Slashdot Mirror
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. $76M in savings last year alone. The author questions the legality of the practice given Microsoft's 35,500+ employees and 11.2 million square feet of real estate in Washington state."
Dead.
Do I hear someone call for "Small government" ? This is what happens when the sheeple are being led by corporate hacks calling for small government: no checks on the corporations, while people are starving on the streets.
God forbid that profits might for once be kept by the people who created it, rather than leeched off by various governments in order to waste on all sorts of irrelevent crap.
If Nevada can manage without corporation tax, I see no reason why Washington can't.
Would Washington rather MS move their operations to Nevada and lose the tax base of all the employees? This situation is actually a good argument for getting rid of corporate taxes. Corps wouldn't just sit on the money they saved. They would invest it by hiring more people and spending more money where they are actually based.
MS Employees have paid for that bridge many, many times over with their payroll, sales, and property taxes. Don't worry about the poor state of WA having enough money for what they need to do (as opposed to what they choose to do). And corporations don't pay taxes, they collect them.
Insightful and funny are really the same thing, except one has a punch line.
The 35k plus employees pay taxes in state and Washington State is certainly aware of that fact. If they make too much of a grumble about the corporate loop hole, they could lose the much larger 35k plus employee tax base. Those 35k are probably just the people who work for M$. There are probably lots and lots of other Washington residents whose primary income derives from Redmund.
Microsoft is not the only company using fancy accounting tricks to avoid taxes... in fact, they at least have kept their HQ in country rather than going to the bahamas.
A corporation has a financial duty to avoid paying unnecessary taxes. If you don't like the way those "fat cats" (I notice rabble rousers use that term a lot) get out of paying taxes, talk to the government and have them close the loopholes. More importantly, not that every dollar Microsoft pulls in is taxed _multiple_ times by the time it makes it into the shareholders' pockets. The fact is that it's a myth that corporations are pulling one over on the government, corporate taxes are a little silly since the money _is_ taxed before it goes into any individual's pocket.
Microsoft has effectively paid its employees with your tax dollars for years.
http://www.fool.com/portfolios/rulemaker/2000/rulemaker000217.htm
--
Basically, Microsoft receives cash by issuing employee stock options, after which the company then receives billions of dollars in tax deductions from the IRS for doing so. Add in the warrants it sells on its own stock, and the company made over $5 billion off the stock market last year (fiscal year ended July 1999), tax-free. For comparison, its after-tax net income was only $7.8 billion. Microsoft may not be much in the programming department, but its accountants are impressive.
--
Corporations pay taxes on their own income (generally 35%), but money they pay out in salaries to employees is deductible from the corporation's income. Since granting options to employees results in taxable income to those employees, Microsoft gets to deduct that taxable employee income from its own taxable corporate income, and that's where Microsoft got a tax-free $3.1 billion in cash in fiscal 1999: "Stock option income tax benefits."
--
When I go to my accountant and get every deduction I can and go through my invoices to determine which locality gets its piece, I am not getting a tax break. Only suckers pay more taxes than they have to.
If Washington State wants more, they can change the law. How you could charge an occupancy tax out of state is beyond me, but MS is free to take its entire operation to Nevada if they don't like Washington state taxes.
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.
....An Anti-Microsoft forum? Looking at the stories, seems like MS discussions dominate this fucking site. Look slike the "creative" proccesse for this couumity has gone to "creating new innovative ways of bashing Microsoft" instead of actyally "innovating" something useful. Fuck, then they wonder why they are so resented. It's your trolling, bitching and complaining, not your "radical views". It's your obesession with "MS", not with "Opening all software". It's your "with us you live - not with us you die" approach to everyone and everything. It's your totalitarian stance not your "free-for-all" slogan. Until you change from within, you will always get stuck on the same gear where you have been for the past decade.
kinder capitalism, huh?
"The author questions the legality of the practice" : don't worry, I'm sure there are tens of resident laers at Microsoft paid just to answer this question!
Don't take my posts literally; it's just code to control my botnet.
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
Is anybody actually surprised by this? Nevada prides itself on these laws that protect companies like that choose to incorporate there, they advertise it rather vigorously around here. Thousands of companies have been doing this for years, to consider only Microsoft would be neglecting the BILLIONS of unearned tax dollars every year from companies that incorporate in Nevada. Nevertheless, there is nothing illegal about this practice, though I wouldn't be surprised if there some federal laws instituted at some point adding additional requirements to such practices. The government is always looking to find ways make us pay.
