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Creative Capitalism Gets Microsoft $528M Tax Break

CmdrTaco posted more than 6 years ago | from the well-good-for-them dept.

Microsoft 545

NewsCloud writes "Microsoft makes products in Washington but records software sales to PC makers and high-volume customers through an operation in Nevada, where there is no corporate tax. So Washington has missed out on more than half a billion in taxes; revenue it could use for badly needed infrastructure needs — such as the needed replacement of the 520 bridge which connects Seattle ... to Microsoft. Reported by Slashdot in 2004, the numbers have increased with the company's growth to approx. $76M in savings last year alone. The author questions the legality of the practice given Microsoft's 35,500+ employees and 11.2 million square feet of real estate in Washington state."

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I wish I were dead. (-1, Redundant)

Anonymous Coward | more than 6 years ago | (#22292024)

Dead.

Re:I wish I were dead. (-1, Offtopic)

Anonymous Coward | more than 6 years ago | (#22292316)

Then kill yourself.

Re:I wish I were dead. (0)

Anonymous Coward | more than 6 years ago | (#22292850)

better than using Microsoft's products

Re:I wish I were dead. (0)

Anonymous Coward | more than 6 years ago | (#22292968)

good luck.

"small government" (4, Insightful)

Anonymous Coward | more than 6 years ago | (#22292072)

Do I hear someone call for "Small government" ? This is what happens when the sheeple are being led by corporate hacks calling for small government: no checks on the corporations, while people are starving on the streets.

Re:"small government" (-1, Troll)

Arthur B. (806360) | more than 6 years ago | (#22292190)

I personally don't call for small government, I call for no government.

I don't see how this article relates to people starving on the street. "Need" does not constitute a legitimate claim to anything.

I am glad Microsoft managed to lower its taxes, it's theirs.

Re:"small government" (3, Insightful)

Anonymous Coward | more than 6 years ago | (#22292272)

Ok, so where are the employees educated before they get into MS service? I hate people claiming that the profits corporations make are entirely made on efforts of the corporation.

Re:"small government" (2, Informative)

Arthur B. (806360) | more than 6 years ago | (#22292530)

I am not making that claim, Microsoft is indeed benefiting from free roads, free education providing a better labor supply, and - most of all - patent and copyright laws. So I'm not saying Microsoft is responsible for all the profits made in the corporation, far far from it.

What I do claim is that they own their profit, regardless of "effort". If I build something with someone's help, I don't owe him anything just because he helped me, but because we agreed on compensation beforehand. There is no valid contract between the State and Microsoft.

You eat the food, you pay the bill (4, Insightful)

spun (1352) | more than 6 years ago | (#22292690)

There is no valid contract for you to pay for your food when you go into a restaurant, yet few people dine and dash. No one would assume the restaurant is just giving you the food for free. What there is is an implied contract. You eat the food, you pay the bill. With government services, there is the same implied contract. If you don't want to pay the bill, don't make use of the services. If you don't agree to pay taxes, go live somewhere else, you have no right to live here.

Re:"small government" (1)

Osiris Ani (230116) | more than 6 years ago | (#22292550)

Ok, so where are the employees educated before they get into MS service?
If you're implying that the answer to your question is definitively "Washington" — thus ignoring that Microsoft hires from... well, everywhere — then you're kidding yourself for the sake of your argument.

Who owns my education? Who owns my mind? (2, Insightful)

qbzzt (11136) | more than 6 years ago | (#22292642)

I didn't realize that the education I got from the government, for which my parents paid by taxes, made me the property of that government (since I cannot be parted from that education without killing me). It's only a short logical jump from saying that the employee's education obligates the employer to saying that it obligated the employees themselves and therefore they may not leave the jurisdiction that paid to have them educated. I seem to recall the USSR, may it rest in pieces, used that argument.

The fact is that having a well educated workforce does benefit the state of Washington. It means a workforce that makes more money (= state income tax), spends more money (= sales tax), and gets more expensive houses (= property taxes). This is true, and pays the state of Washington for the costs of educating the children who grew up to work in Microsoft, regardless of how Microsoft runs its business.

from whom does the benefit come? (2, Insightful)

BorgCopyeditor (590345) | more than 6 years ago | (#22292898)

So, in other words, only workers should have to pay taxes.

Re:Who owns my education? Who owns my mind? (1)

Beyond_GoodandEvil (769135) | more than 6 years ago | (#22292980)

The fact is that having a well educated workforce does benefit the state of Washington. It means a workforce that makes more money (= state income tax), spends more money (= sales tax), and gets more expensive houses (= property taxes). This is true, and pays the state of Washington for the costs of educating the children who grew up to work in Microsoft, regardless of how Microsoft runs its business.
Now, I am not a fan of taxes by any means, but I dislike free riders even more. Using your logic, it would be ok for all of Mircosoft's employees to declare themselve personal corporations in the state of Nevada, and then claim their wages as revenue of such a corporation. Since hey, what's good for an employer should be good for an employee right? Perhaps an intellectual property tax might help pay for all the court time and ambassador's salaries for protecting all the US IP.

Re:"small government" (1, Insightful)

The Aethereal (1160051) | more than 6 years ago | (#22292282)

People starving in the streets is not an economic problem; it is a mental health problem.

Re:"small government" (1)

oliverthered (187439) | more than 6 years ago | (#22292458)

mod parent up, there are too many people on the streets because they have mental health problems.

Re:"small government" (1)

msuarezalvarez (667058) | more than 6 years ago | (#22292786)

Do you and the GP really believe this?!

