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Keeping Microsoft Happy
Jeff writes "In Citizen Microsoft, I report on Microsoft's use of Nevada corporations to avoid approximately $327 million in Washington state taxes while telling voters they need to pay more to fund education. I also contrast Microsoft's attacks on the open source community with its in-state lobbying efforts and its recent promise to get more involved in local politics. The cover has Gates in a gorilla suit."
Ohhh! Ohhh! I got an idea too. What if the majority of my revenue comes from another state since were are talking about state INCOME tax and where my LABOR comes from can have nothing to do where I make my money. But wait, what if I have multiple businesses, all of whom who have labor in every state, and I need one jurisdiction to deal with all possible legal challenges to contracts. That's when I incorporate in Deleware because the Delware Chancery Courts are the default Supreme Court for business law in the country. No, you cannot expect anyone to incorporate in just any state based upon the parameter that suits your purpose at the time. You have to either create consistentcy in US law or you have to deal with situations such as this.
This is more an indictment of the various tax laws and the shenanigans of the legislative bodies that enact them than of any company or individual that might take "advantage" of them.
Legislators, state and federal, have no incentive to make straight-forward, logical, honest tax laws. They get too much gain from making the laws obstuse and full of holes, for special friends.
Oh, and if you look at any statistics, poor people don't pay enough taxes.
This issue is a bit more complicated than you think.
" all sorts of companies incorporate in Nevada not just Microsoft for this same purpose"
Of course they do. It's just that if you are incorporated in Nevada and are not paying WA taxes then maybe you ought to keep your mouth shut about how WA spends the taxes it collects from other people.
evil is as evil does
Sounds to me like Seattle/Washington State's real problem is politicians who are all too willing to give corporations tax breaks. I'm not naive enough to believe that these politicians are not receiving rewards for doing this. Maybe they'll eventually get a clue and realize that having corporations set up shop in the state is not going to generate much revenue for the state unless they are actually required to pay taxes. There is no reason Microsoft is not required to pay Washington taxes, other than the fact that the state government doesn't have the backbone to make them pay.
IMHO, Microsoft is doing exactly what they are supposed to do as a corporation: limit costs, and increase profit. That's what capitalism is all about. Unless I misunderstood that part of economics.
Hmm, maybe that's why their software sucks so bad. They don't care about making good software, they only care about making good money.
Americans aren't all that good about being consistant, even within a single State. (Not that any other country is much better.) To expect all fifty States to unify around a single optimised set of laws is hopeful at best. Most Americans would even argue that such a concept is "bad" as the present system gives individuals the ability to "customize" where they live, to a degree.
That's why AG's for the states get together in order to draft legislation that will create some consistency in the laws across the country. I would agree with the second statement. Many people choose to establish residency in Florida before declaring bankruptcy because of the laws put into place to protect the individual declaring bankruptcy.
Probably a more realistic system would be to require a corporation to state its "home turf" (much as a ship states its home nationality). The corporation would then have to obey the laws (including tax laws) of its home turf AS WELL AS the laws of wherever any outposts were.
Before putting forth this analogy go see where the majority of ships nationalities are registered. It isn't here in the US its actually Panama and the Bahamas because once again they are avoiding tax liability.
Unfortunately you are correct many companies are moving off-shore, Tyco and Dewalt come to mind off the top of my head as two recent examples, but the only way to prevent those things from happening (and retain our jobs here at home) is to become consistent and competitive.
Taking your argument to the extreme is very Kant'ish of you but in no way resolves the issue at hand. Not everyone can skip the country and if everyone did the laws would be changed. BTW, according to the Congressional Budget Office the top 20% of all taxpayers shoulder 82%~ of the tax burden of the country. The minimum wage worker does not even contribute to the tax burden because they receive payments back from the government.
So I don't have to sign an EULA and a two-year service agreement to use a road to drive the store.
Why should the *government* hire teachers?
To keep everone else's kids out of trouble and off my lawn.
Why should the *government* hire firefighters?
