Microsoft wins its $100M tax-break and amnesty from broke-ass Washington State

Jeff sez, "As the Washington State Legislature wound down its special session to close a $2.8 billion fiscal deficit, Microsoft's General Counsel Brad Smith successfully used a carefully timed press conference making veiled threats about tax rates as a concern regarding future job expansion in Washington State. Led by Finance Chair Rep. Ross Hunter, a 17 year former Microsoft manager, the Legislature gave Microsoft two huge gifts: a $100 million annual tax cut and an estimated $1.25 billion in amnesty on its 13 year Nevada tax dodge. To make ends meet, the Legislature cut $120 million from K-12 education and $73 million from university budgets. It also raised the general tax rate on businesses from 1.5% to 1.8% and created new '7-11' taxes on the Average Joe on beer, soda and candy. The benefits of 4,700 at-risk unemployed people with disabilities will expire in the coming year. No word on how cash-strapped Washington plans to address Smith's concerns about its educational system and transportation infrastructure. On Wednesday, Gates' father, Bill Sr. announced a citizen initiative to replace the business tax with an income tax on high earners (>$200,000/yr). Asked if his son was on board with the tax initiative, Gates Sr. said, improbably, they hadn't discussed it. 'I don't know what my son is going to do.' Governor Gregoire said this isn't over: once the budget is signed into law, 'there will be real cuts, there will be real people losing jobs.' Yesterday, Microsoft reported record quarterly revenue. It now has $39.6 billion in cash and short term investments."

Microsoft Wins Nevada Royalty Tax Cut and Tax Amnesty; Reports Record Revenue (Thanks, Jeff!)


    1. What makes you say Microsoft > Linux? Because more average Joes who don’t understand computers or how to secure them have them on their desktops? Because 99% of computers in botnets are Windows computers? Because Windows has the worst security record to date? Because Linux runs the internet and Microsoft only wishes it could?

      All these things make Microsoft > Linux? Or maybe is something juvenile like the amount of money they make and the number of people they rip off and the number of lawsuits filed against them every year.

  1. Well, I guess that’s one way of looking at it. Here’s another:

    Washington State has grown spending 33% in the last four years, and is increasing the rate of state spending (16%)at twice the rate of revenue growth (7%). Despite a huge shortfall driven mostly by decreased real estate taxes, new entitlements, education, and health benefits have continued to be added.

    Microsoft is a huge local employer, they do tons of construction work with local labor, and are one of the areas few remaining engines of prosperity. Now, while I’m sure it’d be nice to allow Washington state to tax revenue that Microsoft earns in Nevada, why stop there? Why not tax MS (and Boeing, and Starbucks) on money they earn overseas? Why not capture payroll taxes on foreign workers? Why not tax Microsoft on the money they pay the construction companies who build their corporate buildings?

    It’s easy to look around for deep pockets and say, “they should pay more” – but the the problem in Washington state isn’t with revenue (which is growing at 7%), it’s with the shopaholic mentality of state government bureaucrats.

  2. Why not tax a corporation on money they earn overseas? The US and Libya are the only two countries in the world that tax citizens who permanently reside in other countries. If the IRS thinks it’s okay to nickle-and-dime an individual for foreign income earned, why not ‘American’ companies?

    1. Good question Davis, here’s why. When companies pull the old bait and switch of moving their headquarters over to an offshore PO box (a loophole that REALLY needs to get closed), those companies become foreign entities and are no longer US corporations. Thus, they are not subject to the US Internal Revenue Code.

      It would be like the US trying to force a French citizen living in France, to pay US income taxes. Impossible.

      SO, those companies that have not flat out bailed, set up international subsidiaries, which pay the income taxes of that nation instead (in cases where the local tax would be higher, the companies let the money flow through their US offices).It goes on and gets even murkier from there.

      It is all an elaborate shell game to allow companies to maximize profit, and minimize expense while providing government provided services that they don’t pay for.

      Yeah, it pisses me off too.

