Microsoft To Get $100M Annual Tax Cut and Amnesty

reifman writes "Despite a $2.8 billion deficit, Washington State's House Bill 3176 would provide Microsoft with an effective $100 million tax cut annually and possible amnesty on its $1.27 billion Nevada tax maneuverings. Under current law, all of Microsoft's worldwide licensing revenues of approximately $20.7 billion annually are taxable at .484 percent. Under the new law, only the portion of software licenses sold to Washington state customers would be taxable. Ironically, after slashing Microsoft's tax burden, HB3176 directs the Department of Revenue to crack down on 'abusive tax transactions' like those in Nevada — except for a loophole that may provide Microsoft amnesty on its twelve year practice. The bill's lead sponsor is Ross Hunter of Medina, home to Bill Gates and a number of current and former Microsoft billionaires and multi-millionaires, and other areas around Microsoft's corporate campus."

Comments

Bill's Sponsor Also Ex-Microsoft Employee

[eldavojohn]

The bill's lead sponsor is Ross Hunter of Medina ...

The article's update notes:

Update: Rep. Hunter is a former Microsoft general manager.

As does his bio:

PROFESSIONAL EXPERIENCE:
I retired from Microsoft in 2000 after 17 years of service ranging from program manager for Microsoft Access to general manager of the Microsoft Commercial Internet System.

At this point apathy consumes the rage that would normally well up inside me ... Halliburten got contract after contract with a former employee as vice president of the United States ... should this sponsorship surprise me? I guess it doesn't fall under conflict of interest though a large part of me feels it should ...

Re:Bill's Sponsor Also Ex-Microsoft Employee

[Anonymous Coward]

As a Washington state resident who also considers the amount of the state's budget deficit, I can't figure out how even a representative with MS ties could figure that this move should be viewed favorably. Let's shoot this down folks.

Re:Bill's Sponsor Also Ex-Microsoft Employee

[Cryacin]

There's so much back scratching going on here that these guys must sleep on their stomach. I'm sick to mine.

Re:Bill's Sponsor Also Ex-Microsoft Employee

[rtfa-troll]

X: They are shooting little children.
Y: So what? Under the last administration they shot little children too.
X: oh; that's okay then. Sorry I mentioned it.

Re:Bill's Sponsor Also Ex-Microsoft Employee

[Attila Dimedici]

The poster I replied to was clearly implying that Haliburton got their contracts during the Bush Administration because Dick Cheney used to work for them. However, Haliburton was getting the same type of contracts before Dick Cheney was Vice President, so I was pointing out that his case was not made.
It is important when trying to fight government corruption (or other wrong doing by the powerful) to clearly make one's case and to not get sucked into edge cases that have an appearance of serving a partisan agenda. This is because there are many who will use corruption fighters for partisan advantage and then promptly abandon the cause when their group is in power.

Re:Bill's Sponsor Also Ex-Microsoft Employee

[stephanruby]

However, Haliburton was getting the same type of contracts before Dick Cheney was Vice President, so I was pointing out that his case was not made.

Yes, but they were not getting no-bid contracts under Clinton. In my opinion, that's a huge significant difference.

Not that Clinton doesn't help his own friends out, he does too. Cronyism does run rampant in both parties.

Re:Bill's Sponsor Also Ex-Microsoft Employee

[Alex Belits]

I don't get why people don't understand that corporations don't pay taxes. Taxes are just another expense that gets added into the final price of the product. It doesn't matter that they actually write the check, you pay Microsoft's corporate taxes every time you buy one of their products.

Product prices will be the highest the market can bear, regardless of expenses. Software already has massive profit margins, so taxes merely eat into those profits, thus depriving the company from money they can use to buy other companies, run ad campaigns, pay bribes and manipulate market in other ways.

We should eliminate them entirely. Nearly every company in the world would want to be headquartered in the US if we had no corporate taxes, imagine how many jobs that would create.

Corporate headquarters are only considered useful for locals because THEY PAY TAXES. The local employment they provide mostly consists of secretaries and janitors.

Re:Bill's Sponsor Also Ex-Microsoft Employee

[Duradin]

X:How can you shoot women and children?
AM:It's easy. You just don't lead them as much.

