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Not Just Apple, How Microsoft Sidestepped Billions In State Taxes 595

reifman writes "Apple's not the only company to save billions in taxes through Nevada as The New York Times reported yesterday. Here's how Microsoft's saved $4.37 billion in tax payments to Washington State and how it's led indirectly to $4 billion in K-12 and Higher Education cuts since 2008. 18% of University of Washington freshman are now foreigners (because they pay more) up from 2% six years ago. Washington State ranks 47th nationally in 18-24 yo college enrollment and 48th in K-12 class size. This hasn't stopped the architect of the company's Nevada tax dodge from writing in The Seattle Times: 'it's [Washington] state's paramount duty to provide for the public education of all children. Unfortunately, steady declines in public resources now threaten our ability to live up to that commitment.' Yes, indeed."
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Not Just Apple, How Microsoft Sidestepped Billions In State Taxes

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  • what about slashdot? (Score:5, Interesting)

    by larry bagina ( 561269 ) on Sunday April 29, 2012 @07:05PM (#39840109) Journal
    Does geeknet, Inc. pay accountants to minimize their tax burden?
  • I live in Seattle. (Score:5, Interesting)

    by khasim ( 1285 ) <> on Sunday April 29, 2012 @07:07PM (#39840121)

    While I oppose the kind of tax dodges that Apple and Microsoft are up to ... I cannot say that any of the problems in this state would be that much better if Microsoft paid all the taxes possible here.

    Our local government seems amazingly incompetent.

  • by countach ( 534280 ) on Sunday April 29, 2012 @07:08PM (#39840131)

    It seems to me all the states are in a race to the bottom to make big companies come to their state. The end game is nobody pays taxes, because states are too afraid of losing companies in their jurisdiction. The only way out is for all the states to gather together and put an end to these races to the bottom.

  • Re:Perfectly fine (Score:5, Interesting)

    by Concerned Onlooker ( 473481 ) on Sunday April 29, 2012 @07:13PM (#39840159) Homepage Journal

    Why is it that when CEOs are payed ridiculous compensation packages people say that "to attract the best talent you have to pay," but when it comes to teachers people say "they should be doing it for the love of it, not the money."

  • by Karmashock ( 2415832 ) on Sunday April 29, 2012 @07:31PM (#39840293)

    They're not defacto rulers. They just pay an internationally competitive tax rate.

    Forget what you think the tax rate should be... what is the most you can charge before the companies leave the country.

    Not only do companies need to offer competitive prices to make sales... countries need to offer competitive tax rates.

    That doesn't make the companies the rulers. It merely forces you to be reasonable. If doing business in your country costs the company more money then other places then it isn't reasonable.

    Companies will take a zero sum of the whole thing. So if you want higher wages, that's fine... it just gets added to the total cost of doing business. You want to offer healthcare to people? Again, it just get added.

    Every time you add something it reduces the amount you can take in taxes before you cross the line and it becomes cheaper to do business elsewhere.

    So be careful with it. If you want the tax money, you'll probably have to make doing business cheaper by skimping on something else. Maybe loosening regulations. Maybe making labor cheaper. Whatever. But if you make it too expensive to do business in the US, they'll leave.

    Game over. Then you get ZERO in taxes. They are out of your jurisdiction so the regulation is irrelevant. And labor policies are also irrelevant because everyone is unemployed.

    It's a balancing act. Don't cross the line.

  • Re:Perfectly fine (Score:5, Interesting)

    by AngryDeuce ( 2205124 ) on Sunday April 29, 2012 @07:32PM (#39840305)

    Because those people are ignorant, either naturally or deliberately, and think that somehow their own upbringing wasn't just as subsidized by the nanny state they bitch about as anyone else that grew up in a first-world country.

    They were all raised by wolves in the forest and had to fight to the death for every bit of sustenance in their lives, didn't ya know? Remember the movie 300? They grew up like those guys, except for without the helots [] that made it all fucking possible.

    In other words, they're full of shit and just don't want to pay it forward now that it's their turn to do like their parents and everyone before them did.

  • by Fluffeh ( 1273756 ) on Sunday April 29, 2012 @07:43PM (#39840395)

    I think everyone tries to minimize their tax burden. What makes these companies stand out is the vast extent of effort they put into it.