      Now, the Microsoft case (referenced above) deals with something similar, except on a state level. Microsoft legally set up an out of state corporation to deal with their licensing income…thus making that income not subject to Washington State’s tax laws.

      This is a tax AVOIDANCE scheme as opposed to a tax EVASION scheme. Tax avoidance is legal, tax evasion is not.

      The new law (which again, provides neither a tax break NOR an amnesty) specifically closes the loophole that Microsoft has been using, thus making that money taxable for Washington State purposes.

      As this deals with interstate trade, expect this new law to be challenged though.

  3. Really? More Yellow Journalism on this subject?

    There wasn’t a tax break and there wasn’t an amnesty. Indeed, this CLOSES a tax loophole to make Microsoft PAY taxes.

    Do I really need to repost everything into this thread too? Plenty of reasons to be upset at Microsoft, this isn’t one of them. Can we PLEASE maybe stop spreading these untruths?

  4. Heck, I’ll just quote my earlier posts here and get it over with since I’ll surely get called on this…again.

    “Now then, to continue we need to look at how corporations work between states. When you incorporate in a state you are bound by that state’s laws for your corporation. To do business in OTHER states, you are actually required to register as a foreign entity doing business in that state. TECHNICALLY, without doing so you have no legal write to do business in, or collect money from the residents, of that state. A foreign entity is bound to the tax laws of that particular state, but only in so far as they do business in that state.

    A prime example, a corporation doing business in New York and California is only required to pay California income tax on the corporate income derived from California.

    So, with that in mind, Microsoft moved its licensing business over to its own corporation located in Nevada. As the income for licensing was funneled through the state of Nevada, no tax was actually owed.

    (This does bring up an interesting question about ALL of these products that are “licensed” whether software movies or music)

    Now, what the state is trying to do with this bill…

    PART I
    Minimum Nexus Standards
    NEW SECTION. Sec. 101. (1) The legislature finds that out-of-state businesses that do not have a physical presence in Washington earn significant income from Washington residents from providing services or collecting royalties on the use of intangible property in this state. The legislature further finds that these businesses receive significant benefits and opportunities provided by the state, such as: Laws providing protection of business interests or regulating consumer credit; access to courts and judicial process to enforce business rights, including debt collection and intellectual property rights; an orderly and regulated marketplace; and police and fire protection and a transportation system benefiting in-state agents and other representatives of out-of-state businesses. Therefore, the legislature intends to extend the state’s business and occupation tax to these companies to ensure that they pay their fair share of the cost of services that this state renders and the infrastructure it provides.

    Quite a mouthful at the opening, but the bill is working to extend taxes to entities that one could argue have a moral obligation to pay for the services and protections provided to them, and correcting the fact that they were not legally obligated to pay for these services.

    It is interesting to note that this bill also would serve to levy some taxes on corporations that moved their HQs overseas as a method of tax avoidance.

    (2)(a) The legislature also finds that the current cost apportionment method in RCW 82.04.460(1) for apportioning most service income has been difficult for both taxpayers and the department to apply due in large part (i) to the difficulty in assigning certain costs of doing business inside or outside of this state, and (ii) to its dissimilarity with the apportionment methods used in other states for their business activity taxes.

    So, the bill also seeks to address the difficulty of untangling the mixture of revenue streams from various states and, in many cases, countries.

    There is still no mention of any illegality involved in these past methods, because they were not illegal. Indeed, there is a reason that the bill clearly addresses tax AVOIDANCE.

    That said, the only person who mentions tax evasion ANYWHERE is the author of the original argument…and he’s mistaken. Let’s look at another quote from his article.

    “The Department of Revenue’s arguments to us explaining their inaction have been vague and weakly argued. Allowing Microsoft to evade the royalty tax to date appears to be an administrative decision.”

    Again, he makes the common mistake of confusing avoidance and evasion. Now, I cannot argue for or against the reasoning that the loophole had not been closed before now…his aspersions to the reasoning are really not something that I can argue for or against in any fashion based on tax code and tax laws.