Re:"small government" (1)

RancidMilk (872628) | more than 6 years ago | (#22293010)

I had a girlfriend that had mental problems... now she is on the street. I think that the parent's parent was right about their parent.

Hippie socialist sheeple (2, Informative)

reidconti (219106) | more than 6 years ago | (#22292478)

This is what you get when a bunch of hippies convince small-minded people that corporations have more power and are more evil than the government.

It is your beloved cure-all government that is the source of the problem. Microsoft cannot imprison you. The government can.

Corporations only have the power to buy government that you socialist sheeple demand.

See, we can both play this clever game of calling people 'sheeple'. It's almost as clever as calling Microsoft M$.

So what? (-1)

drsquare (530038) | more than 6 years ago | (#22292074)

God forbid that profits might for once be kept by the people who created it, rather than leeched off by various governments in order to waste on all sorts of irrelevent crap.

If Nevada can manage without corporation tax, I see no reason why Washington can't.

Re:So what? (5, Insightful)

ceoyoyo (59147) | more than 6 years ago | (#22292148)

I guess Microsoft should maintain their own bridge then.

Nevada may have lesser public services than Washington, or higher non-corporate taxes. Either way, Microsoft and it's employees are enjoying privileges in Washington that they've skipped out of paying for, placing more burden on Washington's other residents.

If Nevada is such a great, efficient state then I see no reason why Microsoft shouldn't move their actual operation there, instead of just maintaining a front for tax evasion purposes.

Re:So what? (1)

moseman (190361) | more than 6 years ago | (#22292486)

And take their employees with them you twit. Just think of the tax-base loss Washington State would see.

But I suppose you give extra tax to the state?

Re:So what? (4, Informative)

Mr2001 (90979) | more than 6 years ago | (#22293000)

And take their employees with them you twit. Just think of the tax-base loss Washington State would see.
Washington has no personal income tax, so that amount is smaller than you think.

Re:So what? (1)

ravenshrike (808508) | more than 6 years ago | (#22292872)

What right does Washington have to tax a product sold worldwide? What right do they have to cause a price increase for everyone else? A corporate tax is nothing more than a sales tax hidden to keep the populace from blowing their lids.

Re:So what? (5, Insightful)

nick_davison (217681) | more than 6 years ago | (#22292900)

If Nevada is such a great, efficient state then I see no reason why Microsoft shouldn't move their actual operation there, instead of just maintaining a front for tax evasion purposes.

And, as you file your own tax returns this year, I'll bet you carefully record each internet transaction from out of state, ensuring that you pay full taxes even though it would have been easy to avoid it? Of course, your charitable deductions will be paid at the lower rate you really know your junk was worth rather than the higher "standard rate" you know you can get away with? Similarly, when you realize your itemized receipts don't add up to as much as the standard deduction, you'll still take the lower amount you know you really deserve? You'll also stop using lower rate credit cards issued out of Delaware in favor of higher rate ones from your own state?

Sure, you could be saving money on your own taxes. But won't anybody think of the children in your own state who are in cramped classes because there aren't enough tax dollars. Thank God for people like you who make a point of paying every dollar they can, rather than looking for the best possible savings.

When an individual figures out ways to avoid paying taxes - or paying as little as possible - it's considered frugal. When a corporation does it, it's evil?

Re:So what? (1)

cayenne8 (626475) | more than 6 years ago | (#22292992)

Well, you can't blame a company or person for jumping through the legal hoops in order to keep as much of their own money as you can. It is kind of like U2, the Stones, and other groups that moved much of their business to Amsterdam to avoid the high taxes in other parts of Europe.

Now, if we wanted to make it simple, and get rid of the loopholes, then we have to change our taxing system (at least the federal tax) to something simpler, like the FairTax or something.

However, state and local taxes just cannot be brought into a single compliance this way, as that the states in the US are like little countries...and each can have their own laws. We'd have to do some SERIOUS constitution changing to get around that.

Maybe this isn't a bad thing. Maybe Washington state needs to look to reasons why companies are moving parts of themselves out to places like Nevada. Maybe Washington needs to look to cut some un-needed pork from its budget, and then they could lower taxes and become competitive for businesses like Nevada currently is. If they did this, rather than bitch about losing tax dollars...other states would then be bitching about losing businesses to WA since they would naturally migrate to WA as a more tax friendly environment.

Re:So what? (1)

fractalVisionz (989785) | more than 6 years ago | (#22292232)

If Nevada can manage without corporation tax, I see no reason why Washington can't.

Since Nevada doesn't have a corporation tax, the other tax schemes it does have are most likely different, and higher, then Washington's. Therefore this argument holds no water as you are really comparing apples to oranges. Also, Washington doesn't have an income tax, whereas Nevada does have income tax.

Re:So what? (1)

Rob_Ogilvie (872621) | more than 6 years ago | (#22292284)

If Nevada can manage without corporation tax, I see no reason why Washington can't.
That argument is lacking in logic. Oregon has no Sales tax. Washington has no personal income tax. Neither have a personal property tax. Different states have different taxes. By your logic, it seems that everybody should be able to live and work in Washington via an employer's fake subsidiary location and a PO Box for you and buy in Oregon to avoid the Washington sales tax. If Washington can manage without a personal income tax, you see no reason why Oregon can't. If Oregon can go without a Sales tax, you see no reason Washington can't.

Oops. We just took some significant sources of income away from the states.

No taxes! (4, Insightful)

Tony (765) | more than 6 years ago | (#22292298)

Let's do away with taxes. And, we can do away with all the things taxes pay for: the education system that trains Microsoft's employees, the roads that allow the employees to get to work, the police that help protect Microsoft from the roving bands of rabid cats, the standing militia that protects Washington from invasion by Canada. (Those bastards covet Washington, and are just *waiting* to invade.)