    I earn an above average salary and I pay my accountant to do my taxes to ensure that I am able to claim all the deductions that I am entitled to. The difference is that I don't have a shell company set up in a tax haven paying me in some nefarious manner that is done to avoid yet another fee of some sort. These stories wouldn't be stories if MS or Apple simply claimed all that they could on their tax statements, they are stories because of the absurd lengths that they go to. I am absolutely sure that /. and many websites try to claim all that they are entitled to, but I would be exceptionally surprised if the lengths that they went to included offshore tax havens, "Offices" set up in a state to claim a different regional address and the like.

  • by MightyMartian ( 840721 ) on Sunday April 29, 2012 @07:56PM (#39840477) Journal

    Even if I believed you (and claims like these are a dime a dozen on the Internet), it's at best an isolated case. Teaching yourself PHP is hardly brilliance. Anybody can do it. Teaching yourself to code well, that's a whole other ballgame. The mere fact that you didn't say "I taught myself C++" or "I taught myself Java", but in fact, picked out a language that could best be described as the BASIC for the 21st century suggests to me that your proof of why higher education is needed, not why it isn't.

    I'll wager you're the kind of talentless hack that I have to clean up after. I was paid by the hour by a friend of mine's company to fix up a PHP catastrophe coded by some assholes who actually got away with $40,000 for a site that violated every notion of security and best practices. I made $20,000 on it, so by your calculation I'm the talentless chump, but by any reasonable standard, the assholes who ripped off a company for $40,000 for a product that wasn't worth taking a shit on would have been the talentless ones.

  • by soundguy ( 415780 ) on Sunday April 29, 2012 @09:07PM (#39840893) Homepage

    This thread is not about federal taxes. It's about state-level taxes. Incorporating in a state allows principles in an enterprise to protect their own assets against litigation and other liabilities while still operating the business. If they have a good accountant, it can also be a way to legitimately reduce federal income taxes, however it can open up the company to considerably higher state and local tax liabilities in some jurisdictions.

    Incorporating in a DIFFERENT state that does not have corporate income taxes, B&O taxes, or other impediments to business is a way to minimize the costs of running the enterprise by legally doing an end run around location-based taxes.

    Incidentally, MS has physical facilities all over the state of WA, not just in Redmond. They pay more in property taxes ever year than most people here will ever see in a lifetime. Public Education in WA is primarily financed by property taxes and to a small extent, by the state lottery. The parent article is just alarmist election-year bullshit. There are a million legitimate reasons to be pissed at Microsoft. This isn't one of them.

  • Re:Perfectly fine (Score:5, Interesting)

    by KalvinB ( 205500 ) on Sunday April 29, 2012 @09:36PM (#39841047) Homepage

    I'm going into teaching. I just finished student teaching, I'll have my certificate for Secondary Ed within a month or two. The *minimum* salary I will be paid is clearly posted and easy to find. There's really no excuse to complain about your pay when going in you know what you're getting into. Schools are free to pay teachers whatever they want above the minimum and many do. Teachers are paid middle class income. If you don't want to earn middle class income, then find a different profession.

    And yes, teachers actually have to like their job because if the teacher isn't enthusiastic about what they are teaching, the students aren't going to be enthusiastic about what they're learning. I've been living on 30K for the last few years with a nice house, a decent car, etc. The minimum teacher's salary with my credentials is actually a raise so no, I'm not complaining.

    Teaching is not a revenue generating profession. CEOs can quantify their value in real dollars and that's how they get paid. On top of not generating revenue, teachers are barely being ranked on results. By what objective metric can we say that a particular teacher deserves X amount of dollars? Currently we just lump all teachers together and refuse to acknowledge teachers as individuals. Any attack on a particular crappy teacher is turned into an attack on all teachers.

    So until that changes, teachers will be paid a decent middle class income. And no, they have no room to complain about it unless they want to change the collective mindset into an individual mindset.

  • by Grishnakh ( 216268 ) on Sunday April 29, 2012 @10:12PM (#39841255)

    Voluntary extra payments just let people with empathy and benevolence cover for people with neither.

    Actually, no. Voluntary extra payments to the federal government allow it to continue to murder people overseas and give unearned money to sociopathic corporations who then give a little bit back to politicians in the form of bribes^Hcampaign contributions. In my book, it's ethical to withhold as much money from the federal government as possible, although obviously it's a lot safer if you find legal methods of doing so.

    Withholding money from state governments, on the other hand, seems a little worse to me. State governments aren't engaged in illegal wars of aggression overseas (nor do their budgets pay for that; that comes entirely from 1) federal income tax payments and 2) the Fed printing money and 3) borrowing from other countries), and that's generally where the funding for social programs comes from these days. It's certainly where the money for pre-college education comes from, so a company chiding the state government for not spending enough on education, and then that company dodging taxes as much as possible with loopholes and foreign "offices" is the height of hypocrisy.