    Finally there is this section…

    “Washington’s statute of limitations on unpaid tax debts is five years, longer if fraud is involved. Despite HB3176, a court challenge could still force Microsoft to pay its royalty tax bill in amounts from an estimated $370 million to the total amount including extra for interest and up to 35 percent penalties.

    However, Sec 1504 of HB3176 raises a huge red flag (p. 88) to us: “Sec. 1504 … (2) Section 201 of this act does not apply to any tax periods ending before July 1, 2010, that were included in a completed field audit conducted by the department.”

    In other words, if a field audit was conducted at Microsoft, which the company would know, then its entire billion dollar tax dodge would be shielded from collection under HB3176. In other words, an audit finding based on weaker, older administrative policies at the Department of Revenue could clear Microsoft from wrong doing despite the newer, stronger enforcement edicts in HB3176.”

    The “in other words” again, wholly misses the point. Yes, there is a five year statute of limitations, with an unlimited statute term in the case of fraud.

    That said, here is section 201. You will notice that it says no such thing. Indeed, what it DOES say is that even if the corporation set up for tax avoidance is created in a wholly legal fashion, the income will be reclassified anyways.

    Abusive Tax Transactions
    NEW SECTION. Sec. 201. A new section is added to chapter 82.32 RCW to read as follows:
    The department must disregard, for tax purposes, abusive tax avoidance transactions. In disregarding an abusive tax avoidance transaction, the department may: (a) Recharacterize the nature of income, such as recharacterizing dividends received from a related entity as income received for providing services to that entity; (b) Disregard the form of a corporate or other entity, even when legal formalities have been observed, when the form of entity is used as part of an abusive tax avoidance transaction; (c) Treat the tax effects of the transaction, plan, or arrangement according to its underlying substance rather than its form; (d) Treat a series of formally separate steps as a single transaction; and (e) Take any other reasonable steps necessary to deny the tax benefit that would otherwise arise as a result of the abusive tax avoidance transaction.

    (2) For purposes of this section, “abusive tax avoidance
    transaction” means the avoidance of any tax collected by the department under the provisions of this chapter by means of a transaction, plan, or arrangement that lacks economic substance.

    (3)(a) A transaction, plan, or arrangement will be considered as having economic substance only if: (i) The transaction, plan, or arrangement changes in a meaningful way, apart from its tax effects, the taxpayer’s economic position; (ii) The taxpayer has a substantial nontax purpose for entering into the transaction, plan, or arrangement; and (iii) The transaction, plan, or arrangement is an objectively reasonable means of accomplishing the substantial nontax purpose. (b) A transaction, plan, or arrangement that carries some risk of loss and profit potential may nevertheless be found to lack economic substance if the economic risks and profit potential are so insignificant when compared to the tax benefits that a reasonable person would conclude that the taxpayer would not have engaged in the transaction, plan, or arrangement absent its tax effects.

    (c) An objective of achieving favorable financial accounting benefits arising from tax savings is not deemed to be a substantial nontax purpose for entering into a transaction, plan, or arrangement. (d)(i) Except as provided in (d)(ii) of this subsection (3) the burden is on the department to establish that a transaction, plan, or arrangement lacks economic substance. (ii) If the taxpayer fails to produce records requested by the department that are relevant in determining whether a transaction, plan, or arrangement has economic substance, the burden is on the taxpayer to establish that the transaction, plan, or arrangement has
    economic substance. (4) The provisions of this section are cumulative and nonexclusive and do not affect any other remedies provided to the department under statutory or common law.

    (5) The department must by rule, and as resources allow, provide guidance on what it considers to be an abusive tax avoidance transaction. The adoption of a rule as required under this subsection is not a condition precedent for the department to use the authority provided in this section to disregard abusive tax avoidance transactions. The rule adopted under this section must include examples of abusive tax avoidance transactions.

    I could go on further, but I’ll stop here and ask if I really need to.”

    So really….can Boing Boing please stop spreading this misinformation about the web?