If there's no corporate taxes in that area, the fact that they don't pay the non-existent taxes makes it a tax break? disclaimer: I didn't read the article
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.
No, it didn't net Microsoft anything. The proper title should be "Restrictive socialism costs Microsoft competitors billions."
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.
Basically, the dispute is whether the "product" you purchase is a chunk of software hand-crafted for you in Redmond or a license generated for you in Nevada. Seems like the "its not stealing its copywrite infringment" crowd ought to be 100% on Microsoft's side on this one, no?
What I'm listening to now on Pandora...
Don't hate the player, hate the game. MS is fulfilling their duty to their shareholders.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
It is definitely just Mircosoft that does it, a lot of companies even setup "corporate" HQ in countries like Bermuda. e.g. Accenture is one that comes to mine, but there are tons of others that do it.
This is what you get when a bunch of hippies convince small-minded people that corporations have more power and are more evil than the government.
It is your beloved cure-all government that is the source of the problem. Microsoft cannot imprison you. The government can.
Corporations only have the power to buy government that you socialist sheeple demand.
See, we can both play this clever game of calling people 'sheeple'. It's almost as clever as calling Microsoft M$.
Not only does this fail the "Tragedy of the Commons" test, but this vitriol pretends that Microsoft's missing tax dollars would have been allocated for infrastructure. Why not say the missing dollars were meant to alleviate the pain of orphans suffering from terminal cancer? To add insult to injury, the infrastructure Microsoft's intelligent tax dollars supposedly would be building is "needed" infrastructure for Microsoft itself - as opposed to infrastructure for the rest of Washington...
I guess how shady the accounting is depends, in part, on how large a presence Microsoft has in Nevada. Is MS shipping DVDs of Windows and Office from some warehouse in the desert? Do they have servers based there that distribute authorized soft copies to OEMs? Are their sales and volume-customer relations based there?
I find myself conflicted. I want to stick it to Microsoft, but at the same time I want to stick it to the Government.
I guess in the end, corporations play the game they're given. If it's legal, then good for them.
The other major business of Washington state - Boeing - flies their planes just outside the U.S. territorial limit offshore to sign the transfer papers with international customers so that they won't have to pay tax. Should we complain about them too?
Film at 11:00!
This article started off really well with what appears to be some solid facts. However, it then jumped to the weird conclusion that this tax revenue would have been used to repair our roads and infrastructure. Clearly the author is not in touch with how this money would have really been spent!!!
P.S. Also, if the corperations are able to keep more of the money, that does not mean that they would have hired more workers... It, more than likely, would have been used as bonuses for the executives. A long time ago, I felt that CEO's should make the amount of money they do because of the risks involved with thier jobs... However, these day the CEO's get bonuses even when the corporation is losing money and laying off all of the employee's...
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!
Got Trader Joe's? friendwich.com RSS feeds work now!
Bridges are here to allow people to travel, and people pay taxes. Tens of thousands of people spend comfortable incomes in Washington and lots of sales tax on their spending thanks to Microsoft, that should be enough to keep the infrastructures that support these people.
Don't you support corporate welfare? In our corporate-run facist society you are supposed to deride the poor woman working two jobs to support her children because she gets food stamps because "well if she can't support them she shouldn't have them" while cheering the corporations your tax dollars go to in th eform of "pork" who aren't forced to pay workers enough to live on.
It's the Corporate American way.
The "child tax credits", food stamps, and other government handouts to "the poor" subsidise the corporations that don't have to pay Americans a living wage. The corporations are the true recipients of all American government handouts.
The foreign owned and run corporations have bought America's government and corporate owned news outlets have brainwashed Americans, including slashdotters who are supposed to have brains. Think again; no, think once you haven't yet.
Damn but I'm in a bad mood today and reading slashdot ain't helpin' much. From the thing about Democrats and Republicans (but no Greens or Libertarians) to this fucking bullshit about the world's richest man's company being on welfare... well I'm not happy with my stupid, stupid countrymen.
-mcgrew
mcgrew's razor: Never attribute to stupidity that which can be explained by greedy self-interest
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...
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
... the trough, what a surprise. Bill G and his billion dollar play for sympathy and understand and redemption belies the true nature of the company. TAX AVOIDANCE IS A CRIME. And they should be punshed severely.
