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Income Tax Quashed, Ballmer To Cash In Billions
theodp writes "Washington's proposed state income tax not only prompted Microsoft CEO Steve Ballmer to spend $425,000 of his own money to help crush the measure at the polls, it also inspired Microsoft to launch a FUD campaign aimed at torpedoing the initiative. 'As an employer, we're concerned that I-1098 will make it harder to attract talent and create additional jobs in Washington state,' explained Microsoft general counsel Brad Smith. 'We strongly support public education, but we're concerned by key details in I-1098. This initiative would give Washington one of the top five highest state income tax rates in the country. I-1098 would apply this tax rate to all income, including capital gains and dividends, and would not permit any deductions for charitable contributions.' Nice to see a company take a principled stand, backed by a CEO who's not afraid to put his money where his company's mouth is, right? Well, maybe not. Just three days after the measure went down in flames, Ballmer said in a statement that he plans to sell up to 75 million of his Microsoft shares by the end of the year to 'gain financial diversification and to assist in tax planning.' Based on Friday's closing price of $26.85, the 75M shares would be valued at approximately $2 billion. All of which might make a cynic question what was really important to Microsoft — public education, or a $2B state income tax-free payday for its CEO?"
A corporation is required to maximize the profits for its share holders. Ballmer is a major share holder. Of course Ballmer's profits matter more than public education.
Palm trees and 8
Income tax is on income, not capital gains. He wouldn't have been paying income tax on his share sale anyway.
And his argument was that it would hurt his ability to attract talent. Unless by talent he meant himself I fail to see how what he does with his assets has to do with this issue.
Can you be Even More Awesome?!
Just because the CEO then uses the tax free environment he helped create the article questions his intentions? Of course it was going to benefit him greatly, and just because it does, doesn't make any of the prior points against the tax less valid. Its his money, he worked for it. Get over it.
"Cowardice in a race, as in an individual, is the unpardonable sin." --Teddy Roosevelt
The biggest reason why I-1098 didn't pass has little to do with Ballmer. I believe the biggest reason was that in only two years the law makers could modify the tax to include all Washington tax payers, not just the rich. There is quite a large distrust of the spending habits of the progressive law makers here so 60% plus of voters decided not to risk it.
"There are four boxes to be used in defense of liberty: soap, ballot, jury, and ammo. Please use in that order." -Ed H
It wasn't just Steve Ballmer or Microsoft fighting I-1098 ... this measure was very unpopular all across Washington State and failed at the polls by a 65% - 35% margin. Washington State is one of the few states in the US without a personal income tax (the sales taxes here are very high to make up for the revenue deficiency). I-1098 would have introduced a personal income tax on the "richest" residents (those making over $200K individually or $400K as a family), but the reason it failed by such a wide margin is that most Washington residents (including me) believed that once they introduced a personal state income tax here, the politicians would plead "necessity" and keep lowering the threshhold over time to the point where most residents would be paying it, and without any decrease of the sales tax to compensate. The majority of the population here is all in favor of education and healthcare, we just don't believe that a state income tax is the way to fund them.
FWIW, Microsoft and other large businesses in Seattle do have a legitimate interest in avoiding a personal state income tax, as for recruiting and keeping high-priced talent there is an advantage for them to come to Redmond and live in a state with no income tax vs. going to some other company - say, in California - and paying the tax rates there. An equivalent pay job offer in the Seattle area vs. many other states actually means more take-home pay here.
"95% of all Slashdot
It is staggering to look back at the decade Ballmer has been in charge:
* Stock price has been effectively flat for an entire decade
* Lost hundreds of billions in market cap since Gates left
* The cellphone market failure
* The Xbox fiasco
* The search market failure
* The online services failure
* The portable music market failure
* IE's stagnation and market-share shrinkage
* The resurgence of OS X market-share
If Ballmer is soon to get dumped from the top spot at Microsoft it is bad news for Linux and Apple whoever replaces him can't possibly do any worse than Ballmer's disastrous decade at the helm.
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Is that the biggest rat is deserting the sinking ship.
> ...a $2B state income tax-free payday for its CEO...
He is selling the stock this year. The new income tax wouldn't be retroactively applied to this year. Whether it passes or not, it has no effect on the sale. Why lie and try to make it appear that they do? Your agenda is showing.
You are lying or out of your mind. A sales tax hurts low income people because they have to spend everything they make in order to live, and every cent they make is taxed. The rich can spend a tiny fraction of their income living in style, and keep the rest entirely tax free.