  5. Business taxes are silly. They are really consumer taxes, since businesses just pass them on to consumers like every other business expense. But it’s a lot easier for politicians to pretend otherwise, that they are heroically standing up to big greedy evil businesses and extracting their fair share.

    Are there ANY politicians honest enough to actually say so? Republican fat cats don’t count, since they think just the opposite, that businesses can do no evil, of course as long as they contribute to election campaigns.

    1. this is the real bit of truth! businesses do not pay taxes or fees or any other tariff or duty, etc. businesses spend billions of $ every year collecting taxes, fees, duties, and tariffs from customers, while hiring accountants and tax lawyers, etc. to manage the accounts and avoid returning as much of that revenue to the various local and state governments, and the federal government as possible. not until the true tax rate is revealed to American suckers, i mean citizens, will the real tea party begin. you think these morons are pissed now? you just wait!

    2. Yeah, I recently had that discussion here too. Corporate taxes are indeed an illusion. Corporations factor those taxes into their cost of doing business. Then, if they can move their headquarters and not pay them…they certainly don’t pass those savings along to the consumer.

      That said, the tea party stuff? You hit the nail on the head… Morons.

      But really? This Microsoft thing? Anyone else find it interesting that Jeff is a former Microsoft employee who is spreading falsehoods about Microsoft through the blogosphere?

      I mean…he wouldn’t be a “Disgruntled” former employee would he?

  6. Taxing employers is just plain silly. It just means they employ less people or move away. It’s better to simply let them conduct business free of charge and then tax the employees (who can’t simply move to a P.O. box in Bermuda).

    Yes, that includes the income of the CEO, etc.

  7. I wanted to take a moment to respond to some of the allegations above.

    Microsoft has been dodging one specific tax called the royalty tax. It’s a tax on intangible property (licenses that provide the right to duplicate and use software). Laws related to intangible property are different than say real estate, retail sales taxes, etc.

    Read this post to understand the case law precedents that Washington could use to enforce its existing tax law – that’s just one example. Here’s a doctrine California uses Here’s a primer in the NYT on Alter Ego’s like Microsoft’s Nevada licensing company.

    Essentially, Microsoft feared that this tax could be enforced in the future – this is why it directed Rep. Hunter to change the definition of the royalty tax (the $100 million tax cut) and add the field audit clause to the strict enforcement language (the amnesty clause). Read this post for more info and this one

    So, while the State of Washington was not enforcing the tax against Microsoft, there is a very strong legal case to make that it should have and could have been. Now, it is restricted from doing so with the passage of this bill.

    Only a Microsoft supporter or Ross Hunter could claim that this bill closes a loophole. This bill is a huge gift to Microsoft.

    1. Hi Jeff, glad to see you join the conversation. Having pretty much taken apart the arguments you’ve posted on your site, let me address your points one at a time.

      “I wanted to take a moment to respond to some of the allegations above.”

      Not so much allegations but facts based on the evidence you yourself have presented.

      “Microsoft has been dodging one specific tax called the royalty tax. It’s a tax on intangible property (licenses that provide the right to duplicate and use software). Laws related to intangible property are different than say real estate, retail sales taxes, etc.”

      Let’s get specific. Microsoft has been AVOIDING the tax. Tax avoidance, while certainly skirting an ethical boundary, is perfectly legal. You have made wide and spurious claims that it has been evasion. This is not the case. Please see the “allegations above.”

      “Read this post to understand the case law precedents that Washington could use to enforce its existing tax law – that’s just one example.”

      First off, Louisianan case law, while interesting, is wholly irrelevant. Moving to the Washington case

      You are confusing the foreign corporation status and trying to overstretch what that court decision represents. You miss the fact that Microsoft Licensing GP of Nevada has MINIMAL contact with the State of Washington and certainly does not meet the requirements laid out in International Shoe Co. v. State of Washington,as it is a separate corporate entity. Yes, it is an entity designed for tax avoidance, but since that is the loophole being closed, there is a REASON that loophole is being closed.

      “Here’s a doctrine California uses Here’s a primer in the NYT on Alter Ego’s like Microsoft’s Nevada licensing company.”