Corporations benefit from -- nay, depend on! -- public infrastructure. Public infrastructure costs money. It's been proven time and again that private interests cannot provide neutral, equitable infrastructure at a reasonable price. Taxes are necessary.

Now, taxing both corporations and individuals seems a bit of double-dipping, I agree. Tax the corporations, and let the individuals keep their wages. Politicians would end up with a lot more votes that way (though a lot less money through corporate sponsorship and whatnot).

Re:No taxes! (4, Insightful)

erlenic (95003) | more than 6 years ago | (#22292764)

Corporations never pay taxes. Their customers do, and they don't even realize it. That's why I believe we need to eliminate ALL corporate taxes at all levels. Each individual person should be able to calculate to the penny how much they pay the government. How much of the cost of your last Windows license went to Uncle Sam? Don't know, do you?

Re:So what? (3, Insightful)

Actually, I do RTFA (1058596) | more than 6 years ago | (#22292338)

God forbid that profits might for once be kept by the people who created it, rather than leeched off by various governments in order to waste on all sorts of irrelevent crap.

Even the Lauffer Curve, beloved of Reagan, says that taxes lead to more productivity. While 100% is bad, 0% is also bad. The right number is in-between.

Re:So what? (3, Insightful)

tjstork (137384) | more than 6 years ago | (#22292516)

Even the Lauffer Curve, beloved of Reagan, says that taxes lead to more productivity. While 100% is bad, 0% is also bad. The right number is in-between

The problem is that a lot of leading political figures on the left believe that 50% is the right mark, and we Reaganites believe that's a bit too high!

0% being useful assumes investment in useful things like roads and bridges that actually improve the business climate. If it doesn't improve business, which does actually include quality of life and nationalistic branding stuff, then, it shouldn't be there. That would automatically chop a lot out of the budget, for sure.

Question I have is, why do rates need to go up at all? Population is increasing, GDP is increasing.. shouldn't government spending increases be constrained, at least, to GDP? Unfortunately Bush has been absolutely terrible on this one, but no President will do actually the right thing here either. I mean, why should Medicare ever go up more than GDP?

Re:So what? (3, Insightful)

Dachannien (617929) | more than 6 years ago | (#22292910)

That's not what the Laffer Curve says. It says that tax revenues are optimized at a certain point. Taxes always* have a negative effect on productivity, and that has to be considered against the potential increase in tax revenue that an increase in the tax rate would otherwise bring.

* Specific uses for tax dollars can increase productivity, but that increase is usually not as much as the productivity that a firm could gain by just spending the money itself.

Re:So what? (2, Interesting)

jaywee (542660) | more than 6 years ago | (#22292404)

Well, don't forget that Microsoft is only able to create those profits because the government granted them temporary market monopoly (copyrights)... It's a trade - something(copyrights) for something(taxes).

Re:So what? (1)

gandhi_2 (1108023) | more than 6 years ago | (#22292584)

You obviously don't understand the socialist agenda of Puget Sound Elite. Could they do without the tax? Sure, but then more people are have to work. Won't someone think of the methlabs???

Re:So what? (1)

crashfrog (126007) | more than 6 years ago | (#22292802)

God forbid that profits might for once be kept by the people who created it

God forbid that the people and entities that benefit from public works be expected to contribute some portion to their upkeep.

I suppose you think that it's just fine to skip out on the check, too - if the restaurant wants to get paid for their meal they shouldn't have windows in the men's room, right?

Re:So what? (1)

Tomy (34647) | more than 6 years ago | (#22292942)

Washington doesn't have a state income tax. So you're suggesting shifting the burden from profitable companies to average citizens? Nevada doesn't have the largest ferry system in the US [wikipedia.org] or the world's longest floating bridge [wikipedia.org] to maintain. Nor does it provide roads and other transportation services to the 35,000 people employed by Microsoft.

So... (4, Insightful)

EastCoastSurfer (310758) | more than 6 years ago | (#22292084)

Would Washington rather MS move their operations to Nevada and lose the tax base of all the employees? This situation is actually a good argument for getting rid of corporate taxes. Corps wouldn't just sit on the money they saved. They would invest it by hiring more people and spending more money where they are actually based.

Re:So... (0)

Anonymous Coward | more than 6 years ago | (#22292256)

Washington state doesn't have a state income tax and trickle down economics doesn't work. The state makes it's money on property taxes, sales taxes, and corporate taxes. Microsoft demands a lot from the state (infrastructure, trade deals, congressional support etc). They've created a HUGE demand on transportations, for example. They should be helping to fund it.

Re:So... (1)

Calinous (985536) | more than 6 years ago | (#22292330)

Why would Microsoft keep its headquarters and workforce in Washington and not move them to Nevada if being in Nevada is so good for them?

Re:So... (0)

Anonymous Coward | more than 6 years ago | (#22292718)

That's the broken window fallacy.

Outside of that, all you've just said is that might makes right. Would you agree that Al Capone had the right to run a protection racket just because he had the power to do so? Probably not. So why do you think that corporations *deserve* tax breaks just because they have got the power to evade taxes?

MS Employees (1)

kylben (1008989) | more than 6 years ago | (#22292088)

MS Employees have paid for that bridge many, many times over with their payroll, sales, and property taxes. Don't worry about the poor state of WA having enough money for what they need to do (as opposed to what they choose to do). And corporations don't pay taxes, they collect them.

