When I lived there, zero taxes were taken from my pay. Companies paid hardly any taxes. Oh yeah, they had to pay the Russian Mafia because the tax-starved government had no power.
So, we see the most anti-American behavior imaginable is some hugely wealthy company like Microsoft scamming the taxpayer. I hope that the state of Washington hits M$ for their entire back taxes. Microsoft could pay it out of petty cash.
Re: (Score:3, Informative)
There is currently a new bridge being built over state route 520, which runs right through the Microsoft campus. This is being done to alleviate congestion on the 40th Street bridge. This new bridge will basically link two Microsoft parking lots. It will be a public road but leads to no place of interest if you're not a Microsoft employee. Guess who pays for the construction costs? Hint: it's not Microsoft.
You sure managed to cram a lot of inaccuracies in such a short statement. A few corrections.
The project is one that regional planners have long thought was necessary to deal with both the current and the projected future growth in the regions, but that they had trouble fundi
Doesn't make sense (MS not doing anything wrong) (Score:5, Insightful)
Re: (Score:3, Interesting)
No Corporation Pays Any Taxes... Ever (Score:5, Insightful)
Basic economics. Corps don't pay taxes. Taxes are a cost. Costs get passed on to customers, shareholders and employees. They get passed on to you. You who buy any products made by corporations. You who has money in a 401K, Roth or any form of interest bearing account. You you work for a corporation.
There is no one else. Get over it.
Utter Nonsense + Economic Fail (Score:5, Insightful)
A tax on profit != a cost of production.
Products and services are already priced to maximize revenue. If Microsoft (or any other company on the planet) can charge customers more money without consequences to their bottom line - they'll go ahead and charge their customers more.
Microsoft the 3rd largest employer in WA (Score:3, Insightful)
So help me understand this:
1. Microsoft is the 3rd largest employer in your state
2. You are in a recession
3. You have a 9.2% unemployment rate
4. You want to raise taxes on business.
So that your government has more money to redistribute to people who are not working, who lost their jobs because companies like Microsoft couldn't afford to keep them on in the first place.
Let me propose an alternative.
Reduce your spending and reduce taxes so that you can afford to pay your bills, and Microsoft can afford to rehire your residents.
Re:Microsoft the 3rd largest employer in WA (Score:4, Insightful)
Use tax (Score:3, Interesting)
Like our sales tax, this license tax is actually a use tax. Its collected by the vendor at the point of sale, but its based upon the jurisdiction where the product is to be used. So the only revenue WA state is going to collect is that on the sales to WA state residents and businesses. Businesses in the state are subject to audits and must show where the appropriate use tax has been paid, either in the form of a sales tax, or via their WA State dept of revenue tax returns. Anyone buying goods or services who can document a residence or business outside of WA state are exempt from the tax anyway (their home state may have similar taxes that apply). Boeing does the same thing with its airplanes (even before it became an Illinois based corporation).
Microsoft (and other companies) often sell through offices in states with no taxes. Not to avoid paying them, which they don't have to anyway. But to avoid having to document sales to exempt individuals and companies in 49 other states. Since its the duty of the end user to see to it that use taxes have been paid, the state would be better off chasing after its businesses (which it already does, to a point) and residents (which it typically lets slide) for the taxes owed.
Two great quotes from Oz (Score:5, Insightful)
"I am not evading tax in any way, shape or form.
Now of course I am minimizing my tax and if anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra."
I've already given you the answer on this subject, I have told you that I pay whatever tax I am required to pay under the law, not a penny more, not a penny less, and the suggestion that I am trying to evade tax, which is what you're putting forward, I find highly offensive and I don't intend to cooperate with you in the blackening of my character.
Comment removed (Score:4, Insightful)
kdawson sucks (Score:5, Interesting)
lets examine his claim about post dating 13 years of taxes. if this has been law for 13 years why haven't they gone after MS before now, if MS is cause why weren't we in deficet 13 years ago?
Details about Washington State Royalty Tax Law (Score:4, Informative)
Re:C'mon - like this isn't standard practice (Score:4, Informative)
correct; if lawmakers don't want corp entities USING the laws, then why have the bogus abusable laws in the first place?
"waaaaah! they're taking money from my state."
hey, its way worse than that; most companies in tech are sending money OFFSHORE, never to come back again, anyway. playing the 'tax and income game' left and right.
close the loopholes and stop letting corps get away with murder.
duh!
but you cannot force a company NOT to use things that are legal. I hate MS but even I can see this.
Re:If it was legal, what can they do? (Score:4, Informative)
The guy writing this article is some loony activist one man army who's been arguing this issue since at least 2004. Who knows his motivations, but let's not read into this article as though it's some sort of concerted effort that Washington Legislators are taking seriously.
Re: (Score:3, Funny)
Re: (Score:3, Funny)
What else would the come up next? Tax on taxes?
Don't think it hasn't been seriously considered.
Re:To hell with BIG GOVERNMENT (Score:4, Insightful)
Why shouldn't they tax licensing? You think it's not a product? Get real.
I also hope they stick it to Microsoft good. With their huge campus in Washington there's no way they should be able to dodge taxes by "selling" out of Nevada, period.
Re: (Score:3, Insightful)
"This isn't a liberal tax and spend issue. "
No, it's not. It's a Tragedy of the Commons issue. Any service provided for "free" (i.e. provided at the expense of non-users) results in over-use of that service. Microsoft should pay for their own fire, water, security, roads, etc., and then they should be free to keep the money they earn for their shareholders.
Re: (Score:3, Insightful)
That will help Linux, when the USA Federal Government mandates use and requires all providers to support Linux.
You might want to lay off the crack pipe. They'll be more likely to sign off purchases of Apple computers, designed in California.