The gov't missed out on more money than that when Gates "donated" billions to his own charity. That made those funds completely non-taxable. Half a billion is a drop in the bucket compared to the 22 or so billion he "donated". Of course, Bill Gates believes in the death tax, so the moral of the story is your money should be taxed, but not his.
I am thinking of becoming the first human, converted to corporation.
I don't see too many downside: I can be a global citizen, not restricted to country of citizenship, I can pick and choose the best places for operating my lif.., I mean my business, the optimal spots for tax(exemptions), I can sub-divide myself and shuffle my revenues around, I can act as a psychopath bully, without rising any eyebrows.
The more I compare whether to be (human) citizen or a corporation, the less benefit I see to stay with the status quo.
I may not be able to vote, but I can openly pay for the support of any targeted politician by lobbying them with money I could save only as corporation.
I think I could have a much more effective maybe even happier life as a corporation.
Yes, I'm left. You have a problem with that?
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 - 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)
It ain't what they call you. It's what you answer to. http://mylyceum.us/
Businesses never pay taxes, even when they are writing the checks for them. They are simply indirect taxes on people:
- Lower wages from the company
- Less employment opportunity
- Higher costs charged on their goods/services
- Fewer dividends paid to shareholders
Eliminate all business taxes, and enact a national sales tax (FairTax). Then you will start collecting from individuals that currently avoid taxation through fraud. You eliminate the loopholes in our current tax system that allow for special interests to get their tax breaks and rebates.
Ironically, the word ironically is often used incorrectly.
So, in other words, only workers should have to pay taxes.
Shop as usual. And avoid panic buying.
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.
Remember that statement next time you drive along a road. Where TF did that road come from?
Engineering is the art of compromise.
With a few more creative accounting methods like these, they could get Yahoo! for free :P
Anyway, are the many Microsoft patents on software or accounting methods ?
I have discovered a truly marvelous proof of killer sig, which this margin is too narrow to contain.
11.2 million square feet, wow! That's pretty big!
Almost as big as, I don't know... 1.04 square kilometers. Hmm, still big, but, somehow... lacking.
I guess it's a case of creative reporting.
"A goldfish was his muse, eternally amused"
Yeah, but were? From what I can see, this money would be spent in Iraq anyway. Every cent kept out of the hands of the politicians is a cent well spent.
that life always has negative effect on productivity.
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?
Maybe the state of Washington should take a page out of Microsoft's book: If you are working for Microsoft they give you a certain time period to pay up (activation) and if not will disable access to the bridge. Once they pay up the will allow them through, but sometimes get it wrong and prevent them from crossing until they have waded through the support process.
:)
Fiscal Genuine Advantage
Jumpstart the tartan drive.
Washington State had better watch itself...Microsoft is liable to pull up stakes and move to Nevada. Then Washington would lose all the income tax revenue, property tax revenue and so on from all those Microsoft employees. That is the fallacy of trying to squeeze too much revenue out of 'rich' companies.
Galileo: "The Earth revolves around the Sun!"
Score: -1 100% Flamebait
Add up the actual amounts involved and account for the dilution in share value and you'll realize that no one is cheating anyone else.
Employees exercising stock options pay taxes on the value of the benefit they receive just as if it were income through wages. The employer deducts the value of the benefit just as if it were income through wages and the net value of the corporation is reduced by the same amount just as if it were income through wages. Stock options allow you to tie that income to the stock performance but apart from that there is no difference taxwise between providing the income as stock options as opposed to wages. The article is either written by someone who is completely ignorant of basic accounting or is preying on an audience he expects to be ignorant of it.
Consider a hypothetical company with 1 million outstanding shares valued at $100 each. Now consider an employee exercising a 1000 shares with a strike price of $10. The employee receives a benefit of $90,000. The employee pays the company $10,000 for the options. The company now has two options:
Option A: Buy back an equivalent amount of stock to provide the employee. This would cost $100,000. Subtract the $10,000 the employee paid and you see the company is faced with a cash outlay of $90,000 - exactly as if the amount were provided as wages.
Option B: Don't buy the stock back. The total number of outstanding shares are now 1,001,000. Maintain the market cap of $100 million as before and the value of the 1 million shares held by the previous stockholders is now $100 million minus $90,000.
There is a real loss of $90,000 that the company experiences and a real profit of $90,000 that the employee experiences. The employee pays income tax on the $90,000 and the employer gets to deduct the $90,000.
Mmmm.. Donuts
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.
Some of us realise that the Military and Police are the biggest tax-suckers. Considering the value addition that they offer, I think I'd rather support welfare. Posse comitatus FTW.
