Income Tax Quashed, Ballmer To Cash In Billions 650
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?"
And so what? (Score:3, Interesting)
There's more to it. (Score:4, Interesting)
Re:He wouldn't be paying income tax on that (Score:2, Interesting)
If you would have read above, you would see the tax DOES apply to capital gains. Also, it applies to anyone who makes more than 200,000 a year, so it would hurt his ability to recruit management employees.
Not really trying to start a war, but people should actually read before they post. The capital gains part is right in front of your face in the paragraph above.
Microsoft's Lost Decade (Score:5, Interesting)
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.
The payday comment is a lie (Score:4, Interesting)
> ...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.
Re:There's more to it. (Score:2, Interesting)
If we seriously want to move in this direction, we need to first remove all the potential, and current, corruption that already exists.
If we can, I think the best capitalist markets are those best suited for being oriented toward such a tax-governance approach; but you cant let the fox guard the hen house.
Why I voted against WA state income tax (Score:5, Interesting)
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.
Re:And so what? (Score:4, Interesting)
Re:Not just Microsoft (Score:3, Interesting)
Precisely. You can see why 1098 failed in another initiative that passed: Initiative 1053 (which requires a 2/3 vote of the legislature to raise taxes). This is the third time Washington voters have instituted such a restriction. The legislature keeps getting rid of it after the requisite two-year waiting period. It's clear to most Washington voters that if an income tax in any form were to be passed, the reaction would be much like a junkie employed by a pharmacy: just wait until the boss leaves the store and then get your fix.
Re:I live in Seattle. (Score:3, Interesting)
Agreed 100%. I live in Washington and voted this down because the sales tax is already at 10% for us living in Seattle. No way I'm giving the legislature the ability to add an income tax on top of that. If they want to make the tax system fairer, they should pass a constitutional amendment removing all sales taxes and instituting an income tax. Like you said, one or the other, Not Both!
Strange bedfellows (Score:3, Interesting)
The income tax initiative was pushed by Bill Gates Senior, the father of Slashdot's favorite person. His son also (eventually) came out in favor of it. But Ballmer and Allen were both against it, IIRC.
Washington state has a very regressive tax structure, with a stupidly high sales tax rate that IMO puts way too much of a burden on lower income people. But the stupid thing was that the income tax measure didn't really address the sales tax inequity - instead, it was going to lower parts of our property taxes and also cut the B&O tax - neither of which would directly benefit low-income people. I voted for it anyway because I thought it was a small amount fairer than the current system - but it didn't really get at what I see as the underlying problem here.
That's the thing about the income tax initiatives that've come through our state. There've been a few in the last 30+ years, and they never make a significant dent in the sales tax rate.
Taxes are going up on your entire net worth (Score:4, Interesting)
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.
Re:I live in Seattle. (Score:3, Interesting)
Ah, Moron's calling Moron's Morons. Seeing as that's the game this Moron will join in. You Moron.
The beauty of any tax proposal is to convince everyone else to raise their taxes so you can pay less. If all things are equal and the same "tax" revenue is required, the only way to lower taxes for ANYONE in the system is to raise taxes on someone else. More than 50% of the population doesn't even pay federal income tax right now. In fact a significant percentage pays "negative" taxes through the earned income credit.
Your "fair"-tax proposal would raise the taxes of everyone between the poverty level and middle income earning levels. That's a fact. This income group is also the largest group of tax payers, it's also the group where children are most likely to be present and comprises the largely of blue collar workers. The benefit of a tax increase on this large portion of the population that is barely making end's meet is to decrease the tax level of the highest 1% of earners. The irony of this is to call the tax "fair", this is the typical game the highest earners play because by percentage they pay the highest percentage of taxes, ignoring of course that they pay a lower percentage of total income than anyone else.
I won't argue that the tax system is hideously broken, but the solution isn't to butt fuck the blue collar workers in the name of a tax cut for the ultra-rich. If you want to fix the tax system in a fair way eliminate ALL deductions. Mortgage, children, charity, etc and make all earnings income (eliminate the idea of capital gains being different than income) and you will restore the fairness. The progressive tax is fair because everyone pays exactly the same rate for every dollar earned, the system is gamed with "deductions" that congress added at the request of special interest groups. Those deductions create the loopholes to allow those with the means to game the system and reduce their tax bill.
There's a lot more to this than Ballmer (Score:5, Interesting)
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.
Re:National or state makes quite a difference (Score:2, Interesting)
It amounts to the same thing. The workers who make the product pay income tax, the corporation pays taxes on any profits it can't hide, all this income comes from the corporation, but all of the corporation's income comes from the sale of the product or service.
