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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."
Seven years ago, Microsoft opened a small office in Reno, Nev., to collect the money it got from PC manufacturers that installed Windows and Office on the computers they sold. In the years since, Microsoft has sheltered more than $60 billion in royalty revenue in Nevada, a state with no corporate income tax, costing Washington an estimated $327 million in unrealized tax revenue.
That should be easy to verify, contact the SecState of Nevada
If they wanted to evade $350 million in taxes, all they had to do was threaten to leave the state. It worked for Boeing. In fairness, WA state has a very, very messed up B&O tax... In fact they maintain the most regressive tax structure in the nation.
From the article:
"Every time Microsoft hires someone in Washington, it creates 3.5 new jobs here. According to the company, Microsoft created an estimated 117,620 new jobs in Washington between 1990 and 2001. But while Microsoft promotes the positive impact of success, all this growth has placed a heavy burden on our schools, roads, and overall livability."
Wow - How could Microsoft be so insensitive as to create jobs.
However, this also raises the BS meter. I always love when I hear "We create xx jobs for every one we hire". Sounds good... but it doesn't add up. To even out, there has to be a job somewhere that causes -1.5 people to be hired. Other than the 435 CongressPricks, and the one in the Oval Office, there aren't too many jobs like that.
Huh? I live in WA state and pay tax on each purchase from Amazon, regardless of where fulfillment comes from.
Ultimately this is a major reason I think we should move to VAT or sales taxes and just get rid of everything else. The fact is major corporations always have a cadre of lawyers to find ways around taxes. And even if they didn't, it really wouldn't matter because the government really can't tax corporations, it can only use them to help collect taxes from individuals. Whatever taxes corporations actually end up paying are just another expense and get taken care of by boosting the cost of their goods and services to cover them. The rich have very high nominal tax rates but considerably lower effective tax rates. Of course I don't actually expect sales/VAT to every become a reality. Tax prepartion and advising is a billion dollar industry. Politicians wouldn't turn their backs on millions of dollars in lobbying money, and the complexity of the tax and budget system is a main source of their power.
Vote Quimby.
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.
So having a branch in Nevada would mean Microsoft had to pay Nevada taxes AND Washington taxes.
This isn't unusual, and is how many countries elsewhere work income tax. Those from Britain will remember the Ken Dodd trial, where the British Government successfully argued that overseas earnings - even those where he had paid tax overseas - were ALSO taxable in the UK.
Yeah, you could argue that this is unfair, but the problem is that a lot of big-name celebrities and corporations have moved to tax havens. As tax exiles, they get to keep all of their money. The consequence of that is that, in order to maintain any kind of level of service, everyone else has to pay more.
Eventually, what you end up with is the very rich being wholly and completely subsidized by the very poor. Welfare in reverse. Such a system is inherently unstable. The poor - by definition - don't have much in the way of resources, so the greater their burden, the greater the chances of the system collapsing.
Let's take an admittedly extreme example. Let's say that the economy rested virtually entirely on the shoulders of minimum wage workers. It is physically impossible to work more than 3 shifts in a day. Given all that, and given the State and Federal income taxes at that level of income, how many minimum wage workers would you need to cover the average State budget and a typical Federal budget?
If the answer exceeds the population of the US, then neither the States NOR the Federal Government can afford to support tax exiles.
(In an ironic twist, those who do live in tax exile are often the most influential in Government, inverting the age-old critisism that there should be no taxation without representation. Here, they have no taxation, but often all the representation.)
It's a small world and it smells funny; I'd buy another if it wasn't for the money; Take back what I paid (SoM)
There is a serious question of how to regulate companies like Microsoft when they have such concentration of wealth they can basically afford to buy congress and the leadership of major political parties. It really does sound like these companies are destroying the very people and institutions that allowed them to become successful.
Sales tax = regressive taxation = hurts the poor much more than the rich
Poor Boy buys a $20,000 car pays $1000 or 5.0% of his income.
Rich Boy buys a $60,000 car pays $3000 or 1.0% of his income.
Conservatives love this, too. When the Republicans took over the Iowa Legislature 10 years ago (and things were good) they cut income tax by 10% across the board (giving a massive break, in terms of real dollars to the rich).
Years later, when things weren't so good, they raised the state sales tax 1%, which had the same affect: hurting the poor in terms of both real dollars and % of income.
Let's clean up our existing tax laws first--eliminate the subsidy on SUVs, make it harder to create tax shelters in the Caribbean.
A speech...
I was recently involved in setting up a corporation and rather than set it up in my own state, there were advantages, other than taxes, for setting it up in Nevada. You will notice, for example, that many companies are incorporated in Deleware or elsewhere, often for the better legal protection provided by that state's laws. For example, trying to sue a Nevada corporation may be more difficult than many other states.
In our case, taxes were not the intent at all. We still pay local state taxes as well, so the savings are not that significant. There is some tax savings since some of the taxes are paid to Nevada instead, but nothing significant.
Now what I do feel bad about is how some companies set up their offices offshore in places like the Caymen islands to avoid federal income taxes or other federal laws. If a US based company does this, then they should not get the benefits of being a US company. I also feel that the federal government should not be allowed to sign contracts with companies that do this. I.e. why should my tax dollars go to Haliburton when the company sets up offices (usually just a mail stop) in places like the Caymen islands or elsewhere to not only avoid paying US taxes, but to also circumvent US laws and do business in places like Iran.
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