      Jeff, California case law has no weight in the State of Washington. Bringing in caselaw from other states to support an argument that laws are being broken in a DIFFERENT state is useless as best, intentionally misleading at worst.

      “Essentially, Microsoft feared that this tax could be enforced in the future – this is why it directed Rep. Hunter to change the definition of the royalty tax (the $100 million tax cut) and add the field audit clause to the strict enforcement language (the amnesty clause).”

      Read this post for more info

      Well, that first link is merely a link to your flawed views on what is going on. You simply saying that they are being given amnesty doesn’t make it so Jeff, especially when the facts line up AGAINST you.

      “and this one

      Nor do Todd Bishop’s views (a tech writer and not a tax professional) lend any more credence. Simply having someone say the word amnesty doesn’t make it so. Indeed, in my above repost I went through the law point by point and showed how this is NOT the case. I’m answering you point by point, I challenge you to do the same.

      “So, while the State of Washington was not enforcing the tax against Microsoft, there is a very strong legal case to make that it should have and could have been. Now, it is restricted from doing so with the passage of this bill.”

      Again, not so. As the law was previously written, the State of Washington knew it could NOT enforce the law against Microsoft. Now it actually has something that it CAN enforce.

      In addition, in tax cases there is no statue of limitations on fraud. So, if Microsoft were actually fraudulently dodging this tax (which I can continue to assure you, they were not) nothing in the bill would prevent the State of Washington from taking action.

      But again, I pointed this out above.

      So, I’ve shot it all down. Do you have anything else you want to throw my way?

      I don’t think that you are a bad guy Jeff, don’t get me wrong. I’m pretty certain that whatever a “Group Program Manager” is, I may very well not be qualified to fill that role. However I *DO* know taxes. Perhaps it is time to step back and ponder the thought that you may not know as much about tax law as you think you do.

      “Only a Microsoft supporter or Ross Hunter could claim that this bill closes a loophole. This bill is a huge gift to Microsoft.”

      And no… I don’t work for Microsoft…nor am I Ross Hunter.

  8. This is especially brilliant, considering their recent outsourcing of US jobs. Let me provide a personal example.

    I was recently employed doing customer support for the Cashback program associated with Microsoft Bing. I worked at a Redmond, WA office, and we had around fifty people doing the job. in November they started outsourcing to the Philippines, and forcing the people in Redmond to train their replacements. They slowly started dwindling the workforce until only a skeleton crew remained, and they announced that come July all customer support work associated with Microsoft Bing Cashback would be outsourced to the Philippines, and everyone better find a new job because transfers were not available.

    I know fifty people isn’t very large in the grant scheme of things, but this is the tip of the iceberg. They’re getting tax cuts on one hand and outsourcing on the other.

  9. Those claiming that corporate taxes are really consumer taxes are wrong. Corporate taxes are on profits, not sales. The expense of complying with or evading/avoiding those taxes is deductible. If there are no profits after paying salaries, benefits, expenses, lobbying, “depreciation” and so forth, there are no taxes to pay other than payroll taxes. Corporate profits are paid by the customers, true – but to say that taxes on those profits are paid by customers assumes not only that the company can increase prices to maintain a given level of net after-tax profit, which is only true for monopolies on products with zero elasticity of demand, but also that the company will actually do so. But why would a profit-maximizing company with such a monopoly on a product with zero elasticity of demand (which isn’t at all realistic) have a finite pre-tax profit in the first place?

    In the real world, the company will have at most a near-monopoly on a product with a relatively inelastic demand, and this will set the amount of profit it can extract. Taxing the profits reduces the return for the company, but the company cannot simply pass the tax on since the increased prices will reduce sales and thus profits.

    1. you are right, but for one thing, this crap has been going on for so long that the cost of doing business is just the cost of doin bizness. every dollar a company collects comes from only one place, my pocket. how that revenue is distributed is not my problem, in the end i pay for everything. how this does or doesn’t impact profit is unimportant to everyone, but the shareholders. the only thing a company or corporation should pay is fines and penalties, which also comes out of my pocket. When all sales taxes, taxes paid by business, and other fees are finally revealed as coming from my income, then we will fully understand the true tax burden.