So I don't have to find my credit card before I can get somebody to rescue my family from a burning building.
Why should the *government* give disabled people money?
So I don't have to trip over them on the sidewalk and in stairwells as if I was Charlton Heston in Soylent Green.
Since you're the one who doesn't seem to need anybody else, why don't you head for the border.
I think it's time to point out Super Obvious Tax Fact #1-- 99% of tax loopholes AREN'T. They are specifically written into law in order to promote free enterprise health, the backbone of this country lest everybody have a lobotomy at the mention of Microsoft. I find it amazing how the submitter portrays this story as MS being above the law and commiting tax evasion when they are doing no such thing. Infact, the submitter (and half yas out there) should be looking at Nevada, who specifically wrote their tax code to encourage companies to set up shop in their state. Companies like -gasp- Mircrosoft. I'm sure you'll be seeing huge crocodile tears shed by the Nevada state government for having to host one of the richest companies in the world.
Looks like those 'loopholes' worked out pretty well for them.
You need a FREE iPod Nano
I agree with a national sales tax but as you said it will never happen. Its the same reason we will not have a flat tax either. Gotta keep those tax advisors and the people at Turbo Tax's Intuit unit employed. There is another reason income taxes will not be replaced by either one of these. Income taxes give governments the ability to both reward and punish certain behaviors. For instance, you get a break for giving money to chairity, purchasing an electic car, or putting a child through school. You do not have the ability to reward and punish such behaviors when everyone is just paying a flat rate or paying a tax on goods.
Also, I would not sign on to a VAT until there was specific language in the law that declared an income tax and VAT could not exist at the same time.
Having dug up some info on the California Secretary of State's website at http://kepler.ss.ca.gov/, I discovered the following:
1. Apple Computer is incorporated in California, but owns subsidiaries, such as "Apple Computer Peripherals, Inc." that are incorporated in Delaware. Apple even owned "Apple Computer Domestic Subsidiary No. 4", incorporated in Delaware - I guess that ACDS No's 1-3 were too old to be on the Sec. of State's online records.
2. Sun Microsystems: Almost entirely Californian, but there was a Delaware corporation, Sun Microsystems, Inc. that was created in 1987.
3. HP? Well, there is a Hewlett Packard Retiree's Club incorporated in California. Agilent? Delaware. The old HP was in California. The new one? I couldn't find it.
4. Novell? Incorporated in Delaware.
5. eMachines? Delaware.
6. IBM? Seems to be in Delaware, but there's a "IBM Global Services India Private Limited" in India. Wonder how much IBM phone support comes from there? (Seriously - I don't know).
I'm tired and I'm going to sleep, so I leave additional research as an exercise for the interested. The point here is that most of the big corporations seem to be incorporated in "friendly" states like Delaware, or at least have subsidiaries in Delaware the way Apple Computer seems to have, apparently for the purpose of minimizing tax liability and taking advantage of other laws benefiting corporations.
So is MS ripping off the good people of the State of Washington? Sure. But it's only par for the course, and it's what the other corporations are doing and will keep doing until we amend the constitution, repeal dual soverignty, and eliminate the states as entities with the power to legislate (ie, it ain't going to happen). It's the same thing as "forum shopping" (filing lawsuits in the jurisdiction with the most favorable law, if you can), or even some advanced estate planning techinques (some states have completely repealed the Rule Against Perpetutities, which allows people to create trusts domiciled in those states that can, literally, last forever).
Hell, want to know the biggest corporate scam?
1. Buy an asset owned by a municipality - a bus, subway car, sewer system, for an example.
2. Lease it back to the municipality for an amount roughly equivalent for what you paid for it amortized over a few years.
3. Depreciate the hell out of it and pay little or no corporate taxes, ever.
4. Once you've milked the depreciation, sell the asset back to the municipality for a nominal value.
5. Lather, rinse, and repeat.
6. ??? (couldn't resist)
7. Profit.
The loopholes exist, and corporations (and people) take advantage of them. And when they don't exist, lobbyists convince legislatures to create them. Are we doomed? Not really. Washington may be whining over a few hundred million bucks, but it's not as if the state government has collapsed. Yet...