The cost of that cleanup, of course, will be borne by taxpayers, not industry.
So, after all the corporate tax breaks and loopholes and charitable donations, this saved MS all of what, 3 or 4 dollars in taxes last year? Give me a break.
If Washington state goes to a worldwide (rather than water's edge) method of taxation (where a resident company and all related entities are subject to state income tax on all of its income) and/or a three-factor method of taxation (i.e. resident wages are considered as part of allocating income to Washington state), the portion of worldwide income assigned to Washington state and therefore subject to corporate income tax will increase, thereby closing this loophole.
However, this may generate certain negative effects on the corporate environment in the state, and may cause Microsoft (as well as a boatload of other companies) to pack up and leave town for places such as Nevada.
... (Think The Gap, Best Buy, etc) ALL get their products and good manufactured offshore for pennies an hour in labor. Should those companies contribute to US social systems to offset the billions in wages that are not being paid out to the American workforce? C'mon... get real. ~m
"Yes, I have a Disaster Recovery Plan. It's called my Resume"
just look at sourceforge's stock. i wonder if taco was still worth millions and millions and knew of a loophole if he's just pass over it to 'do the right thing' or if he would take advantage?
the only reason this appears here is because he doesn't have that choice to make anymore. must suck to have all that wealth pulled from under you.
While we're at it, somebody should question the legality of mindless editors posting flamebait stories written by clueless authors for the sole purpose of driving hits to a website.
How much Crosscut.com stock does Taco own anyway?
You never really know how close to the edge you can go until you fall off.
"in fact it is jobs, not entitlements, that help the poor."
That reminded me, it is real productivity, rather than jobs, that help the economy. So much of our effort is for money, which allows us to produce so little with our time. It is a wonder as many of us are still making out okay, as are. I don't pretend to have an answer, maybe some of you Big Brains can come up with something. The states and the people have conspired to shut down the engine of productivity, or at least off-shore an awful lot of it. I think that dealing with the laws that exist is wise in MSs case. OTOH using the law to scam the people is evil. Perhaps if the law was revised to even the field for corporations OPERATING IN THE STATE OF WASHINGTON, some good real estate might go on the market as Microsoft moves to the nice part of Nevada. (Actually, the nice part of Nevada doesn't need- anybody.) Using the state and the laws to shift money to non-productive uses have created an astounding imbalance. The shit is falling towards the fan now.
The cost of that cleanup, of course, will be borne by taxpayers, not industry.
I don't like MicroSoft but they do pay $6,000,000,000 in income taxes per year on a net income of $14,000,000,000. (via Yahoo Finance. 2007 numbers) Do you seriously think they are not paying their share??? That's $20 for every man, woman, and child in the whole freaking country and they are only ONE company!
They have a duty to their shareholders to do so. If MS decided to register in Washington tomorrow, due to a sudden urge to pay more tax, they'd be being sued by their shareholders the next day for squandering their money.
Almost every single major corporation is incorporated in Delaware-- to avoid paying taxes. Overseas, many companies have paper headquarters in the Caribbean or Dubai for tax savings purposes (eg just look at Arcelor Mittal Steel -- most of the operations are taken care of from UK but the head quarter is in the Neatherland Antillies... Another one: Ikea is a Swedish Company but with its paper headquarters in the Netherlands). Also many American companies get screwed because they are taxed on global income-- not just the income generated from within sovereign boundaries-- as a result many American companies have multiple incorporations and various tax shelters... I guess its just part of corporate nature to avoid paying taxes using creative yet accepted accounting principles.
I think tax evasion is illegal(at least in the UK). There are all sorts of economically tax assisted areas around the global as governments want to stimulate economic growth in poor areas and the idea is to attract big business with lower taxes. in the EU alot of mail order stuff comes out of lichtenstein, jersey, madeira, cyprus and others as they have the lowest taxes. Generally companies can't just transfer money around their ofshore companies though as there are tax codes to prevent it (I think antiavoidance regs start around section 400? of the taxes act or whatever the current chancelor decides to call it ICTA TA or some other act???). I am not an accountant, but as far as I know you can be as creative as you like with accounts so long as you don't lie and don't break any laws.
There are tax laws put in place, but why should people pay more tax than they are required to by law. The government is there to screw you for as much tax as it can get within the law, obviously any indivdual should be out to pay as little tax as is required by law.