When the poor person, supposedly at the 0 tax level, buys that product, all those taxes are built right into it because in the end, that's the only place the money can come from. This would be fine if the poor could be exempt from it up to a survival level, but that's almost impossible to do without a known flat rate to recompense them at because as you say, tax structures vary enormously. Which is one of the huge flaws in the current system. Look at Google paying a few percent as compared to the rate I pay, which is well over ten times that. And I assure you, I don't make as much as Google does.
So again, a retail flat tax with survival level support for everyone built in cuts right through all the problems. Tax collection, the IRS itself, all the corporate nonsense about figuring out and collecting employee taxes, accountants... it all goes away. You pay x% on retail purchases, you deposit your monthly government tax refund (or they electronically stuff it in your bank) and you're done.
Not that I believe it'll ever get implemented, of course, because it removes the special advantages for the rich and outright levels the playing field -- and they'll never stand for that -- but it's actually a fair solution.
Re:No surprise (Score:4, Interesting)
That's a large chunk to be selling off just because of a tax. 75 million shares when out of something like 400 million total is more than just a tax issue.
Behind the scenes, he must not have much faith in Windows Phone 7 making them much money. But he would know that Microsoft has lost billions and billions on lots of products which have been, and continue to be, money pits.
LoB
Re:And so what? (Score:4, Interesting)
Why replace him with a random schmuck just because they'll work for nothing?
It's common enough for people below the C level. So much so that it has a special name: "offshoring". So why not? The unemployment lines are filled with people who were ready, willing, and able to work for one company for life and who routinely went the extra distance when it was necessary.
Quite a lot of people routinely go over 8 hours a day and quite a lot of people have a much bigger impact on people's lives than Ballmer. They typically make 40-100K/year.
Odds are, there's a nuclear plant close enough to you that you are really glad the people running it have made good and timely decisions every day. Their decisions affect millions of lives. The level of impact could be described fairly as life or death. If they screw up, they could easily kill more than 90,000 and leave a fair portion of their state uninhabitable for generations to come. People in other countries could easily suffer for their mistake. They don't make even 10% of what Ballmer does.
Airline pilots work crazy hours, rarely get to sleep in their own bed, and routinely have hundreds of lives in their hands. They would work more hours except that the FAA has determined that their job is sufficiently difficult that they cannot possibly do so without endangering lives. If they screw up, those lives will be over. Screw up enough and thousands more on the ground will die as well. Likewise they don't even make 10% of what Ballmer does. Instead, they keep getting asked to take pay cuts.
Meanwhile, Ballmer is "so confident" in his own ability that he wants to diversify in case MS flames out.
Re:No surprise (Score:3, Interesting)
Let me be blunt again: Fuck public education. It's not more important than educating my children. I care about my family. That's it. My wife, and my children.
This attitude is how we get No Child Left Behind producing legions of dipshits who are going to have no choice but to enlist in the military because no one else will hire them, and to serve as cannon fodder because any more desirable job requires the ability to use your brain. These useful idiots will continue to pad out our standing armies so that we have the power to project our might across the globe for economic gain for the same people who convinced you that public school is a bad idea. The bad idea is letting the government fuck it up...
Re:He wouldn't be paying income tax on that (Score:3, Interesting)
Re:He wouldn't be paying income tax on that (Score:3, Interesting)
Trickle down economics? The system you described is exactly not trickle down economics. That's the one where it doesn't matter that the rich get richer, because they are then willing to pay higher for the services and goods they use, thus letting the money 'trickle-down' to the lower economics strata.
The problem is that 'trickle-down economics' only works when you have continuous wealth generation. India is a perfect example of how it works well when you have an insane 8.5% growth rate. The US has not exactly been generating net wealth for some years now, rather its propped up by an incestous cycle of self-lending.
As for Europeans, I live in Germany. We have high taxes, and we enjoy superb public transportation, almost free education up to the Doctorate level, public healthcare and so on. By I assure you, Germans are getting awfully pissed about paying for bail outs of some countries (I am looking at you, Greece) who can't seem to balance their cheque books.
Re:National or state makes quite a difference (Score:3, Interesting)
My provincial government has been implementing something like this, cutting income tax and broadening the sales tax.
The way it's working is businesses don't pay sales tax (actually reimbursed it at 100%) which is the selling point, attract more business. So it's only regular people who pay taxes.
And people don't get pay raises anymore because with the lower income tax they have more money. In practice wages are dropping as in the plumber example up the page. Before he charged a $100 and took home $65. Now he charges $80 + sales tax and takes home $65 which has depreciated by 12% due to having to pay sales tax when he spends his wage. The customer is still paying $80 + 12% tax but as his take home pay has actually dropped due to inflation that is a bigger chunk of his income.
Meanwhile big business, while saving money due to simpler accounting and dropping wages, keeps raising prices.
Re:National or state makes quite a difference (Score:3, Interesting)
And once income tax is eliminated you only pay the plumber $65 cash to avoid the service tax so he has the same take home cash. Of course when he spends that $65 at the grocery store he discovers that the bill is actually $75 due to the sales tax.