Anyone moderating his post as insightful is a moron.
The summary should have mentioned that the tax proposal was authored by Bill Gates Sr., and was supported by Bill Gates Jr., which is some pretty good evidence that Gates Jr. really has managed to separate himself from Microsoft.
As to why Ballmer is selling now, there's a pretty good chance it was for tax planning purposes. Many think there's a high chance the capital gains rate is going up soon, and so taking long term capital gains this year is indicated.
If you eliminate income tax, sales tax will have to increase considerably. Probably around 10-15 percent. At that price, people would likely shop elsewhere to avoid the state's sales tax. Especially on expensive items. Again, only the rich would have the means to do this. So you end-up killing local businesses as well as hurting those who have limited income.
Views expressed do not necessarily reflect those of the author.
Right now in washington, the income tax is political suicide. In order to take more money, they're trying to get the voters to pass it. Sure, they can't adjust it for 2 years, but after that.. well, we'll just lower the threshold by 10%. It'll only affect a small number of people. The rich people will already be taxed (so why do they care), and people below $180,000 still won't be taxed, so why do they care?
Next year.. wash, rinse, repeat.
That's why I voted against it even though I wouldn't have been taxed.
All of which might make a cynic question what was really important to Microsoft — public education, or a $2B state income tax-free payday for its CEO?
If the measure had passed, the tax would not have started until 2012, so that was a pretty stupid question. Ballmer's stock sale was income tax free regardless of what happened with 1098.
That sounds like part of the Fair Tax proposal. It eliminates taxes for low income citizens entirely.
I'm in favor of the Fair Tax. It's one of the best and fairest tax plans I've seen in my 57 years.
I live in Wisconsin too, and my house is worth more than double that and my property tax is $6500 a year. My state income tax doesn't come anywhere near my federal income tax. Even the example property tax bill on the Wisconsin Department of Revenue FAQ site shows a $367,000 home/property paying $5741. http://www.revenue.wi.gov/faqs/index-pt.html State sales tax is 5%, and some counties tack on another .5%. Highest counties in the state tack on .6% for a maximum sales tax of 5.6%.
http://www.revenue.wi.gov/faqs/pcs/taxrates.html#txrate2
So yeah, I'm guessing you are exaggerating a wee bit.
You, moron, need to read the national fairtax bill. It reduces the taxes on the poor to absolute 0. If you make below the poverty limit, you get a 100% refund of the taxes, with an increase for each dependent. If you did not work at all this year, you would get a refund of taxes up to the poverty limit, as if you had worked (the same refund, for doing nothing). So your argument is null. Under that tax system, the poor would pay absolutely nothing, and would even get paid, if they didn't work.
Now if you are rich on the other hand, the tax would apply to all kinds of luxury expenses. Buying a ferrari? Well then you are paying 23% of the purchase price in a tax. Buying a plane? The same.
By all means, keep supporting the progressive tax system. I will be more than happy to make millions I can keep shifting through tax loopholes because you are unwilling to close them. The reason a consumption tax is better, is because you can determine your tax overhead at the beginning of the year. No need to manage taxes for your employees paycheck, figure out your deductions, find tax credits, buy your car with your company, buy your vacation home as a company asset. It would no longer matter, because all of these things would become moot points. You would pay taxes on them, end of story.
It's a shame that you started an otherwise cogent retort with 'You, moron', because that typically makes people tune the rest out. Try civil debate sometime; you may find that you get better results.
I'm not really sure what you guys are concerned about. I get taxed out the ass but I don't really see much of a problem with it.
Amusingly enough....Maryland has also been a leader in the nation for job growth for a large duration of the "recession". We were far less hit with it than anyone else around us.
In other words, you actually paid the plumber $65, and of course, that's as much, or more, than the service you got, and you paid the government $35;
You just desribed a tax on INCOME rather than a tax on PROFIT.
That's not how it works. Nice try though.
Divide a cake by zero. Is it still a cake?