If the government feels the tax laws are wrong they change them. I don't know but surely if MS moves the money out of nevada tax would be due?
Isn't las vegas in nevada where the mob launders all it's money?
The arguement that the citizens of a state are powerless and better fall in line with the greed of capitalist is laughable in this case. This arguement works ONLY for industry where the means of production are mainly machines and unskilled labor. In the case of software, it is humans that matter the most. Or at least it should be...patents, the bastardized version we have now which the founding fathers did not intent work against the creative people who create them. And the idea that software engineers, the key ones at MS, would move to Nevada is crazy. Nevada doesn't compare to Seattle/Bellevue/Redmond area in the least. The beauty of Seattle is one thing MS still has that is better than perk any of the bay area companies have. And you can't compare any place in Nevada to Seattle or the bay area.
Of course, Bill Gates and Balmer, who both hate their developers (I judge this by the incompetent leaders they put in change at Microsoft), are doing everything they can to turn humans into interchangable cogs. This is why patents, software patents on obvious ideas, are so important to Gates and Balmer. Patents allow the corporation to de-value humans because the corporation assumes ownership of the patents the employee created. And with every obvious idea patented and with MS's powerful lawyers they can crush competition via the courts rather than the marketplace. Also they push hard to not compete in natural labor markets by having lobbyist push the government to interfere with labor markets directly, H1B visas are a classic example (notice that there is a shortage of CEOs, Doctors, Lawyers, Investment Bankers, etc judging by high wages *yet* we don't have special visas for these occupations...just engineers...yes, we did for doctors but those were ended by the AMA...I think developers need something like an AMA perhaps) , and then they talk a big talk about being capitalist. But H1B visas, which are just a targeted labor market manipulation is purely command economy styled. Its certainly NOT free market. If it was free market then we would have special programs to import upper and middle management workers from around the world. Gates and Balmer also work very hard to build up labor in other countries but do nothing for America's except bash it.
Finally, back in H1B, if Bill Gates was a capitalist he would say, "we need engineers, so we are going to pay more and this will encourage students to go into math and science. The last thing we want is for the government to get involved by manipulating the labor markets which could further erode US students interest in math and science." But guess what Gates did? And guess what has happened to US students interests?
With all the money that Microsoft puts back into Washington's (let alone all of the other States) School system and Public interests, please!!
Why not complain about the US companies that move their "HQ" offshore. Waste your time bitching about something worth bitching about!
If U2 can avoid taxes by moving their music publishing to Amsterdam and not catch flak for it... why should Microsoft for basically the same thing?
The author knows more than all the teams of lawyers working for M$.
Ugh.
"So, in other words, only workers should have to pay taxes"
Well, publicly owned companies shouldn't have their profits taxed. Property taxes on facilities, yes. On profits, no, because in publicly owned companies, those profits go to their shareholders. As it stands now, those people are essentially getting taxed twice. First there's a tax on the profits, which reduces that revenue. Then when the revenue is given in dividends to those shareholders, they're taxed individually on that money as well. Not only is their income, which includes those dividends taxed, if they make a lot, they're also hit with another tax, a capital gains tax. So some of them are in reality being taxed three times for that companies revenue. Further, they're also paying taxes on the value of the stock they own in most cases.
The only case in which I think company profits should be taxed are when a company doesn't pay dividends and simply builds up large cash reserves. Even then, there should be caution in how they're taxed, because building up cash reserves is a smart way for a company to acquire assets without piling up a lot of debt. You want to be careful not to punish a company for good business practices.
Life is hard, and the world is cruel
BFD. Most companies are not registered in the states in which they reside. Microsoft isn't the first to do this, and definitely won't be the last.
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.
Nice 'appeal to authority' fallacy there, but could you please provide evidence of where it's been proven in history? Companies of one sort of another have existed and operated throughout history under almost every imaginable system so far; people are apt to solve problems that need solving.
Did anyone notice? He linked his earlier Seattle Weekly article, in which he writes:
Ironic, eh? I wonder if he bothered to calculate the percentage of his own money which resulted from the shenanigans he accuses MS of, and gave it to the state?
He did (in the Seattle Weekly article) mention the more than a billion dollars the Gates Foundation has given to Pacific Northwest, and the many charitable donations MS has also made in the area. But he quickly moved on to more of the liberal 'evil M$ fatcats profit on the backs of the poor' rhetoric which Seattle Weekly readers love to read.
