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Microsoft, Amazon, Boeing face pushback for tax dodging

Lobbying, tax dodging, buying elections: Can corporations be forced to improve their citizenship? A new initiative campaign looks to change the rules of behavior with a Seattle Bill of Rights.
Amazon's logo on a company building

Amazon's logo on a company building Flickr user simone.brunozzi

Microsoft has been legally dodging taxes for years, a practice that many high-tech companies employ. The New York Times shed some light on the practice with a recent look at how Apple grows its profits but not its taxes by running its cash through companies around the world ("How Apple Sidesteps Billions in Taxes"). The Times also notes that Microsoft uses some of the same tactics to avoid Washington state taxes through an office in Nevada.

Local activist-writer-former-Microsoft-exec Jeff Reifman has been on Microsoft's case for years about the practice, pointing out the gap between the company's rhetoric about improving, say, education, but sheltering software income from funding the very kinds of programs it says the state needs to remain competitive. By his account, Microsoft has gained an extra $4 billion or more that could have gone to the state - an amount that might have come in handy during the recent budget crisis and safety net slashing in Olympia.

The Seattle Times' recent series on Seattle's Amazon raised many questions and eyebrows about the retailer's business practices, but an especially sore point was the company's relative lack of local charitable giving when compared with the city's other major players ("Amazon a virtual no-show in hometown philanthropy"). The excuse for this among tech companies is usually that they're in the ramp-up phase, making hay while the sun shines. There's a vague promise that some of it will come back to the community via private foundations someday. Of course that is often true; Bill and Melinda Gates and Paul Allen being notable examples.

In the meantime though, civic involvement is left to the employees, or administered through in-kind donations of software and the like. The overall message: We're too busy right now.

That is if corporations feel any sort of guilt or obligation at all. More frequently you hear arguments that justify the making of money itself as a charitable act. By this philosophy, embraced by both Republican and Libertarian techies, selfishness is either a virtue (see Ayn Rand) or being a job creator is akin to sainthood. The prosperity gospel rationalizes the making of money - even at the expense of others - as a measure of Judeo-Christian goodness. People with jobs, who carry the burden of regressive taxes, are expected to be grateful and to quit their unions.

It's not universal. While Bill Gates, Sr. fought for a state income tax on the wealthy to fix the state system, some local venture capitalists like Madrona Venture Group's Matt MacIlwain opposed the measure, countering that Washington would be smarter to adopt the low-tax model of Rick Perry's Texas if we want to continue to prosper ("So you like Texas better than Washington?").

The high-tech sector is a special case in many ways. It's semi-virtual, easier to pick-up and move to greener pastures. Its products can often be transmitted electronically, and companies can easily operate globally. The culture of the Internet is libertarian - hard to regulate and resistant - and software and services are cash cows. By their nature, such companies have many global interests, but are less rooted in any one place. Employees are recruited from elsewhere. Washington state cannot produce enough engineers or college graduates to meet local needs, so they're brought in, though not necessarily permanently.

Writer Wallace Stegner talked about the West's phenomenon of attracting boomers or stickers, people who come either for the quick buck and fast strike, or to put down roots. Our tech companies tend to attract a kind of highly educated boomer who's passing through, thinking more about job and future than community. The residents of "Knowledge Cities" like ours are often cloistered in campuses that provide for their daily needs, are immersed in work cultures that are all-consuming, and live in communities that feel detached, new, or in-the-making, like Bellevue, Sammamish, or South Lake Union. Because the newcomers are often new, busy, un-bonded, the local issues might seem rather abstract or irrelevant. Olympia? Ick. City Hall? Where's that? Why should I give up my red Sox cap? Why doesn't this burg operate like a big city, Chicago or New York? What's wrong with you people? Tell me when I'm back from my trip to Shanghai.

It's true that deeply rooted companies, like Boeing, have cheated the local community as well - signing deals out of state to avoid taxes, threatening to move unless tax breaks and subsidies are delivered. The state's tax code has been largely written to accommodate a company that isn't even headquartered here anymore, and the little guys are punished through taxes (like the B&O) that they can't avoid.


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Comments:

Posted Wed, May 2, 9:24 a.m. Inappropriate

It's hard to make the case that anyone, businesses especially, should pay more taxes than they owe. The problem is not the businesses, it's the tax code. Large corporations can afford to hire whole departments of lawyers and accountants to figure out exactly what they owe and pay only that. Small and mid-sized businesses cannot. The result of an overly complex tax code is that those with the greatest ability to pay contribute the least, while small firms are forced out of business by their greater tax burden. This is only going to change with radical simplification of the tax code at all levels. Then everyone can easily pay what they really owe and get on with their work.

As far as a freedom-limiting "bill of rights" goes, good luck with that. I hope the last major employer to leave Seattle will remember to turn out the lights.

dbreneman

Posted Wed, May 2, 10:06 a.m. Inappropriate

Db, if you take a look at Microsoft Tax Dodge ... you'll see that this is more than just the company not paying taxes it doesn't owe...

Rep. Hunter, a 17 yr ex-Microsoftee, leads a change to the Royalty Tax to effectively eliminate the company's Nevada tax dodge in 2010 and grant the company amnesty on back taxes.

Gregoire appoints Suzan Delbene, who is literally in bed / married to, President of Microsoft Office, Kurt Delbene, to run the Dept. of Revenue.

Gregoire and the D.o.R. made a choice not to pursue MS for the back taxes. That was a legal battle they could have taken on had they chosen to.

The Royalty Tax is essentially a .24% tax on Microsoft's $580 billion in revenue during the years 1998-2010 ... are you saying the company can't afford that? It's a tiny price to pay for access to our incredible region and its gifted people.

Do you really honestly think they will pick up and leave just because the tax is enforced?

Posted Wed, May 2, 11:48 a.m. Inappropriate

I'm not saying that Microsoft cannot afford a .24% tax, certainly not. If Microsoft is breaking the law, they should be prosecuted. But if the law itself is broken, it should be fixed. Simply making the tax code more and more complex is not tax reform. You can't complicate a system into fairness.

dbreneman

Posted Wed, May 2, 12:15 p.m. Inappropriate

To the issue of measuring Microsoft as Corporate citizen, consider their law firms post Citizen's United PR followed closely by the Corporate stance of Microsoft on 520 - also in conjunction with Gregoire.

This stance opposed a constructive neighborhood alternative which, in an apples to apples comparison, would've cost less than the selected alternative, if you include the $200 Million (!) in enviro political machine analysis.

Posted Wed, May 2, 12:32 p.m. Inappropriate

Doug - can you provide more detail and links ... I'm not as familiar with this stuff.

Posted Thu, May 3, 12:07 a.m. Inappropriate

The case is simple. Simplify the tax code so that balance happens.
They pay more, I pay less.

Fair.

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