Re:Bill's Sponsor Also Ex-Microsoft Employee

[iluvcapra]

Regardless of how you may feel about taxes, it really isn't at issue. Here we have a company breaking the law, and using its influence to avoid the consequences, and to seek special treatment under the law.

Re:Bill's Sponsor Also Ex-Microsoft Employee

[iccaros]

ahhh.. no Halliburton Received No-Bid Contracts During Clinton Administration For Work In Bosnia And Kosovo. “Halliburton has also gotten some no-bid jobs in Iraq, just as it did in Bosnia and Kosovo in the 1990s, and for the same reason: Not a lot of other firms have similar expertise in supplying the U.S. military, and with a war on there’s no time to stage a lengthy bidding process.” (Max Boot, Op-Ed, “Don’t Blame Halliburton,” Los Angeles Times, 4/22/04) During Clinton Administration, Halliburton Received $2.2 Billion From US Government For Work In Kosovo. “Between 1995 and 2000, while Democrat Bill Clinton ran the country and Republican Dick Cheney ran Halliburton, there was no talk of favoritism or political ties as the Houston-based company billed the government $2.2 billion for its work in Kosovo.” (James Rosen, “Is Iraq’s Reconstruction Rigged?” The [Raleigh] News & Observer, 10/5/03) Halliburton’s Performance Praised By Former Vice President Al Gore’s “National Performance Review.” “[V]ice President Al Gore’s National Performance Review mentioned Halliburton’s performance in its Report on Reinventing the Department of Defense, issued in September 1996. In a section titled ‘Outsourcing of Logistics Allows Combat Troops to Stick to Basics,’ Gore’s reinventing-government team favorably mentioned LOGCAP, the cost-plus-award system, and Brown & Root, which the report said provided ‘basic life support services – food, water, sanitation, shelter, and laundry; and the full realm of logistics services – transportation, electrical, hazardous materials collection and disposal, fuel delivery, airfield and seaport operations, and road maintenance.’” (Byron York, “All Smoke, No Fire: The Administration’s Critics Are Wrong,” National Review, 7/14/03)

Re:Bill's Sponsor Also Ex-Microsoft Employee

[ElectricTurtle]

That explains why MS software is so sub-par and MS advertising is so laughably terrible... it's all being written and designed by secretaries and janitors...

Re:Bill's Sponsor Also Ex-Microsoft Employee

[Jane Q. Public]

If the tax rate on their revenue is 0.484%, as OP states, that is hardly an amount that will affect Microsoft very much, or increase their prices very much. Figure it out yourself: what is 0.484% of the price of any Microsoft product you bought lately?

Any tax breaks for large corporations at a time when they are proposing to increase taxes on citizens is unconscionable. Hunter should be ashamed.

Re:Bill's Sponsor Also Ex-Microsoft Employee

[Jane Q. Public]

"One is the fact that Washington cannot really tax an entity based on business practices outside the state."

That is complete nonsense. If their primary base is in Washington State (it is), the state has every legal right to tax them on their total revenue (known in Washington as the "B&O tax"). This tax has been active in Washington for many years now. If it were illegal, someone would have challenged it long since. (Actually it has been challenged, and it's still there.) If you think they "cannot really" do that, I suggest you talk with a Washington State tax attorney and find out why you are wrong. Here are some hints:

"The constitution forbids it unless congress agrees to allow it."

Again, complete nonsense. What is prohibited by the Constitution is charging sales tax for sales in other states. The B&O tax is neither a sales tax or an income tax.

Also, Washington State probably would NOT lose if that were taken to court, because again B&O is not a sales tax, and Microsoft's primary base of operations is in Washington State, regardless of where they are incorporated. The B&O tax is not an income tax either. You are mixing apples and oranges.

"It's sad when government is in a weak bargaining position against a gigantic corporation..."

That may be so, but that is not the case here. Corporations (including some large corporations) have already challenged in courts, and the B&O tax has been upheld. It is not bound by the laws regarding either income or sales taxes, since it is neither. I strongly suggest you do a little research about the subject before expounding on it so "authoritatively". It is obvious that you know very little about the real situation.