How quickly they forget. The Bush Administration argued that taxing those dividends amounted to double taxation too. So let's see. If you tax the profits, it's double taxation with the dividends. If you tax the dividends, it's double taxation with the profits. So let's tax neither. Total bullshit.
In the name of states' rights, we've set up a bunch of banana republics that operate largely as tax havens for one industry or another. It seems to me to be less a question of the morality of taxing corporations, but of the practicality of finding a foolproof way to do it. Maybe multistate corporations should pay their taxes to the feds and then have the proceeds divvied up among all the states. That way, business could locate wherever it makes sense, and we'd all reap the benefits of their share of the cost of running a government.
And if you think there shouldn't be a government to pay for, well this is a democracy. Try voting that in. Good luck.
Posted from my Android phone. Oh, I can change this? There, that's better...
Real Tax Evasion is when individuals use a corporation to buy stuff for their personal use and then have the corporations write it off as a business expense thereby keeping profit to as close to zero as possible and hopefully never paying taxes on any of it. This actually happens all the time and it's the real problem that needs enforcement. Also if the corporation is the end user of a good or service, it should pay sales taxes on it. This kind of evasion happens a lot too.
So how well does that work out?
I wonder if Bill Gates itemizes his deductions?
I apologize if this is redundant, but but but...
If the law allows MS to do something that is technically legal and save a half a billion dollars, don't blame Microsoft -- blame the stupid system that allows such things to happen.
What an I thinking? I'm on Slashdot! I hates Micro$oft! Windoze sux!
Sorry, but I have to repeat that!
SO?
Microsoft isn't Washington's (state or capitol of the USA) bitch.
I am quite sure they are already paying enough taxes to support the needed infrastructure where they are located. I am also quite sure that money is available for bridges and schools and such but is diverted to PET PROJECTS. Yes, pork exist at all levels. There are probably some really good projects done just for local politicians and even federal one's where the money should have been spent on bridges.
See, the thing that offends me about the initial subject of this is trying to load up one side of the argument with items you can't disagree with without being an ass. The politicians GEM of a saying to get your money and especially someone else's is " BUT IT'S FOR THE CHILDREN " . No corporation wants to hurt children do they? Hence people go right along allowing their taxes to go up because politicians won't spend the money they have already for the item needed but want new money. Well all that comes out of the taxpayers pocket. Microsoft and others will simply pass those taxes along to you and me. What, you don't buy their products? Too bad, someone you do business with does. Its all one big dogde. Government goons know they can redirect your ire by embedding taxes so you can't see them. Gas shoots up in 09 suddenly because of a tax on "excessive" profits will get the gas companies blamed, not the government.
Why not start looking to where the money is going when its needed elsewhere instead of some corporations bank account? You do realize that every tax dollar Microsoft spends is simply taken from their customers and their customers customers... and so on and so on. It also will take money from people through 401k loss and the like.
The reason corporations are located in higer taxe bracket areas isn't because of the support needed, its because these corporations can bear the taxes. Want to lower your tax income, simply tax unfairly companies in your region. As Detroit how well that did. Ask Youngstown. You can't keep bilking the golden goose. Eventually it leaves or dies.
* Winners compare their achievements to their goals, losers compare theirs to that of others.
And with government crippled, how do you expect to actually hold them responsible?
Dan Aris
Fun. Free. Online. RPG. BattleMaster.
So what are you advocating for, revolution? Or do you not know who writes the rules of the game?
$1,012,321.14 for property tax (that includes the $1.95 fee for noxious weed)
source: https://payments.metrokc.gov/metrokc.ecommerce.propertytaxweb/RealProperty.aspx?Parcel=9208900079
I'm sure the rest is made up by the remaining 35,000 employees living in the state.
Pro-government, pro-taxation arguments that put government needs first inevitably devolve onto government as a religion, and high taxes as its catechism. The end game of that approach is to simply take everything from anybody earning any income or making any kind of transaction; this, of course, is what we used to call feudalism, and chasing that off was one of the side effects of the Enlightenment. The idealists who claim, with a straight face, that this is not so will never tell you just where their plans should end or how much is "fair", just more than is currently being collected. So grows the State, and their mad plans for running things on somebody else's nickel, coin they didn't have to earn.
Dog is my co-pilot.
Support SETI@home
And here we have the stupidity of supply-side economics. The idea that companies and the wealthy make business decisions based on how much money they have rather than say... I dunno... maybe, demand for their freaking products or sound business decisions based on calculated risk. Money is never an issue for a smart company with a good product (which will in turn have good credit).
