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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. $76M in savings last year alone. The author questions the legality of the practice given Microsoft's 35,500+ employees and 11.2 million square feet of real estate in Washington state."
Do I hear someone call for "Small government" ? This is what happens when the sheeple are being led by corporate hacks calling for small government: no checks on the corporations, while people are starving on the streets.
Would Washington rather MS move their operations to Nevada and lose the tax base of all the employees? This situation is actually a good argument for getting rid of corporate taxes. Corps wouldn't just sit on the money they saved. They would invest it by hiring more people and spending more money where they are actually based.
The 35k plus employees pay taxes in state and Washington State is certainly aware of that fact. If they make too much of a grumble about the corporate loop hole, they could lose the much larger 35k plus employee tax base. Those 35k are probably just the people who work for M$. There are probably lots and lots of other Washington residents whose primary income derives from Redmund.
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.
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Living With a Nerd
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.
Large corporations exploit tax loopholes? Who would have thought?
I read the internet for the articles.
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).
Microsoft is to software what Budweiser is to beer.
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.
\u262D = \u5350
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.
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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?
Ed R.Zahurak
You know, oblivion keeps looking better every day.
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?
This is my sig.
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.
-- Support a free market in the field of government
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.
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.
- None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
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!
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So, in other words, only workers should have to pay taxes.
Shop as usual. And avoid panic buying.
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?
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.
Government's view of the economy: If it moves, tax it. If it keeps moving,regulate it. If it stops moving, subsidize it.
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.
Remember that statement next time you drive along a road. Where TF did that road come from?
Engineering is the art of compromise.
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.
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.
Please help metamoderate.
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.
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.
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.
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."
And with government crippled, how do you expect to actually hold them responsible?
Dan Aris
Fun. Free. Online. RPG. BattleMaster.
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.
I am officially gone from
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.
mcgrew's razor: Never attribute to stupidity that which can be explained by greedy self-interest