Re:Bill's Sponsor Also Ex-Microsoft Employee

[mysidia]

Actually.. I think it's being designed by secretaries, and written by armies of trained monkeys.

Which explains the bugs.

The janitorial work was outsourced to a contracter that is (secretly) owned by a competitor, a long time ago.

Re:Bill's Sponsor Also Ex-Microsoft Employee

[Anonymous Coward]

Oh you silly billy if high tech corporations moved to where taxes are lower Apple would be in Mississippi and Google would be in New Hampshire. Instead these companies need intellectual talent which is drawn by the availability of educational, cultural, medical, etc. infrastructure supported by high taxes. This is yet another case of the law of unexpected consequences, lower taxes saps the infrastructure which ultimately decreases the quality of the available labor pool.
In my view corporations have a duty to maximize profits for their owners but governments have a duty of build a civilization. Too often politicians forget this.

Re:Bill's Sponsor Also Ex-Microsoft Employee

[ahabswhale]

Ffs, they are paying pennies on the dollar for the taxes that ANYONE else would be paying. Cry me a fucking river. They'll get my sympathy when the government offers me the same deal.

Re:Bill's Sponsor Also Ex-Microsoft Employee

[boxwood]

Remember when the government had to spend a trillion dollars bailing out corporations because they completely screwed up the financial sector?

Here's a tip for you: There are only so many good investments out there. When there is too much money in the hands of the corporations they run out of good things to invest in. But they have all this money laying around so they start investing in things they shouldn't. And when those investments fail, what inevitably happens? See 1929 and 2009.

Learn some basic economics, son. Cutting taxes in a bad economy doesn't help. Wow I paid less taxes this year, what do I do with it? The economy is bad right now so I better not spend it, I'll save it just in case. So you've just given more money to the bankers who have already proven themselves to be completely incompetent. Good job there buddy.

Stimulus is required because the government is the only player that is willing to spend as opposed to saving money in a bad economy. Corporations don't spend in a bad economy. Individuals don't spend in a bad economy. Only government is above the individual microeconomic decisions and is capable of making decisions on a macroeconomic level. More spending improves the economy. When the economy is good everyone is willing to spend, so the government can cut taxes, pay off debt, or whatever it wants. But when the economy is bad no one except the government is willing to spend.

Think of it like building a fire. Cutting taxes is like putting more wood on the fire. Stimulus is like throwing on some kerosene and lighting a match. When the fire is going good, throwing a couple of more logs on it helps. When the fire is out throwing more logs on it doesn't help. It just makes a higher log pile, and if yo keep throwing more logs onto it, it gets too high it falls over.

The best government

[Anonymous Coward]

Our system of government may not be the best, but it's the best that money can buy!

every state does this?

[alen]

every state does this to lure companies and jobs to their states. every company including Google, Apple and all the slashdot favorites take advantage of this. one reason why Silicon Valley and the movie industry are in California and don't move their industries elsewhere is because California gives out big tax breaks to tech and the movie industries. in the last few years they talked about taking them away and everyone involved told the idiot legislators that it would result in an exodus out of the state. just like the home contractors left after the idiotic workman's comp rules went into effect a few years ago.

Re:every state does this?

[Rich0]

Ok, I can get how tech companies can relocate if they don't like your local taxes, but home contractors?

If you want a home built in California, you're going to have to have somebody do the work under California law. So, how would home contractors have any leverage, unless CA wanted to impose regulations on their activities out-of-state?

Sure, maybe some would choose not to do business there any longer, but I doubt that in a recession that anybody is going to have trouble finding somebody to take their money to build a house.

just a proposal

[SoupGuru]

Has this been voted into law as the summary and title suggests?

Or is this a proposal that us Washingtonians get a chance to contact our representatives about and make sure they understand how important it is to us?

I like representative democracy. It sometimes works.

Re:just a proposal

[Jeng]

http://apps.leg.wa.gov/billinfo/summary.aspx?bill=3176&year=2009

Doesn't look like its passed yet.

I don't see what the trouble is...

[calmofthestorm]

I have no objection to the government taxing my income at 0.484%

Re:I don't see what the trouble is...

[wizardforce]

Individuals get taxed on their gross income so why is it so absurd that the poor starving corporations be taxed the same way? As things are now, individuals don't get to deduct anywhere near what corporations do.