The stupidity of your argument is even more apparent when you consider that most Fortune 500 companies hold a reserve for making acquisitions, investing to earn interest, or returning shareholder dividends. So yes in fact they would "just sit on the money they saved" or give it to other wealthy people through the aforementioned means. Trickle-down (Chicago style) economics has never made any sense.
I ran a business for a couple of years and I'd be in favor of cutting corporate taxes too, but I recognize that revenue has to be replaced with something. I'd be in favor of taxing consumption of resources and generation of waste--but auditing that would be a nightmare so it probably isn't feasible. That leaves jacking up the income tax and I'm more opposed to that.
Corporation collect tax funds as part of the cost of their goods & services and render them to the government. All coporate taxes come out of some individuals or group of individuals pockets. Corporations don't have pockets.
This is nothing more than simple tax avoidance, not anything illegal (i.e., not tax evasion).
If there were a "Federal Sales Tax" and no "State Sales Tax", this wouldn't even be an option (unless Microsoft decided to move sales out of the US entirely). Or better yet, do away with the regressive sales tax and just increase the income tax enough to pay the costs of government.
What with all of the companies that move their operations offshore to avoid taxes (and to avoid paying US wage scale), this is a most remarkable tempest in somebody's very small teapot.
Washington has no personal income tax ...
Nevada doesn't, either.
(That's part of why I set up my retirement home there - so I could cash out my stock options without paying CA's confiscatory state income tax. Unfortunately the company I'm working for sold itself to a foreign firm, and the options were "exercised and sold" for me while I'm still working in CA. B-b )
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
I'm sure the Beloved St. Jobs NEVER takes advantage of tax loopholes.
Only satanic MSFT would do that.
The tax man will take more and more of your money if he can. All you have to do is hand it over to them. I'm not a huge fan of microsoft or their products, but how about pressing politico to write some tax laws that don't have gaping loopholes in them? Don't give me this crap about corporations pushing politicians around by donating millions of dollars to their campaign. Dollars are quite helpful, but then again, so are these things called "votes". If you are so disturbed by actions taken by individuals or corporations such as Microsoft to avoid paying large amounts of dollars to club fed, then write your congressman about it, tell your friends to write theirs about it, and then tell their friends friends..etc and so forth. Get involved with the National Taxpayers Union, do something about it. Otherwise, give it up. Microsoft (and friends) aren't going to just fork over .5 Billion because we throw tantrums about it.
So they pay corporate taxes in Nevada, where there are no corporate taxes, and they pay their employees in Washington, where there is no income tax?
Or they can pay corporate taxes in Nevada, where there is no corporate tax, and pay their employees in Nevada, where there is also no income tax.
Then if the employees buy stuff in Oregon, where there is no SALES tax, there's a lot of money that stays in their pockets. B-) (How convenient that Oregon is adjacent to both Washington and Nevada.)
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
Bush proposed repealing the dividend tax, but didn't succeed in doing so. His 2003 tax cuts did end up cutting dividend tax rates for most people by reclassifying qualified dividends as capital gains instead of ordinary income, but they didn't eliminate the tax.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
"Soon the system will work the way it is designed to." Bwahahaha fixed it for you.
The cost of that cleanup, of course, will be borne by taxpayers, not industry.
Boeing moved its headquarters to Chicago because Boeing had became something more than an aircraft manufacturer in Seattle.
At the time, Boeing had about 200,000 employees world-wide, 78,000 in Seattle and a headquarters staff of about 500. To attract Boeing, Illinois kicked in $41 in tax breaks and grants, Chicago $20 million. Boeing Moving Headquarters to Chicago
Declare the bridge to Microsoft as unsafe and close it. When Microsoft complains that nobody can get to their office, explain that there simply isn't any money in the budget to do any work on said bridge, so sorry.
I don't actually consider this the right thing to do (MS being in Washington still generates tons of money for the government through other taxes), but Microsoft has been the bully for far too long. It would be funny to see them bullied.
Alternately, turn the bridge into a toll bridge. $100 each way sounds about right.
-- Will program for bandwidth
Excellent points
and misrepresentations of economic issues and tax law makes a large portion of the contributors seem particularly uninformed.
The obvious solution is for Washington state to go to war with Nevada!
Don't blame me, I didn't vote for either of them!
Taxes are going to bureaucrats pocket! Don't lie yourself. Instead, that starving people could eat if they work and one way to incentive companies is less taxes ;-)
ghostbar page.