I voted for the income tax, though I didn't expect it to pass legal challenge. Rich people can buy a lot of lawyers. And in the end, we are back where we started: An antiquated, recession-prone sales tax that hits poor people a lot harder than rich. Washington's the sort of state I thought would be daring enough to perhaps someday implement a negative income tax, but if we can't even pass a traditional income on less than 2 percent of the state, then I really don't know about that. I'm just appalled people are willing to accept the status quo. But the most interesting point here is that this also say something about certain (but not all) macroeconomic theories. Some theories rest on the idea that individuals will always make decisions based on their own personal interests. Passing that income tax would have been in the interest of any person that made less that 200k a year, that is to say, about 98% of the state. The prop lowered taxes on these people. They would have received a direct financial benefit. And yet they voted it down by something like 60%. That either means that people are incredibly concerned about the welfare of rich people, or that people are more than willing to make decisions that harm themselves if they are convinced to do so by advertising.
--The universe will not be altered by forum threads, even those which are very wry. --Tycho Brahe (Penny Arcade)
Don't you worry about income taxes.
I am against income and payroll taxes (that's my bias) I am also pretty much against all government.
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Realize that taxes are going up. Not only taxes on your income, don't you worry about your income, taxes are going up on your entire net worth.
Gov't is printing money.
Fed is printing hundreds of billions of dollars.
This automatically takes away your purchasing power.
Inflation is rampant.
Fed is causing rampant inflation by printing money. By printing money they are taking away your savings in form of dilution of your purchasing power.
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Your purchasing power is going down with every new dollar the Fed is printing.
Note, that the Fed came out (helicopter Ben) with a promise to print 600 Billion dollars more over the next 7 months.
That's just by June and it's about equal to the amount that the Federal gov't will borrow over the same amount of time. This means they are the lender of last resort to themselves. This also means that they know the US bond is on its last legs - nobody wants to buy more.
US gov't is broke. It's monetizing its debt and it's trying to cover that they are doing it, but it's not working as a cover, it's too "in your face".
Abandon ship, get rid of your US holdings, they are becoming worthless fast.
You can't handle the truth.
Income tax is precisely how it works, son. Welcome to the real world.
If you genuinely think that's how it works, I suggest you ask an accountant what "tax-deductible" means... briefly, you're paying a plumber $100, and as part of the same transaction he has to pay an electrician $65, then he does not get taxed on that $65.
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I live in Washington. Here's the deal. The State has increased its spending 80% in the last ten years when inflation and population growth has been 40%. No one can see a 40% increase in services. They just spent more money. Now that the recession has reduced the state coffers the State is whining that it has a deficit. If the State went back to a 40% growth rate over the last ten years there would BE no deficit.
Now, this is like the umpteenth time the voters have said NO to s state income tax. Why? Because we know it's just the camel's nose in the tent. They're trying to get a class war going so all the people will want to tax the "rich," then when that is implemented, in two years the state legislature will reduce the threshhold so that we all pay or inflation will be so bad we'll all be in the 'rich' bracket. No one trusts the legislature.
One of the ploys was to say "it's for the children." Right. Just like the lottery was supposed to be for education, the legislature has shown its stripes so many times by raiding earmarked funds that it makes a travesty of the claim.
Voters also passed, for the third time, an initiative calling for a 2/3 vote of the legislature to raise taxes and fees. The legislature has managed to override the last two. One of the complaints was, why should 51% vote for a 2/3rds majority? OK. This time we approved the intitiative by 67%. Capiche? We don't have a revenue problem in Washington. We have a spending problem.
I don't care one whit what Ballmer & Co do with their money. I just know my money is more precious than his because I don't have anywhere near what he does. And I'm tired of having it confiscated by a state that doesn't understand it has to live within its means.
How about a moderation of -1 pedantic.
Income: $30,000
Standard Deduction: -$5,700
Taxable Income: $24,300
Tax on first $8,375 @ 10%: $838
Tax on remaining $15,925 @ 15%: $2,389
Total Tax: $3,227
Did you look up what current tax rates are? That person would pay about 37% more in tax under your plan ($4,409 vs $3,227). They'd have to put nearly $5,000 per year into savings just to end up with the _same_ tax burden.
On the other hand, a person making $250,000 per year and spending $150,000 of it would end up paying less than half of what they do now ($65,736 vs $32,009). Even if they spend every penny, they'll still only pay $55,000 for a savings of over $10,000.
Sigh, it always amazes me that people are this willfully ignorant.
Fair tax isn't what they're suggesting. This is a way of allowing Billionaires to pay even less tax than they do currently. Under it you'd pay absolutely no tax on investment income or income of other sorts. Meaning that as long as you don't spend it you don't pay tax.