Re:I don't see what the trouble is...

[Grishnakh]

You obviously know nothing about business. Taxing revenue instead of profit is idiotic; this means that a company that has a very high profit margin because their operating expenses are low has a big advantage over a company that has high operating expenses.

For instance, look at Boeing, a big WA state employer. They build big, expensive planes. These planes aren't expensive just because Boeing decides to set the price on them at $250 million. They're expensive because it costs a lot to build a big plane: parts, materials, labor, safety testing, etc. That plane might cost a quarter-billion dollars, but only a small portion of that is profit, the rest is money they have to pay out for labor expenses, for raw materials costs, for parts from their suppliers, etc. Why should they pay taxes on all of that? You get to deduct your student loan and home loan interest from your taxes, as well as other things like medical expenses, and other unavoidable things.

Whereas some company that just does, for instance, motivational speeches, is almost pure profit (except for the rent for conference rooms or wherever).

Only a moron would think it's OK to tax companies on gross income. The effect of this is that companies will do whatever they can to reduce operational expenses, including cutting labor costs, outsourcing, cheapening their parts and materials (leading to poor quality), eliminating testing (leading to people dying when airplanes crash), etc. Every decent governmental entity does not tax on expenses; in fact, companies don't even normally pay sales tax for anything which will be used for resale.

Re:I don't see what the trouble is...

[QuantumRiff]

Um, the parent was asking why its okay to tax people on gross income, but not companies? Either I should be taxed on Profit too, Or a company should be taxed on Gross income. Cause its just as easy to invent all sorts of crap to never have a profit. Go Google Hollywood accounting.

I mean with my income, I have to purchase a ton of expenses that eat at the total too. I have rent, food, medical care, etc. Just like Boeing has to pay for expenses to assemble their big shiny planes! And you can't get away with the "Well, they hire people and then they pay taxes" argument, cause I give income to the Landlord. I give income to Blue Cross, I provide income to farmers, sales clerks, hell, even the lady that cuts my hair. The economy is a network of economic networks..

but I guess its easier to insult their (the GP's) intelligence in the matter. Hooray, you took basic Economics in High School

"To get"?

[sys.stdout.write]

I see the authors are using the phrase "Microsoft to get" to mean the less-common "Microsoft may get if a bill proposed by one Representative is passed by both Congressional bodies in its current form which is not going to happen."

Scintillating!

Re:Hardly Surprising

[Phrogman]

Politicians get into power by getting corporate sponsorship, once they are there they quite naturally pay back the favour. Really, the Politicians are not much more than Corporate Representatives in Government. There is the minor formality of convincing the public to vote for the company candidate but you just throw money at that and hire good advertising companies.

The US has the best politicians the corporations can buy.

Sadly up here in Canada, its no different as far as I can see. I still believe in democracy, but I am no longer sure we still have it :(

Hasn't passed yet

[Jeng]

http://apps.leg.wa.gov/billinfo/summary.aspx?bill=3176&year=2009

Alot of stupid bills get submitted, luckily most don't get passed.

If this one gets enough notice perhaps the bill will be killed.

Re:The other side

[prakslash]

To play devil's advocate, giving tax breaks to attract/keep major businesses is a normal thing for state governments. After all, these businesses bring in major direct (income taxes) and indrect revenue (local employees' property taxes, sales taxes etc) to the state. Nine years ago, Boeing ditched Seattle and moved to Chicago partly because of tax breaks offered by Chicago.

Re:Hardly Surprising

[maxume]

Democracy is a compromise, not something that requires or benefits from belief.

"I used to believe in forcing my neighbors to do things, but then they started forcing me to do things."

Geese and golden eggs

[5KVGhost]

I have no problem with this. The state of Washington is not $2.8 billion in debt because corporate taxes are too low or because Microsoft makes too much money. The state government is in debt because they insist on spending vastly more money than they actually have available. The state could take every single penny MS owns and they'd soon find themselves back in the exactly the same situation, looking for someone else's money to take.

Creating a hostile environment for employers only encourages them to leave your state and set up shop somewhere else. Like another state where they're not punished for being successful.