Re:MS Employees (1)

omfglearntoplay (1163771) | more than 6 years ago | (#22292532)

Lesson learned. Laws are only much trouble for the little guy. Why should the corporation be taxed when 10 million little guys can pay for you? 1. Make your company big enough to be able to use any loopholes that may be inconvenient to start with. 2. To help get to #1, stretch, bend, and break laws and relationships as needed (monopolize, copy ideas, screw people over, stab your friends in the back, etc.). 3. After you get huge, threaten governments if they try to make you pay, and then offer your employees as sacrificial lambs. After all, they aren't important and they can obviously afford to pay more taxes than the corporation... which obviously deserves to make more money and pay less taxes than the people. It's fair b/c the corporation tried so hard, made good grades in school, and screwed it's friends up the arse and... and besides the little people don't really mind paying taxes. If they really cared then they would have made Microsoft and been at the head of things. Bill Gates was destined to make Microsoft... it was a design by the Gods. Ok, enough of that. Are taxes fair or fun for anybody? No. But should one of the richest companies in the world get a break just because they are big? I don't particularly think so. Will they get a huge break? Apparently they will and do, since they are so big they can threaten/make a deal with (subtly at least) the people who control taxes.

Rock and a hard place (4, Insightful)

huckamania (533052) | more than 6 years ago | (#22292096)

The 35k plus employees pay taxes in state and Washington State is certainly aware of that fact. If they make too much of a grumble about the corporate loop hole, they could lose the much larger 35k plus employee tax base. Those 35k are probably just the people who work for M$. There are probably lots and lots of other Washington residents whose primary income derives from Redmund.

Re:Rock and a hard place (3, Insightful)

necro81 (917438) | more than 6 years ago | (#22292358)

Microsoft isn't going to leave Redmond - just accept it. Consider what it would take to relocate to someplace else: you'd have to build an entirely new campus for 35k+ employees, then you'd have to convince them all to come with you sight unseen, then you'd have to hire thousands of new employees to replace the ones who didn't come with you.

If taxation and cost of doing business were the deciding factor of where a company locates, Silicon Valley would not exist, and the World Trade Center would be in rural Idaho.

Re:Rock and a hard place (1)

huckamania (533052) | more than 6 years ago | (#22292790)

Ahh, but they wouldn't have to move 35k+ jobs, only (Total/2) + 1, depending on what the formula is going to be for determining where a corporation gets to put its headquarters.

Still, I don't think it is workable to have the states determine where a companies HQ is. What if two states both claim the HQ? What if the employee count goes up and down each year? I'm sure Texas, California and New York would have no problem telling company X that they now pay state corporate taxes. Although I don't think Texas has state corporate taxes, so it would be a bit of a empty threat.

Re:Rock and a hard place (1)

Frizzle Fry (149026) | more than 6 years ago | (#22292908)

No, you move one piece at a time as necessary. They've already moved much of their R&D out of Redmond and up into BC because the US wouldn't let them have as many H1-Bs as they wanted. Even if regulations aren't "the deciding factor" in choosing location, there is a certain point where they place a large enough burden to be worth moving.

Re:Rock and a hard place (1)

coyote1 (228518) | more than 6 years ago | (#22292640)

Well, Washington isn't getting as much in taxes as they could if they had a state income tax...I guess they're only getting it from the sales and property taxes.

Re:Rock and a hard place (2, Informative)

Mr2001 (90979) | more than 6 years ago | (#22292694)

The 35k plus employees pay taxes in state and Washington State is certainly aware of that fact. If they make too much of a grumble about the corporate loop hole, they could lose the much larger 35k plus employee tax base.
Washington has no personal income tax, so the state would only stand to lose sales and property taxes. If MS is avoiding $76 million in annual corporate taxes, that's $2171 for each of their 35,000 employees. How much sales and property tax are those guys actually paying?

Re:Rock and a hard place (1)

huckamania (533052) | more than 6 years ago | (#22292924)

More then that, for sure. Plus, it rains all the time.

why is this news? (1)

JoshEanes (1172285) | more than 6 years ago | (#22292102)

Microsoft is not the only company using fancy accounting tricks to avoid taxes... in fact, they at least have kept their HQ in country rather than going to the bahamas.

Re:why is this news? (2, Insightful)

Pojut (1027544) | more than 6 years ago | (#22292194)

You must be new here.

Re:why is this news? (1)

TykeClone (668449) | more than 6 years ago | (#22292286)

John Edwards [rothcpa.com] also sheltered money from taxes. If it is allowed and ethical, each taxpayer has a duty to minimize their taxes.

Warren Buffet [thinkprogress.org] is putting a huge chunk o' money into a foundation to avoid paying Nebraska their share of his estate tax when he dies as well.

Re:why is this news? (1)

RightSaidFred99 (874576) | more than 6 years ago | (#22292436)

Warren Buffet is hypocritical scum then. Isn't he the moron complaining because he didn't pay enough taxes and that his secretary paid more than he did as a percent, and wasn't he the liberal rich freak saying the rich should pay more taxes, even though they actually shoulder the main tax burden in this country?

Re:why is this news? (1)

TykeClone (668449) | more than 6 years ago | (#22292618)

Buffet and Edwards both used the tax code to their advantage to minimize their exposure. Both of them also feel that we must pay more in taxes.

Re:why is this news? (1)

RightSaidFred99 (874576) | more than 6 years ago | (#22292744)

They're both incredibly retarded, then. Do they know they can do this thing called "donate" their money? If they want schools to get more money, they can give more money to schools. If they want the "working poor" or homeless to have help, they can create programs or donate to existing programs.

Instead, they want an inefficient middle-man to take more of their money, waste some huge percent of it, and trickle down a few dollars to people who "need" it? They are both complete and utter idiots, I don't care how rich they are.

