Microsoft To Get $100M Annual Tax Cut and Amnesty 406
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."
Bill's Sponsor Also Ex-Microsoft Employee (Score:5, Insightful)
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 [wa.gov]:
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 ...
every state does this? (Score:3, Insightful)
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.
"To get"? (Score:5, Insightful)
Scintillating!
Re:Hardly Surprising (Score:5, Insightful)
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 :(
Makes sense. (Score:0, Insightful)
Ofcource Washington state is going to do all it can to please the biggest and most successful software company in the world. When you have a company that employs tens of thousands of higly paid engineers, you'll get special favors too. This isn't specific to MS (well only on slashdot) every large company enjoys this advantage.
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.
Re:The other side (Score:5, Insightful)
Corporations are people (Score:3, Insightful)
I can't help but notice that this article comes on the heels of the OK of corporate personhood status.
I can't find the words that compares the figures from TFA to those on everyone's recently received W2s.
Re:Hardly Surprising (Score:5, Insightful)
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."
Re:Bill's Sponsor Also Ex-Microsoft Employee (Score:5, Insightful)
Y: So what? Under the last administration they shot little children too.
X: oh; that's okay then. Sorry I mentioned it.
This really doesn't horrify me that much. (Score:3, Insightful)
I mean, if the summary is right that this dude's district is chock full of Microsoft people, isn't it basically his job to propose legislation that his constituents favor?
Now, if the rest of the state's representatives actually go along with it, you have a different story.
Maybe Toyota should take a cue (Score:2, Insightful)
Back in the 90's when MS was in trouble with the DOJ they had an epiphany. Hire lobbyists and donate to campaigns to get the feds off your back. It hasn't failed them since.
Perhaps if Toyota could field some candidates, or buy a few, they would get rid of their latest headache.
Re:Microsoft has a say (Score:3, Insightful)
Except that this is WA--where there is no state income tax. So WA state isn't getting all that much from MS employees (who probably buy quite a bit online and dodge the local sales tax too).
Re:Bill's Sponsor Also Ex-Microsoft Employee (Score:5, Insightful)
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.
Geese and golden eggs (Score:4, Insightful)
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:Makes sense. (Score:5, Insightful)
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 [mozilla.org]
Blow me.
Re:The other side (Score:5, Insightful)
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:Makes sense. (Score:3, Insightful)
There are legal distinctions between for-profit and non-profit companies that have nothing to do with software licensing. If Mozilla is a non-profit, it operates under a different set of restrictions than Microsoft, but these restrictions do permit business deals. Why do you think the Salvation Army operated a store in our neighborhood, if selling stuff would make them lose non-profit status?
Re:Bill's Sponsor Also Ex-Microsoft Employee (Score:2, Insightful)
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. 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. The end result would be a wash for the average United States citizen, prices would drop across the board, but we could add in a federal sales tax to make up for the revenue shortfall and our goods would be competitive in the world market again.
Re:I don't see what the trouble is... (Score:5, Insightful)
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:Geese and golden eggs (Score:3, Insightful)
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?
Re:i dont see any problem (Score:4, Insightful)
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:Bill's Sponsor Also Ex-Microsoft Employee (Score:4, Insightful)
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:Hardly Surprising (Score:5, Insightful)
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:Bill's Sponsor Also Ex-Microsoft Employee (Score:5, Insightful)
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:Hardly Surprising (Score:3, Insightful)
No, but pretending that "chosen few" are not really in power is something relatively recent (18 century recent, to be exact).
Re:Bill's Sponsor Also Ex-Microsoft Employee (Score:-1, Insightful)
Re:I don't see what the trouble is... (Score:5, Insightful)
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:Bill's Sponsor Also Ex-Microsoft Employee (Score:5, Insightful)
Re:The other side (Score:5, Insightful)
Illinois is set to become the next California. This post points [slashdot.org] 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 (Score:5, Insightful)
Re:i dont see any problem (Score:3, Insightful)
Bush and Obama are exactly the same. Why people keep trying to bash the other when someone bashes one is beyond me; it's the stupid two-party mentality at work, and what's keeping any real positive change from happening. Point out how bad the current party is, and get everyone to vote for the other party, which is in reality exactly the same.
As you pointed out, the Democrats were in control of Congress during the AIG bailout. Then Obama took over, and what changed? Nothing. Continuing bailouts, continued wars, etc.
Re:Geese and golden eggs (Score:4, Insightful)
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:Hardly Surprising (Score:2, Insightful)
Why are we electing people who bother paying back the people that supposedly paid to put them in office?
There aren't any legal consequences if you take some election funds and then screw those people over, you just don't get reelected (or maybe you do...).
Re:I don't see what the trouble is... (Score:1, Insightful)
Being Punished for Being Successful!!! (Score:5, Insightful)
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 [wikipedia.org]
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.
Re:I don't see what the trouble is... (Score:5, Insightful)
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
Re:Bill's Sponsor Also Ex-Microsoft Employee (Score:2, Insightful)
Wouldn't it be great for residents of WA state, if they could stealthily raise taxes on the entire world though?
Also, I don't entirely buy that a tax increase on a monopoly would inherently increase the price of their product correspondingly.