Re:Geese and golden eggs

[sparky555]

I have no problem with this.

OK - so Microsoft employs how many people in Washington?

Around 40,000, as I recall. Let's give about 30,000 as the number of children and another 20,000 for spouses and significant others. Let's devote around 1300 teachers for those kids, and about 400 administrators for those teachers (up to the state level, and I think I'm being conservative). Let's factor in the infrastructure businesses that exist in Washington whose entire existence is centered around Microsoft.

So, between the load on the roads, the educational system, firefighters, police and other essential services, you're entirely satisfied that Microsoft is giving at least as much as it takes from your state? And that the rank and file employee state taxes fairly offset those for the MS cream of the crop?

You live in Washington, have considered these factors, and still believe that Microsoft is a good corporate neighbor?

Okay, so I'm a Microsoft employee, so factor that in however you want. I'm also a citizen of Washington, and it seems like your argument ignores that. I pay 9.5% sales tax on everything I buy, I sort of pay property taxes (I pay apartment rent, but the landlord takes some of my money and pays property taxes). I pay gas taxes, I pay to register my car, I pay stupidly high liquor taxes. There's no state income tax, so I don't pay that, but a lot of Microsoft employees have pretty expensive houses, so they pay a ton in property tax. Sure, there are more/bigger roads in Redmond than would exist without Microsoft, but as a citizen those are the roads that are most useful to me - isn't that why I pay my gas & vehicle registration taxes?

I don't know anything about this specific tax, and don't want to comment on it. But I'm always confused when I see the argument that Microsoft takes from the state, and that we'd be better off without it. I spend a lot of money in the local economy, pay quite a bit in taxes, etc. If Microsoft left, it'd be a disaster for the economy on the Eastside, and probably all of Seattle.

Your argument about the roads, schools, firefights, police, etc. just doesn't make much sense to me. Microsoft employees are citizens like any other (but since they tend to be pretty well paid, they're going to pay more in taxes), so of course they're going to use state/local resources. I am going to live somewhere, and I'll need roads, firefighters, police, etc, so some state and local government is going to tax me and be responsible for providing those services - because Microsoft employs me here, it's Washington/King Co./Redmond. I don't use the schools, I don't cause a burden to the police, I don't get any assistance from the state. I use the roads, parks and libraries. Like a lot of Microsoft employees, I'm young and have no kids, so I'm not using the schools, but I'm paying for them. I have to think that I pay way more into the system than I get out of it. That's fine, but if Microsoft left I'd probably leave too (I'm not a native Washingtonian, and can't imagine I would have moved to Seattle if not for this job), and from the perspective of state finances I think that'd be a loss for Washington.

Maybe we should kick all employers out of the state. If no one lived here, we wouldn't need any schools/police/firefighters/roads at all. The state budget problems would be solved!

Re:Makes sense.

[earlymon]

Even Mozilla dodges taxes because they are a "non profit" and get PAID millions of dollars from google as part of a business deal. But I guess if you pay a tiny percentage of that money to pay for nerds to work on open source, you're immune from criticism on Slashdot.

Right. Because the income dealings of a non-profit corporation are really just so shrouded in secrecy, loopholes and backroom deals.

In the time it took me to respond, Microsoft just wrote off more in taxes than the Mozilla Foundation is worth.

http://www.mozilla.org/foundation/documents/mf-2008-audited-financial-statement.pdf

Blow me.

Re:The other side

[tsm_sf]

The problem isn't whether companies will make smart business decisions (e.g. moving to friendlier tax areas), it's that this is a highly visible example of "he who has the gold makes the rules".

Everybody knows that wealthy people receive preferential treatment in our society, but nobody likes having their nose rubbed in it. A situation like this one with MS, coming at tax time, just feels like a big middle finger.

Re:i dont see any problem

[Nadaka]

You do remember that the AIG bailout happened way back in 2008... right? Obama wasn't on watch at the time, that was all Bush Jr (and the congress, mostly democrats).

Re:Hardly Surprising

[Maxo-Texas]

If enough people do not believe the system is fair, it will end violently.