Apple seeks tax haven in Nevada
Now enriched with hefty cash reserves thanks in large part to booming iPod sales, Apple Computer isn't about to let California tax collectors take too big of a bite. The Cupertino, Calif.-headquartered firm has taken an unknown portion of its portfolio and set up shop in the veritable tax haven of Nevada, according to a recent BusinessWeek Online report.
35,500 employees and thousands of local contractors (like me) who buy homes in Washington and pay property taxes on them or who rent living accomodations from people who pay property taxes on those structures.
35,500 employees and thousands of local contractors (like me) who pump maybe two billion dollars a year of consumer spending into the state's economy, much of it subject to sales taxes of 8.5% or more.
Start a happiness pandemic
Overall, I agree with what you said: this is a non-story. Company I work for is incorporated in Nevada as well-- we design (in CA) products for cinematography, they are bought and used in CA, but they are "sold" by the "corp" in Nevada. Actually, I think they're sold by subsidiary corporations here who pay intellectual property dues (roughly equiv to the profits) to the parents corp in NV, thus negating any need to pay CA taxes on the "profits" (but I could be wrong-- I am not the CCO). This is SOP for most big corps (Home Depot, Toys-R-US, etc). CA is tax-crazy.. they've tried even taxing professional sports figures from other states on the salary earned in the "away" games they play when in CA!!
Movies are not made in CA because CA is tax friendly to entertainment companies (many of the LLCs formed for each film are formed in NV!). Movies are made in California because there is a lot of sun here. They were originally made in New Jersey, but it wasn't sunny enough for the slow film of that era (approx 5 ASA) and Hollywoodland was born. In fact it's not terribly cheap to make films in LA, but most are still shot here, simply because even with taxes (you want to talk about dumb LA taxes? A location permit to film in your own house, zero pyrotechnics or crowd control (i.e. so no police or fire people need be present) will run around $300-500/day.. and it gets orders-of-magnitude more expensive as soon as you want to do anything on public property, light stuff on fire, block off streets, etc) and the cost of operation in LA, it's still cheaper to make films here because all of the talent, equipment, soundstages, etc are all centrally located here. It would be "cheaper" tax-wise and land-wise to shoot in some mid-west state, but no one does that, because getting all of the talent/crew/equipment/etc out there would more than negate the savings. Furthermore, before the dollar was weak as hell, BC (canada) was actually a hub for film production because it did offer some benefits cost-wise. That is no longer the case.
Being from WA, I'm intimately familiar with the good and bad aspects of the state-- one of the bad is they can be a little retarded when it comes to their corp taxes. Look at BOEING-- they literally drove away BOEING's corporate office because other states were willing to offer incentives, and WA wouldn't capitulate. DUMB.
NV does make a lot of money off of people forming businesses, as a result of the strict privacy and corporate takeover laws in Nevada, as well as the zero taxes. The cost to form an LLC or CORP is around $500-750 (depending on whether you need a business license for the city of Las Vegas too) with a yearly refiling fee of $125 (and $100 for that LV city permit). Compare to around $35 or so to form a similar entity in WA.
...US is pulling out of Iraq due to lack of funding.
Starving the US war machine brings peace to the middle east, Ballmer gets Nobel peace prize.
just to offer some perspective.. I live in LA, and we (my fiancee and I) spend around 75% of our aggregate income on rent. I can't *WAIT* to get out of LA.. I'm very, very sick of being broke. And we were lucky to find this place at this price. However, I don't blame our landlords.. they aren't making much (if any!) money on this place.. unless they put a substantial deposit down when they bought it, there's no way we're paying their mortgage. I blame the fucked up housing prices.. working families can't afford to buy a million dollar house, or a $600k condo.. so they figure out a way to *just barely* afford to rent one (for maybe 2/3 of what the mortgage would have been). In LA rent seems to be about $1000/mo for every $250k of value in the residence (with most homes and condos in the $500k-1M range).
That's some way to twist the fact that a company just stole half a billion dollars from citizens. Next you'll be telling us that Microsoft are good people because they charge africans a month's salary for windows, and give back a few million of what they stole for PR and bribes.
Did I say I was advocating anything?
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Small Government People know that you can not have small government with corporations. Corporations are not natural entities but protected entities created by government regulations. A small government would eliminate the corporation. Not the business, just the protected status. Corporations only enjoy their protected status by the largess of government.
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.
My Suburban burns less gasoline than your Prius.