The problem with that is that at some point somebody has to pay taxes. This is the same sort of incompetent tax policy that the GOP has been pushing for years. Cut your taxes and then we'll all have more money. The problem is that you can't cut taxes and have an out of control military budget. You get one or the other, not both.
The best plan I've heard that we could reasonably see implemented was Steve Forbes' flat tax proposal. The tax as I understand it is actually lower than what most folks pay now, with generous rebates for people in lower income brackets that are behaving responsibly.
Run the numbers for Fair Tax over a longer term period. It continues to shift wealth to the wealthy, further increasing the income disparity between classes in our nation. The bottom line is that money makes more money, and the only way to stabilize disparity is to raise taxes on those with more money. I'd be happy if we could keep the ratio of class wealth consistent, instead of watching the rich get richer and the poor get poorer.
I think you'll find that this is impossible. Richie Rich has a billion dollars and makes 20 times more interest in a year than he spends. His net worth goes up over time unless you tax him at over 95%, and if you do anything even resembling that, he moves to a country with a lower tax rate. Joe Sixpack makes $35,000/year and spends all of his after tax income, regardless of whether his tax rate is 100% or -100%.
The trouble with class warfare is that it isn't really a war. Poor people are never going to have as much money as rich people short of some communist utopia. The goal should be to benefit everyone, not some poorly planned "redistribution of wealth" zero-sum game. Measures aimed at punishing rich people rarely do anything other than screw over the middle class (see also: Alternative Minimum Tax not indexed for inflation) and thereby push more of the middle class into the ranks of the poor instead of the opposite.
To clarify the tax situation, There is NO income tax in Washington State. Sales tax is NOT applied to food and prescription medication. The proposed income tax was on income over $250,000.00 a year.
There are a bunch of arguments for why the rich should pay more (not just dollar wise but percentage wise).
Off the top of my head:
1. They can afford to. It costs $X to run the government and lowering the burden on the poor by increasing that on the rich is considered a reasonable thing to do by many people (not you obviously).
2. They use more government resources and hence it's fair they pay more. The military provides more benefit to the rich - they lose more if the Russians invade and confiscate all the property. The legal system provides greater protection (in terms of the value protected) for their property.
3. The marginal propensity to consume falls as income rises. If you think the economy is demand driven then taking more money from the rich and less from the poor will be better for the economy.
4. Income exhibits diminishing marginal returns in terms of utility (a person earning $100,000/year gets less utility from an extra $1000 than a person earning $25,000/year does). Hence taxing the rich at higher rates than the poor will result in higher total utility than a flat percentage system.
You don't need to tax them at higher rates. Percentages already do that. Just tax them at a flat rate.
Do the math. You get taxed 10% on $25,000.00, they take two thousand, five hundred bucks from you. They tax some rich person at 10% on twenty million dollars, and they take two million dollars from them.
Flat tax, two people contributing, one is you at about two thousand, five hundred bucks the other is the rich guy at two million dollars. Total is two million, two thousand five hundred dollars. Of which YOU paid about 1/800th of the total. Say they build a highway from this taxation. Now you and the rich guy can drive on it. Does that feel like you're not "redistributing the wealth"?
Isn't that enough, without the rich guy paying an even higher percentage?
You're certainly entitled to your opinion, but me, I'm not rich, yet a flat tax rate seems pretty severe already, and I'm perfectly satisfied with it. The problem as I see it is that the rich aren't paying that rate. Look at what Google just paid in taxes. And it's perfectly legal, by which I mean to say it's perfectly broken.
I've fallen off your lawn, and I can't get up.
You're wrong. High tech companies are fleeing California for low tax states. In fact, high earners inevitably flee high tax states for low tax states:
Here's a comparison between California and Texas that explains, in great detail, how and why Texas is kicking California's ass.. This is also why more than half the new jobs created in the last twelve months were created in Texas. Another reason is strong vs. weak or no public sector unions. One thing that articles notes:
High tech employees are fleeing California for Texas, because they can keep more of what they make, the government isn't going bankrupt, and the roads and schools are now better in Texas. Despite all the money California spends on a a bloated public sector, the actual core services delivered are worse in California than they are in Texas:
Here's a slightly older analysis from 2007. Since then, of course, things have gotten better (relative to the rest of the nation) for Texas and worse for California.
Low taxes and small government create jobs. High taxes and big government destroy jobs.
Lawrence Person (lawrencepersonh@gmailh.com (remove all "h"s to mail)
http://www.lawrenceperson.com/