Re:why is this news? (1)

EastCoastSurfer (310758) | more than 6 years ago | (#22292844)

Warren Buffet was simply trying to make a point about how messed up the tax system is. If you look up Warren Buffet and charity you'll see he gives 10s of Billions of dollars to charity.

This is rabble rousing. (4, Informative)

RightSaidFred99 (874576) | more than 6 years ago | (#22292114)

A corporation has a financial duty to avoid paying unnecessary taxes. If you don't like the way those "fat cats" (I notice rabble rousers use that term a lot) get out of paying taxes, talk to the government and have them close the loopholes. More importantly, not that every dollar Microsoft pulls in is taxed _multiple_ times by the time it makes it into the shareholders' pockets. The fact is that it's a myth that corporations are pulling one over on the government, corporate taxes are a little silly since the money _is_ taxed before it goes into any individual's pocket.

Forget the non-payment of taxes (5, Informative)

RichMan (8097) | more than 6 years ago | (#22292142)

Microsoft has effectively paid its employees with your tax dollars for years.

http://www.fool.com/portfolios/rulemaker/2000/rulemaker000217.htm [fool.com]

--
Basically, Microsoft receives cash by issuing employee stock options, after which the company then receives billions of dollars in tax deductions from the IRS for doing so. Add in the warrants it sells on its own stock, and the company made over $5 billion off the stock market last year (fiscal year ended July 1999), tax-free. For comparison, its after-tax net income was only $7.8 billion. Microsoft may not be much in the programming department, but its accountants are impressive.
--
Corporations pay taxes on their own income (generally 35%), but money they pay out in salaries to employees is deductible from the corporation's income. Since granting options to employees results in taxable income to those employees, Microsoft gets to deduct that taxable employee income from its own taxable corporate income, and that's where Microsoft got a tax-free $3.1 billion in cash in fiscal 1999: "Stock option income tax benefits."
--

Re:Forget the non-payment of taxes (5, Funny)

kylben (1008989) | more than 6 years ago | (#22292278)

Just so you know, while you were at work today, I broke into your house and stole everything except your widescreen plasma TV. I'll expect a thank you note for the free TV you got from me.

Re:Forget the non-payment of taxes (0)

Anonymous Coward | more than 6 years ago | (#22292736)

Um, not recent years. Microsoft switched to awarding full shares (on which it pays taxes up front) instead of stock options. But nice news article from eight years ago!

Re:Forget the non-payment of taxes (0)

Anonymous Coward | more than 6 years ago | (#22292940)

They're still not paying the payroll or OASDI ("Social Security" to you) taxes on that portion of their employees' pay.

Not a tax break (0)

Anonymous Coward | more than 6 years ago | (#22292206)

When I go to my accountant and get every deduction I can and go through my invoices to determine which locality gets its piece, I am not getting a tax break. Only suckers pay more taxes than they have to.

If Washington State wants more, they can change the law. How you could charge an occupancy tax out of state is beyond me, but MS is free to take its entire operation to Nevada if they don't like Washington state taxes.

So? (5, Insightful)

roggg (1184871) | more than 6 years ago | (#22292214)

I hate Microsoft as much as the next guy (okay, maybe not around here, but I really really hate them!), but why shouldn't they structure their corporation to reduce the tax burden? Just be glad it's Nevada and not Belize.

Re:So? (1)

mwvdlee (775178) | more than 6 years ago | (#22292474)

Because at the end of the day, each state is going to get the same amount of tax money.
If MS isn't paying it's share, guess who has to cough up what's missing?
You.

What is this? (-1, Flamebait)

Anonymous Coward | more than 6 years ago | (#22292216)

....An Anti-Microsoft forum? Looking at the stories, seems like MS discussions dominate this fucking site. Look slike the "creative" proccesse for this couumity has gone to "creating new innovative ways of bashing Microsoft" instead of actyally "innovating" something useful. Fuck, then they wonder why they are so resented. It's your trolling, bitching and complaining, not your "radical views". It's your obesession with "MS", not with "Opening all software". It's your "with us you live - not with us you die" approach to everyone and everything. It's your totalitarian stance not your "free-for-all" slogan. Until you change from within, you will always get stuck on the same gear where you have been for the past decade.

What? (1)

Mandovert (1140887) | more than 6 years ago | (#22292224)

kinder capitalism, huh?

"question the legality" (1)

aleph42 (1082389) | more than 6 years ago | (#22292226)

"The author questions the legality of the practice" : don't worry, I'm sure there are tens of resident laers at Microsoft paid just to answer this question!

Stop the Presses! (4, Insightful)

jandrese (485) | more than 6 years ago | (#22292228)

Large corporations exploit tax loopholes? Who would have thought?

Re:Stop the Presses! (2, Informative)

snehoej (1162671) | more than 6 years ago | (#22292592)

Aye. The Danish branches of Coca-cola and McDonalds for example continuously post negative turnovers even though they're doing _quite_ well here. As for Coca-cola, they simply purchase syrup from the US corp. at extremely inflated prices to avoid taxation.

Capitalism (3, Insightful)

Arthur B. (806360) | more than 6 years ago | (#22292310)

is generally defined as the use of private mean of production on a free market. Regardless of one's opinion on the news, the title of the news is inaccurate, and let's say it stupid.

I for one cheer for anyone protecting money from the prying hands of the State.

Re:Capitalism (1)

Omnifarious (11933) | more than 6 years ago | (#22292840)

I hope that you and Microsoft are equally cheerful about all this when the 520 bridge capsizes with a ton of Microsoft employees on it. Or will that then be the state's fault somehow?

