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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."
Microsoft has effectively paid its employees with your tax dollars for years.
http://www.fool.com/portfolios/rulemaker/2000/rulemaker000217.htm
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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.
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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."
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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.
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.
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?
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?
Paper tiger arguement.
They are in Redmond because it has the infastructure to support them. The telecommunications, roadways and educational system to supply those tens of thousands of employees. Nevada, by contrast, cannot supply these (sorry nevada, you're a great state, but your infastructure is horrid). For microsoft to do such a move would be to cut off its nose to spite its face.
There is a reason why the top performing companies are found in areas with the highest tax brackets. Those territories, which tax for the needed infastructure, are the ones which can support businesses of Microsofts size.
Karma Whoring for Fun and Profit.
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?
It would be fun if everyone started parasitising like that...
I suffer from attention surplus disorder.
Additionally, because of "community needs" and "environmental impact" and "public awareness" campaigns, Microsoft and Boeing pay MILLIONS to build parks, schools, and other government-specific projects MILES away from the construction, just to get their permits approved.
Microsoft PAID for the overpass across 520 when it wanted to join its two campuses. It PAID for the Metro transit center in front of the Redmond campus. It PAID for widening 40th Street. It PAID for the rework that's happening on 150th. Cash up front.
This is a case of a State out of control. Washington's budget has increased 33% in the last 3 years alone. Not promised outlays, actual CASH BEING SPENT. We're going from a $1.5 billion dollar surplus and $2 billion dollar rainy day fund to $600 million dollar deficits and no rainy day fund.
We have the HIGHEST GAS TAX in the nation. That gas tax is supposed to be dedicated to roads. Yet we still have floating bridges that are at risk of sinking with each storm, and a viaduct that carries half the North/South transit through the city of Seattle yet is in danger of imminent collapse PER THE STATE'S OWN EXPERTS.
Yet neither of these infrastructure problems - which were to be addressed by the latest 9 cent per gallon tax - has been started. We're still arguing about whether to just tear them down and not replace them (where did the money go?) or replace them with structures that carry FEWER vehicles, when our population is increasing.
We have an out-of-control L&I system. Woe be to you if you have a warehouse or shop and the State knows about it - EVERYONE that can walk into the warehouse can be considered "high risk" for your L&I costs, regardless of their position or the use of that warehouse.
Unemployment? I ran a business for 10 years in this State, and never ONCE had an unemployment claim. Not one. Employed over 80 people over the years, never ONE claim. Yet every year my unemployment tax rates would increase by 6-8%.
We mandate HUGE income to the State by having the highest minimum wage in the nation. And of course, that means the State gets more income because their income is based on spending, gross receipts by businesses (which must increase when the mandatory wages increase), and those same L&I costs (which are a percentage of your wages).
No, taxation is not the problem - the State's budget is growing faster than the wealth or income of the State's residences. Record budgets are being pushed through with taxation growing 2-3 times that of the wealth of the State... Well what's going on?
Spending - it's up 33% in just 3 years. Oh, and that doesn't include the UNDERFUNDING of the State's pension plan. Or the spending of the rainy day fund. Both of those are "off book" items...
We're spending over a billion dollars a MILE for a light rail system that runs at grade. And cannot climb the hills of Seattle. And originally wasn't even going to go to the airport, but changed because of overwhelming public outcry. The existing example spur - the South Lake Union Trolley (yes, it is actually called the SLUT) - has had 3 train-car accidents in just 3 months, bringing it to a standstill for hours.
This State has seen property taxes rise on average at 15% per year for the last 5 years. And now that it's looking to slow down to only 3-4% per year, the State is figuring out how to increase the taxation rates to bump their revenue intake up.
This State is all about take-take-take, and what YOU can do to contribute to it. Competition is not allowed - no school vouchers, private tollways are illegal, private ferries ar
Browsing at +1 - no ACs, I ignore their posts. So refreshing!