  • by Ihmhi ( 1206036 ) <> on Sunday April 29, 2012 @10:46PM (#39841437)

    Instead of attempting to name and shame companies, perhaps instead we should try to find a mega-corp that actually does fairly and honestly pay its full tax bill. How about a bit of positive reporting?

    My only guess at such a company would be Chik-Fil-A since they close on Sundays despite the obviously lost business. I have a difficult time thinking of any other companies that would lose money solely on moral grounds like that.

    To be honest I'm not entirely sure if "mega-corp" and "plays by the rules" would ever go hand-in-hand, now would they? If you read anything about nearly any big company you hear about how they got their hands dirty squashing the competition and skirting every rule they can. Look at Microsoft with their EEE philosophy.

  • Re:And your summary (Score:5, Interesting)

    by xQx ( 5744 ) on Sunday April 29, 2012 @11:06PM (#39841549)
    I would argue that the Bill and Melinda gates foundation is far more efficient at getting money to people who need it than any government that collects taxes.

    I think if you did the sums you'd find every dollar that Microsoft pays its shareholders does more public good than every dollar they pay in Tax.
  • by JWSmythe ( 446288 ) <jwsmythe@jws[ ] ['myt' in gap]> on Monday April 30, 2012 @05:02AM (#39842917) Homepage Journal

        They all pay their taxes honestly. The problem is, they're exploiting holes in tax law to minimize their tax burden. Everyone does this. Even your average Joe citizen. They file their taxes with as many exemptions as possible, to minimize what they have to pay.

        The larger the company, the more ways they have to get around it. Look at GE [].

        I'm sure most of us have heard of tax shelters, offshore accounts, blah, blah, blah.. There are a plethora of ways to hide income, or minimize its impact on you.

        I, JWSmythe, could open JWSmythe Consulting in any of a number of countries. Payments to "me" could go to these offshore companies with no tax burden in the US. When tax time comes around, *I*, the citizen of the US, never earned a penny here. I did enjoy the comforts of an off shore company paying my mortgage, utilities, and whatever other expenses I had.

        It doesn't work quite that smoothly. Making no money can raise red flags. So I would be paid a low salary, but I still wouldn't need to worry about pesky things like bills.

        For the record, I do not operate this way. It's usually people and companies that make at least $500k/yr that benefit from it. For what I make, it it would cost me more to set up the offshore company than I pay in taxes. I report everything honestly. I pay my taxes appropriate for where I actually live. If I were to cheat the system in any sort of way, I'd get treated like a criminal, and suffer from tax liens, payroll deduction, and bank account seizures. Us citizens have to worry about such things. Big companies rarely do. At worst, they can negotiate their way around such problems.

        In the case of the Apple and Microsoft stories, they used domestic tax havens to avoid paying state taxes. I'm sure they also used quite a few international ones for various dealings. Many companies also frequently get tax incentives for operating in a particular city. I've seen many companies come and go, where a local government will offer them a period of no taxes, or even negative taxes (us taxpayers pay them). When the term of that agreement expires, and the local government expects to start getting a return on their investment, the company moves that office to somewhere else willing to make a sweet offer. It's good for the company. It's not so good for the people who were working in that location, when they find that their job has been moved or downsized.

        IMHO, no company should get special treatment. Taxes work because everyone pays equally. In reality, the lower classes cover the tax burden, while the large corporations enjoy benefits.

        I didn't read too far into the MS and Apple situation. It seems there is a royalty tax, which may have been imposed by the state as an attempt to profit from a small high income segment of the state's industry. That's speculation though, I didn't research that at all.

  • Re:And your summary (Score:2, Interesting)

    by Bert64 ( 520050 ) <bert&slashdot,firenzee,com> on Monday April 30, 2012 @05:32AM (#39843065) Homepage

    Corporations are not ethical by any means...

    One thing to consider, why is exploiting loopholes in program code (ie hacking) illegal, while exploiting similar loopholes in law is not?

    They are basically doing exactly the same thing, a set of instructions which are being followed to the letter have an unintended bug that can be exploited to carry out actions which were never intended by the author of those instructions.

    Either way, the given instructions are still being carried out to the letter but you are going against the intent for which those instructions were written.

    Why should exploiting bugs in a computer program be treated more harshly than exploiting bugs in the law?

"Being against torture ought to be sort of a bipartisan thing." -- Karl Lehenbauer