I tend towards libertarianism myself, but the article makes an excellent point. The 520 bridge is a crucial piece of infrastructure that Microsoft and its employees benefits greatly from the existence of. Do you have a reasonable proposal for how to pay for it? If you think it should be a privately owned toll bridge, I will tell you that almost all toll roads I've been on have been fantastically inconvenient, have a lot of extra real-estate (there is prime park land on the Seattle side of the 520 bridge) and are poorly maintained. I don't think they're the answer. I'm all ears for better answers though.

"prying hands of the state" (4, Insightful)

EmbeddedJanitor (597831) | more than 6 years ago | (#22292988)

Remember that statement next time you drive along a road. Where TF did that road come from?

Surprised? (1)

ZenDragon (1205104) | more than 6 years ago | (#22292314)

Is anybody actually surprised by this? Nevada prides itself on these laws that protect companies like that choose to incorporate there, they advertise it rather vigorously around here. Thousands of companies have been doing this for years, to consider only Microsoft would be neglecting the BILLIONS of unearned tax dollars every year from companies that incorporate in Nevada. Nevertheless, there is nothing illegal about this practice, though I wouldn't be surprised if there some federal laws instituted at some point adding additional requirements to such practices. The government is always looking to find ways make us pay.

tax break? (0, Redundant)

Freeside1 (1140901) | more than 6 years ago | (#22292344)

If there's no corporate taxes in that area, the fact that they don't pay the non-existent taxes makes it a tax break? disclaimer: I didn't read the article

Re:tax break? (1)

Osiris Ani (230116) | more than 6 years ago | (#22292884)

Oh, absolutely. Further, the fact that they're following the tax codes to the letter of the law (legal loopholes, after all, are simply strict interpretations of the law as it's written) means that they're somehow "getting away with something."

I welcome the complainers to file their next tax returns with zero exemptions and absolutely no deductions. Anything less would be utter hypocrisy, and we certainly can't have that.

Personally, I prefer to dislike Microsoft for the correct reasons. This, on the other hand, is just trifling nonsense.

More power to Microsoft! (2, Insightful)

TrebleJunkie (208060) | more than 6 years ago | (#22292376)

Good for Microsoft! If I could do the same to avoid paying the portion of my taxes that go for welfare-state bullshit (which is pretty much EVERYTHING except for the Military and Law Enforcement budgets), I would. In a heartbeat.

If Washington state makes a move to try to get this income, MS should pick up and move it's entire operation to Nevada. What would Washington State do then?

REALLY bad title (3, Interesting)

dada21 (163177) | more than 6 years ago | (#22292410)

No, it didn't net Microsoft anything. The proper title should be "Restrictive socialism costs Microsoft competitors billions."

When I had my retail store, we moved literally 3 miles across a State line because of a sales tax differential of nearly 4%. That's significant, when many of our items were $500-$1000, meaning a savings to the consumer of $20-$40 in taxes. Even funnier, the county/state with the lower tax rate had BETTER public facilities and police attention (the store in the old State had regular robberies and theft), and my customers had a 5 minute longer hop to get there.

We've talked repeatedly about moving out of our State and leaving some customers behind if our State decides to start a labor sales tax. It's a terrible idea, as more taxes don't mean more income (and neither do less taxes necessarily) for the State. It's a VERY complicated "invisible hand" situation.

I appreciate when companies find loopholes, because it gives me hope that I can use them, too. I hate W2s, as 1099s offer many more tax benefits. I've seen many friends give up their stable W2 jobs to move into 1099 contracting, and see their income double, but their tax share not move up as much. When I heard Haliburton was moving offshore, I investigated it and found that there are tons of savings to do so, even if your primary business is still in the States. It makes sense.

Yeah, Microsoft will take heat for this, but the reality is that small and medium sized business owners should do everything in their power to find the least-regulated economies to operate out of. I love seeing companies move out of California, employees and all, and hitting States that so far have not shut down the engine of business, thinking that the State can help the poor when in fact it is jobs, not entitlements, that help the poor.

Seems reasonable... (1)

Otter (3800) | more than 6 years ago | (#22292414)

Basically, the dispute is whether the "product" you purchase is a chunk of software hand-crafted for you in Redmond or a license generated for you in Nevada. Seems like the "its not stealing its copywrite infringment" crowd ought to be 100% on Microsoft's side on this one, no?

Big company has competent lawyers and accountants (1)

jcr (53032) | more than 6 years ago | (#22292426)

Don't hate the player, hate the game. MS is fulfilling their duty to their shareholders.

-jcr

To be fair ... (1)

Sepiraph (1162995) | more than 6 years ago | (#22292448)

It is definitely just Mircosoft that does it, a lot of companies even setup "corporate" HQ in countries like Bermuda. e.g. Accenture is one that comes to mine, but there are tons of others that do it.

Tragedy of the Commons, Smart Dollars (1)

jimgarritano (949986) | more than 6 years ago | (#22292494)

Not only does this fail the "Tragedy of the Commons" test, but this vitriol pretends that Microsoft's missing tax dollars would have been allocated for infrastructure. Why not say the missing dollars were meant to alleviate the pain of orphans suffering from terminal cancer? To add insult to injury, the infrastructure Microsoft's intelligent tax dollars supposedly would be building is "needed" infrastructure for Microsoft itself - as opposed to infrastructure for the rest of Washington...

Nevada Presence? (1)

necro81 (917438) | more than 6 years ago | (#22292496)

I guess how shady the accounting is depends, in part, on how large a presence Microsoft has in Nevada. Is MS shipping DVDs of Windows and Office from some warehouse in the desert? Do they have servers based there that distribute authorized soft copies to OEMs? Are their sales and volume-customer relations based there?