So you're ahead $35 due to only paying $65 cash instead of a $100. Which is lucky as your employer has cut your pay to keep your take home the same. The plumber is behind $10 due to sales tax. And the government is behind $25 due to the underground economy that springs up due to people avoiding the sales and service tax.
The only winner is your employer who now has an extra $35 to invest in China.
Re:I live in Seattle. (Score:3, Interesting)
The other thing about the poverty level is it varies a lot depending on where you live. Generally it seems to cost more to live where there is any work.
Re:I live in Seattle. (Score:3, Interesting)
I've always found it odd that Washington has such a regressive state tax (only sales tax), while just south in Oregon we have a very progressive tax (only income tax).
There must be some historical reason because overall the demographics of each state are very similar.
Re:He wouldn't be paying income tax on that (Score:3, Interesting)
Sure, German banks hold Greek bonds. So basically Germans have had to lend money to Greece and then let it go. That counts for about 45 billion Euro. And then the total bailout package cost about 120 billion Euro. I don't know how you figure that the Euro came at the expense of "places like Greece". Places are Greece are not forced into the EU or the EEZ. They vie for it. And Germany has always been the most generous funding source for the EU.
As Time puts it [time.com] :
According to polls conducted in Germany last week, 53% of people want Greece tossed out of the euro zone if it can't resolve its deficit dilemma without outside funding — a financial helping hand that a full 71% of Germans don't want their government to extend. Though no similar surveys have been conducted in France, leaders there say the public sentiment is much the same. "There are cultural differences for why the French wait for something to happen before reacting when the Germans respond as they see it developing, but opposition to a bailout — if that happens — is likely to be similar in both [countries]," says an adviser to French Economy Minister Christine Lagarde, who commented on background due to the sensitive nature of the situation. "Try explaining to public opinion you're using its money to help Greece after it kept building up debt and lied about it the whole way."
Re:He wouldn't be paying income tax on that (Score:1, Interesting)
The Republicans have done a wonderful job of demonizing Democrats. When Pres. Obama put Pres. Bushes war costs on the budget, the Republicans said Obama tripled the deficit. While Pres. Bush started the war in Afghanistan, it's, "Obama's war." The Republican's tell outright lies about Pres. Obama's policies like, "Don't let anyone get between you and your doctor like the Liberals want to do." Like insurance companies don't get between you and your doctor.
But the Republicans have the most special weapon in the world: Hope. They keep alive the hope in America that you will someday be rich enough that you will need their protection from high taxes. There are an amazing number of people who think that they are helped by Republican policy. Take the so called "Death Tax." In the U.S., any inheritance over $2million was taxed. So few people are affected by this, yet it is an important part of the Republican platform and people buy it!
The U.S. has reached the point where so many jobs have been outsourced that we've begun to turn on one another; there's very little compassion in our politics. The election of the Republicans are an example of people with very little trying to hold on to what they got.
Re:I live in Seattle. (Score:3, Interesting)
I agree with you that the military budget isn't the only villain when it comes to out of control spending.
But your assertion that the military budget has been decreasing for the past fifty years (except for post 9/11) is not a convincing argument. "Post-9/11" means the past decade, during which the budget has increased a LOT. A good portion of military spending has not even been recorded in official budget figures, because it was in the form of emergency funding rammed through congress to support the war on terror. Our intelligence budget alone has tripled in the past three years, thanks to the additional fiscal drag of new organizations like the DHS.
Prior to 9/11, the Cold War saw our military spending ramped up so high that just trying to keep up with it bankrupted the Soviet Union.
All of which is irrelevant, because your argument is based on the assumption that spending only slightly less on defense than we were during a global war is somehow acceptable.
Military spending is vital, but it is largely non-productive. The military consumes vast quantities of resources and, under ideal conditions, does very little. When it is busy, it can bankrupt whole nations, or plunge them into political chaos. Unrestrained military activity has preceded the fall of almost every government in history.
It will likely do so again.
Re:National or state makes quite a difference (Score:3, Interesting)
I didn't say it was part of the same transaction. You did.
Actually you said:
So the net tax rate on the plumber for that transaction is 57.75%.
...implying that there was a single tax rate of 57.75% on one transaction.
Poor choice of wording aside, the argument still falls down on a number of grounds:
Wrong. California is no longer a jobs magnet. (Score:4, Interesting)
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 [wsj.com]:
Here's a comparison between California and Texas that explains, in great detail, how and why Texas is kicking California's ass. [texaspolicy.com]. This is also why more than half the new jobs created in the last twelve months were created in Texas [nationalreview.com]. Another reason is strong vs. weak or no public sector unions [nationalreview.com]. 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 [city-journal.org]:
Here's a slightly older analysis from 2007 [alec.org]. 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.