144l. ph34r my 133t l3g4l 5k1lz!
Just because, in the opinions of other /. posters, every other corporation is slanted and corrupt does not make the crimes of Microsoft any more legal.
Genius? That's a dubious title for Bill Gates. He's a sharp businessman, nothing more, nothing less. He saw opportunities to steal IP before IP was a big deal, and he took them.
Look at it this way. If it wasn't him, it would be someone else in his spot. The market wanted personal computers, with an operating system that was readily available and ran on commodity hardware. He provided half of that equation. Meanwhile, niche computing and heavyweight stuff was reserved for Unix, Irix, Sun and other players. His real genius was releasing bug ridden software that ran just well enough to let you get some work done, but not well enough to convince you that you didn't need the latest upgrade release.
Ask any Windows 95 user why they would want 98. Is there a long list of features that are new? Not really. Instead, it promised what every other Microsoft upgrade promised and continue to promise: greater stability, speed, performance, and compatibility. For those of you that refuse to get on the upgrade conveyor belt, you'll be left ass-out in the cold when MS declares end-of-life for your OS and stops releasing patches for it. Upgrade or get owned.
There are those of us that prefer choice and we generally use MacOS or Linux. So what if we don't have 1000 crap games and 3 good ones. So what if we can't download heaps of junk freeware. So what if we don't need virus protection software and commercial firewalls. We get along just fine without MS.
Actually I can't throw too many stones, because every call I get from an end user that has 215 pieces of spyware and adware clogging up their pc is money in the bank for me. The sad thing is, they think what they use is all that can be used without taking out a second mortgage to buy a G5 tower. One customer actually asked me about Linux, especially after he saw how beautiful it was running on my Dell laptop. Converted.
For all you brainless posters who are sarcastically dismissing M$'s actions as acceptable corporate strategy - you are missing the whole *POINT* of the article!
The problem is not ONLY with M$ avoiding taxes, but their HYPOCRISY, since at the same time they are spouting out of their backend about how the residents are not paying enough and trying to get the people to pay even MORE taxes.
What a bunch of BS! If I were a resident of WA, I'd want to kick them out.
To even out, there has to be a job somewhere that causes -1.5 people to be hired.
Wrong! Wrong! WRONG!
That's zero-sum thinking, and life isn't really a zero-sum game. If Bill Gates gets richer, that doesn't actually mean that poor people get poorer. If you are well-fed, that doesn't actually mean that someone else has to be hungry.
Microsoft is claiming that for each person they hire in Washington state, the state gets extra jobs. This is because that extra MS employee gets paid, and spends money in the state (at Starbucks, for example, as some other posters said). The money can come from all over.
And guess what -- we are all richer than anyone was 50 years ago. What do I mean? For $200 I can buy a cool pocket computer on eBay, with colour display and everything. How much would that cost 50 years ago? Oh, they didn't have colour pocket computers, or eBay for that matter. Our health care is better, so our life expectancy is higher. And while pop music sucks now, the cool music from then is still available now, and we can buy cool TV shows on DVD.
What is the point of the above ramble? It's just this: when someone discovers something cool or invents something cool, the whole world gets a bit richer (at least if that person shares the discovery or the world at least finds out). There is no part of the world that has to get poorer when the rest of the world gets richer. We use money to keep score, sort of, but don't forget that even a billionaire 50 years ago couldn't buy an iPod, or modern health care.
People think there is a finite amount of good stuff, and the rich people hoard it somehow. That's not how it works.
If you are writing new tax laws, write them to maximize the benefit to society, not to punish the richest guys. If cutting the tax rate would encourage more spending and make more tax revenues, then do that. But some people will cry that it's unfair because it lets the rich keep more of their money. Because they are using zero-sum thinking to look at the world.
I really HATE zero-sum thinking.