A true slashdot paradox (1)

CambodiaSam (1153015) | more than 6 years ago | (#22292534)

I find myself conflicted. I want to stick it to Microsoft, but at the same time I want to stick it to the Government.

I guess in the end, corporations play the game they're given. If it's legal, then good for them.

How about Boeing? (5, Interesting)

Exp315 (851386) | more than 6 years ago | (#22292576)

The other major business of Washington state - Boeing - flies their planes just outside the U.S. territorial limit offshore to sign the transfer papers with international customers so that they won't have to pay tax. Should we complain about them too?

Re:How about Boeing? (2, Funny)

msuarezalvarez (667058) | more than 6 years ago | (#22292964)

Yes.

Multinational corporation looks for tax loopholes. (0, Redundant)

lantastik (877247) | more than 6 years ago | (#22292594)

Film at 11:00!

Started with facts, but ended with cynical humor (1)

eclectic_hermit (1232884) | more than 6 years ago | (#22292610)

"revenue it could use for badly needed infrastructure needs -- such as the needed replacement of the 520 bridge which connects Seattle ... to Microsoft. "

This article started off really well with what appears to be some solid facts. However, it then jumped to the weird conclusion that this tax revenue would have been used to repair our roads and infrastructure. Clearly the author is not in touch with how this money would have really been spent!!!

P.S. Also, if the corperations are able to keep more of the money, that does not mean that they would have hired more workers... It, more than likely, would have been used as bonuses for the executives. A long time ago, I felt that CEO's should make the amount of money they do because of the risks involved with thier jobs... However, these day the CEO's get bonuses even when the corporation is losing money and laying off all of the employee's...

Re:Started with facts, but ended with cynical humo (1)

polar red (215081) | more than 6 years ago | (#22292860)

However, these day the CEO's get bonuses even when the corporation is losing money and laying off all of the employee's...
It's a sign of the times: rich people getting richer, poor people getting poorer, the people in the middle dying out. Soon the system will collapse.

There are other taxes to pay to WA state (3, Insightful)

cenonce (597067) | more than 6 years ago | (#22292670)

It is not like Washington isn't getting a cut out of MS. With 11.2 Million square feet or real estate, think of the property taxes? With 35,000+ employees, think of the payroll taxes?

Seriously, please don't tell me everybody on Slashdot is naive enough to think that companies like Red Hat, SUSE and Ubuntu aren't working the tax system either! Companies from a one man show to an MNC use this system to pay the least amount of tax they can. Nevada and Delaware have long maintained favorable tax treatment of corporations exactly for this purpose. If Washington wants in on this action, they can offer the same incentives to encourage MS to claim those profit in WA.

Consider for a Moment (4, Insightful)

asphaltjesus (978804) | more than 6 years ago | (#22292702)

That Microsoft's behavior isn't unique in any way, shape or form. That what microsoft does is standard operating procedure for all mega-corporations.

Paying taxes in the state with the lowest corporate tax rate and forming corporations in Delaware is done for the same reason. It's the best deal.

If this is outrageous to the submitter, then I hope he never discovers how most electronics firms with an office in the U.S. work.

As an FYI, they are set up as subsidiaries that "buy" their product from the most attractive exporting/manufacturing office from some other part of the world of the same corporation. The U.S. office then operates at a perpetual loss (paying less tax) by hiding the income generated as the cost paid to "buy" the goods from some other part of the world.

Minimize tax, maximize profit!

Calling BS again (1)

El Cabri (13930) | more than 6 years ago | (#22292710)

Bridges are here to allow people to travel, and people pay taxes. Tens of thousands of people spend comfortable incomes in Washington and lots of sales tax on their spending thanks to Microsoft, that should be enough to keep the infrastructures that support these people.

What, are you guys comunist or something? (0, Troll)

sm62704 (957197) | more than 6 years ago | (#22292712)

Don't you support corporate welfare? In our corporate-run facist society you are supposed to deride the poor woman working two jobs to support her children because she gets food stamps because "well if she can't support them she shouldn't have them" while cheering the corporations your tax dollars go to in th eform of "pork" who aren't forced to pay workers enough to live on.

It's the Corporate American way.

The "child tax credits", food stamps, and other government handouts to "the poor" subsidise the corporations that don't have to pay Americans a living wage. The corporations are the true recipients of all American government handouts.

The foreign owned and run corporations have bought America's government and corporate owned news outlets have brainwashed Americans, including slashdotters who are supposed to have brains. Think again; no, think once you haven't yet.

Damn but I'm in a bad mood today and reading slashdot ain't helpin' much. From the thing about Democrats and Republicans (but no Greens or Libertarians) to this fucking bullshit about the world's richest man's company being on welfare... well I'm not happy with my stupid, stupid countrymen.

-mcgrew

Re:What, are you guys comunist or something? (1)

freedom_india (780002) | more than 6 years ago | (#22293002)

Hey ! There is no point blaming corporates for the government's asshole largesse.
By law Corporates are permitted only to increase their profit.
Anything beyond that narrow focus, and they risk being sued to dissolution.
The shareholders who put their money into a corporate are not there to donate. They are there to get their money back and more.

If that means the corporate has to lobby congresscritters to change laws in their favor, consider it done.

We (citizens) are illiterate fools to spend time watching Desperate Housewives and ex-pop stars and LOST to form a lobby for our benefit tax changes.

Take for instance: Fuel to drive to work. As a salaried employee i can't get benefit of it. Similarly, i can't donate a couple of 2 cent CDs to my school and claim $2 million as retail value of the same.