It absolutely depends on belief-- partially belief that was brainwashed into us from the time we were in 1st grade and partially belief from propaganda constantly delivered by all the media sources ( "liberal", "conservative" -- no real difference- all are owned by extremely wealthy individuals and corporations and serve the same brainwashing crap).

Re:The other side

[0100010001010011]

Illinois is set to become the next California. This post points out that Cali gave huge breaks to tech companies.

Giving 'tax breaks' doesn't seem to be sustainable long term for states.

Seriously, this entire state is one huge cluster fuck dictated by a single geographical area. It needs to be roped off, along with Gary, and made its own state.

Re:Hardly Surprising

[lord_rotorooter]

They should then be required to where corporate logos on their suits just like they do in NASCAR...

Banks: too big to fail

[NotBornYesterday]

Microsoft: too big to tax?

Being Punished for Being Successful!!!

[mpapet]

Parent marries two flawed ideas that don't belong together and then somehow calls this a justification.

1. Local Government is somehow a spendthrift. This is a Sarah Palin explanation. The people with little comprehension of what their government does whip this explanation out to beat down their enemies. My civics class from grammar school taught me that local government provides public services and infrastructure. You know those awful spendthrifts just wasting our taxes on roads, and sewage systems... Let's do away with law enforcement. Courts too. People that use this kind of thinking have one goal, a return of the truck system. http://en.wikipedia.org/wiki/Truck_system

2. Parent makes the leap that a high-tax environment is somehow hostile to business. The goal of the comment is to make the Corporate Welfare State as big as possible. Shift the entire tax burden away from the corporation to the employee. (not the Owner of the business, the employee)

It is much more expensive, and almost impossible for Microsoft to leave. This is true with any giant-sized super-mega corp. facility. I'm not saying it doesn't happen. I'm saying it happens nowhere near the level of fear the remark generates. The goal behind the fear mongering is to complete the Corporate Welfare State.

red and blue

[zogger]

You are seeing the red state/blue state sort-of lie. We don't really have that division as much as we have red areas, primarily rural and suburban, and blue areas, primarily major metropolitan areas. You can see it on the larger election maps, most fixate on the entire statewide breakdown and how the vote went in total there, but if you look at it state by state by state, the same red/blue split shows up, and it is primarily urban versus "other".

    So what happens is the metro areas in most of the states dominate politics, they have the edge in population a little bit, in most states now, and institute policies and laws that never really fit their *entire* respective states. What you said about Illinois and Chicago is true facts, the same applies to like NYC and the rest of NY, or here where I am, Atlanta versus the rest of the state.

Here is an interesting site that breaks this political split down more with various maps and corrected projections. It is quite interesting and there are links to more detailed analysis. The gist of it is, in the big elections and the general political pull of the nation, it is urban versus everyone else all the time. It fluctuates a little bit, but not much really.

http://www-personal.umich.edu/~mejn/election/2008/

The quickest way to see it on that page is first look at the normal state by state red/blue split (this is a look at the 2008 election), then scroll down to the first "Election results by county" map. The differences are very easy to see there and profoundly obvious.

Causes all sorts of problems all the time, and will continue to do so. And it isn't fair either way you look at it, from either perspective. There really needs to be a different political arrangement, so the major urban areas can have various laws that fit them much better, but without insisting on the same exact laws in the rural areas, and vice versa. As in maybe drop the notion of the political boundaries we have now and switch to what the boundaries really are, smallish city-states and huge "other than that" states as separate political entities.

    We have federal and state governments that keep trying to hammer square pegs into round holes and it just doesn't work very well, there is no real compromise even possible that would work and be more acceptable to all concerned.

    And it's not like this wasn't anticipated back at the beginning of our Union, this was the original idea with having both senators and representatives, instead of just representatives...That fix didn't last long, primarily I think because they didn't think it through far enough ahead in time to the point where there would be so many multi million person large cities, inside virtually every state in the nation. They thought it would remain like less populated states versus more populated, not realizing the political split would fall inside every single state for the same reasons, that urban realities are just different from the rural and suburban.

Re:red and blue

[scotch]

There's this core assumption in your post that geographical areas are somehow important independent of the people that live there, that somehow a person occupying 100 square miles is more important that a person occupying 1/10th of an acre. Land without people is just land. People without land are still people.