And MS has a monopoly (protected and enforced with tax money) on selling MS software. That monopoly is was keeps the price over a few USD a copy.
Re:The other side (Score:3, Insightful)
Giving 'tax breaks' doesn't seem to be sustainable long term for states.
It's sustainable as long as the voters don't vote themselves enough "gifts" from other people's money to the point where the state can no longer afford to give tax breaks to attract business/wealthy individuals.
Unfortunately, "Take some damn responsibility for yourself" buys less votes than "I'll give you more gifts from the public treasury!"
The Tea Party should adopt a new slogan: "No representation without taxation" Honestly, if you're not paying for the government you vote for, do you deserve to influence it's direction?
Re:Hardly Surprising (Score:1, Insightful)
If enough people do not believe the system is fair enough, it may end violently if the powers that be cannot convince a sizable proportion of the people that any any action against said powers is the act of terrorists and another sizable proportion of the people don't remain apathetic.
Re:Bill's Sponsor Also Ex-Microsoft Employee (Score:2, Insightful)
Re:Bill's Sponsor Also Ex-Microsoft Employee (Score:5, Insightful)
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:Ummm.. No. (Score:3, Insightful)
No, YOU are the one who is wrong. Go read that again. This is NOT an income tax! It's called a B&O tax, and it is on gross revenue, not on net profit. So your expenses are not deductible, nor depreciated assets, etc. It is a tax on the money coming in the door. Period.
The advantages of a B&O tax for the state is that it is not subject to the restrictions (including Federal) that are placed on either sales taxes or income taxes. And yes, it has been challenged in court, more than once, and it's still there.
Re:Bill's Sponsor Also Ex-Microsoft Employee (Score:2, Insightful)
Your argument is basically a fallacy. Without any basis whatsoever, you've magically created some sort of line between a software company's tax rate, and the consumer price of goods.
The consumer price of goods isn't based directly on taxes MS pays though, it's based on what the consumer is willing to pay, and what the demand is for the product. Software publishers charge the highest price the market will bear within their desired sales volume (i.e. number units available) in order to maximize their profit.
The great thing about software is the costs to produce are very very low (on average) per unit, and the profits are extremely high. But to get those extreme profits, they are already charging as much for it as they felt they could charge, and increased costs do not change the retail price. Only changes in pricing pressure do that.
Here's the thing... since they are taxes they haven't already paid.. charging them now doesn't retroactively increase the price of already-purchased copies of Windows.
Also, due to competitive pressures in the marketplace, Microsoft can't simply raise the prices of their existing products. They would kill Windows 7 if they decided to raise the OEM price to $300 for Home Premium.
They can't increase the price in the past, so there's only one thing that can give their past profits get reduced.
This reduces the value of their company, and works against developing new products in as cost-effective a way, but it doesn't make the old products more expensive in practice.
Re:red and blue (Score:4, Insightful)
WA is screwed because of Olympia, NOT Microsoft... (Score:3, Insightful)
But class warfare is always a good way for the politicians to shirk their responsibility for the financial meltdown of WA State... Blame the MegaCorps, not the budget-busting increases we've seen over the last 5 years...
Re:Bill's Sponsor Also Ex-Microsoft Employee (Score:5, Insightful)
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 (Score:3, Insightful)
For the cost of the stimulus package, personal and corporate income tax could have been HALVED for three years. That would have actually worked to help the economy; but it doesn't give the state power, so it wasn't an option.
Re:Bill's Sponsor Also Ex-Microsoft Employee (Score:5, Insightful)
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 (Score:1, Insightful)
Really? Because half of the stimulus package was tax cuts.
Incidentally, even many conservative economists generally agree that tax cuts have less of a stimulative effect than government spending, because consumers generally save tax cuts during a recession.
Re:Bill's Sponsor Also Ex-Microsoft Employee (Score:3, Insightful)
"Actually, the SS program is _not allowed_ to build up coffers... by design (IIRC)." :)
Actually, that's incorrect. Although I will agree with you that its coffers are barren "by design".
"So that's why I give the example of me investing my own money in government bonds: More return AND more security."
I can assure you that if they can't afford to pay SS, they won't pay your bonds either. You might get more return on your bonds but US government bonds have a very, very low return. The ONLY reason people buy them is that they are safe -- never for their return.
"Come up with a real argument based on fact rather than partisan buzzwords."
I wasn't trying to hit you with "partisan buzzwords". Most people don't realize the state of things at the time. It's a fact. Research it because it's a very interesting period in history.
"But, honestly, the role of government is not to take care of you (other than for thing such as the common defense). The best government is one that gets the hell out of your way and lets you take care of yourself... or fall on your ass if you fail to do so."
I use to believe as you do. Truely. In a perfect world, that's how it should go but unfortunately most people are too fucking stupid to take proper care of themselves or their finances. Without SS, you would have shitloads of old homeless people all over the fucking place (like we did in the 30's) and people live to a very old age these days so it would be even worse. People don't like to see homeless all over their neighborhoods. SS is a reasonable compromise between homeless everywhere and a total nanny state. Ideal worlds just don't exist my friend. You have to forget ideologies and do what's practical.
Re:Bill's Sponsor Also Ex-Microsoft Employee (Score:4, Insightful)
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.