Similarly i can't take a deduction for all house expenses i make (repairs, etc). Similarly i can't deduction for buying a car.

All these apply only to consultants and corporates.

Change the law to benefit us and then see us benefit instead of just cribbing.

Washington, the "soak the company" state... (4, Interesting)

LynnwoodRooster (966895) | more than 6 years ago | (#22292740)

Note that this is a complaint from the State of Washington (where I reside when in the US), the ONLY State that has the completely regressive and oppressive Business and Occupation Tax. A State tax on GROSS receipts. Yep, have $1,000 in revenue, but because you're a startup, or have a bad quarter or whatever, you lose $1,200 but STILL get the "luxury" of paying tax on that $1,000!

Ignore this story - Washington is taxing itself into oblivion. Boeing moved their corporate headquarters - and most of their taxable profit - to Chicago over the taxation and treatment of business in this State. The ONLY things that is keeping Washington alive right now are:

1. Agriculture. Hard to move a farm, so they're stuck. Of course, our State wants to breach all the dams and eliminate the irrigation systems, which would kill these businesses.

2. Boeing. Already moved their corp headquarters, and unfortunately for Boeing, the physical assets here - buildings, equipment, and people - are so huge that you can't afford to move them. But more and more work is shifted outside the State...

3. Microsoft. Faces the similar situation with Boeing, because of the size of the campus and people. Stuck for now, but does more and more outside the State.

Washington is screwed. It has the highest gas tax in the nation, and still hasn't repaired road damage from the 2001 Nisqually Earthquake. The legislature and governor raised the State budget by 33% in 3 years, and now projects deficits left and right, yet it's also decreased MANDATORY funding of the State employee's pension fund. And now it wants to put the screws to Microsoft...

Washington is dead, it just doesn't know it yet...

Pigopolists of the world, UNITE! MS' snouts in ... (0)

Anonymous Coward | more than 6 years ago | (#22292756)

... the trough, what a surprise. Bill G and his billion dollar play for sympathy and understand and redemption belies the true nature of the company. TAX AVOIDANCE IS A CRIME. And they should be punshed severely.

The gov't missed out on more money (1)

kuriharu (756937) | more than 6 years ago | (#22292806)

So Washington has missed out on more than half a billion in taxes;

The gov't missed out on more money than that when Gates "donated" billions to his own charity. That made those funds completely non-taxable. Half a billion is a drop in the bucket compared to the 22 or so billion he "donated". Of course, Bill Gates believes in the death tax, so the moral of the story is your money should be taxed, but not his.

Incorporating myself (0)

Anonymous Coward | more than 6 years ago | (#22292820)

I am thinking of becoming the first human, converted to corporation.

I don't see too many downside: I can be a global citizen, not restricted to country of citizenship, I can pick and choose the best places for operating my lif.., I mean my business, the optimal spots for tax(exemptions), I can sub-divide myself and shuffle my revenues around, I can act as a psychopath bully, without rising any eyebrows.

The more I compare whether to be (human) citizen or a corporation, the less benefit I see to stay with the status quo.
I may not be able to vote, but I can openly pay for the support of any targeted politician by lobbying them with money I could save only as corporation.

I think I could have a much more effective maybe even happier life as a corporation.

GAAP (2, Interesting)

mbaGeek (1219224) | more than 6 years ago | (#22292868)

as others have pointed out - this is about corporate taxes

calling it "creative accounting" might be valid but misses the point

accountants set the "rules" through generally accepted accounting principles http://en.wikipedia.org/wiki/GAAP [wikipedia.org] - which appears to be what the article is complaining about

Microsoft has a history of being big and mean, but apparently GAAP allows Microsoft to do whatever it is they are doing (or the SEC/FTC/acronym of your choice would be jumping down their throat even more)

maybe the rules should be changed, but it might simply lead to companies moving out of that state. i.e. If it is unprofitable to do business in a specific area, then companies won't do business there very long

the recent hot button examples (sure to get me called an capitalist/fascist/idiot by someone) are Michigan and Ireland. Michigan has "increased tax regulation" and also seen a lot of industry leave for more "business friendly" areas (the "1 state recession" we kept hearing about during the Michigan primary). Ireland on the other hand has "rewritten their tax codes" (read "cut taxes") and seen an economic turnaround (maybe it is unrelated ...lol)

in my little part of the world it is also common practice to give corporations all kinds of tax breaks - the underlying idea being to keep/create jobs in the area (from which the local municipalities collect income tax)

Good! (0)

That's Unpossible! (722232) | more than 6 years ago | (#22292888)

Businesses never pay taxes, even when they are writing the checks for them. They are simply indirect taxes on people:

- Lower wages from the company
- Less employment opportunity
- Higher costs charged on their goods/services
- Fewer dividends paid to shareholders

Eliminate all business taxes, and enact a national sales tax (FairTax). Then you will start collecting from individuals that currently avoid taxation through fraud. You eliminate the loopholes in our current tax system that allow for special interests to get their tax breaks and rebates.

Textbook Tax Case (4, Insightful)

sarlos (903082) | more than 6 years ago | (#22292902)

This is a textbook case of high taxation modifying the behavior of the taxed. If Washington's tax rates weren't punitive for these sales, there wouldn't be any incentive for the company to be incorporated in Nevada. This is a common corporate practice, and demonstrates the necessity of small laboratories of democracy, aka, states. Washington is seeing how Nevada's tax code is modifying the behavior of Microsoft, and Washington has the choice to modify their tax code or continue pursuing their own version of it. It's not Microsoft's fault for playing by the rules to maximize profit.
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