    2. Ultan,
      Taxes are definitely a cost of doing business. All business costs are paid for by the consumer. Corporate taxes are not a SALES tax, but they are a tax paid for by consumers. I’ll see if I can find further reading on teh subject for you if you are interested.

  10. Ceronomus, clearly in your mind you’ve won the debate. But, I’m expressing what’s called an alternate point of view. Just because you disagree with it doesn’t invalidate it.

    I used the term allegation to refer to your claim that this was yellow journalism or false reporting.

    In an interstate issue like this, where there is a public need, pertinent case law from other jurisdictions can be brought in. The Louisiana case is important because of how explicitly it described the handling of intangible property.

    Microsoft Nevada regularly touches Microsoft Washington’s operation. They have employees in Redmond that handle a lot of the Nevada activities – to this day. They sue in Washington court on behalf of Microsoft Nevada. Microsoft’s licensing is 1/3 of Microsoft’s revenue – if you read the Louisiana case – this meets the standard of contact between the states. Also, 7 Washington based employees are officers of Microsoft Nevada.

    The question of whether Microsoft’s tax dodge is legal or illegal has been untested in court. Luckily, you don’t get to decide this issue.

    All that Washington can enforce under the new law is the percentage of Microsoft’s $20.7 billion in licensing sales made to Washington customers – whereas under the old law, Microsoft was required to report its entire worldwide royalty sales. That’s the $100 million tax cut.

    The amnesty is clear as day – just read the field audit clause mentioned in the blog post.

    Remember, just because you disagree, doesn’t mean this isn’t true. It just means we differ.

    I won’t be able to respond further to your comments in this thread.

  11. I would just like to point out that the title of this post seems to infer that part of the reason that Washington State is broke is due to poor tax collection (from Microsoft in particular). However, this isn’t necessarily the case. For example, what is the point of giving the State of Washington $100 million more dollars if it will only squander them on useless schemes? Perhaps, the State needs to use what it gets more efficiently.

    I just think that needs to be pursued before crying too much over lost tax receipts.

  12. That’s fine if you cannot respond Jeff. My “allegations” above went through and REFUTED your claims. You have chosen not to provide any further evidence. It isn’t a matter of a “point of view” but tax law. Furthermore, you have made claims of content in the bill that were simply false (also shown in the original post).

    So, it isn’t a matter of simple disagreement, it is a matter that you have passed on misinformation as fact and got called on it.

    Hence, this *IS* yellow journalism. All sensation, no real fact. For example, your oft-claimed amnesty. Let me quote you…

    However, Sec 1504 of HB3176 raises a huge red flag (p. 88) to us: “Sec. 1504 … (2) Section 201 of this act does not apply to any tax periods ending before July 1, 2010, that were included in a completed field audit conducted by the department.”

    You take this to mean that

    “In other words, if a field audit was conducted at Microsoft, which the company would know, then its entire billion dollar tax dodge would be shielded from collection under HB3176. In other words, an audit finding based on weaker, older administrative policies at the Department of Revenue could clear Microsoft from wrong doing despite the newer, stronger enforcement edicts in HB3176.”

    A field audit is when the GOVERNMENT goes out and conducts an audit. Yes, Microsoft would know if that happened. They also would already have been given a list of changes or non-changes based on the results of that audit. Trying them AGAIN under a new law would be double jeopardy and is unconstitutional.

    Are you SURE you really think you understand what you are talking about?

    Furthermore, yes, that audit would be required to operate under the laws of the time and would not be subject to reinterpretation. Similarly speaking, if posting to Boing Boing were suddenly made illegal, you could not be tried for having posted when it WAS legal.

    This isn’t opinion Jeff. It is fact, and readily apparent fact.

    As for precedent from other states? It can be used to help guide legal decisions in Washington, but those precedents carry no actual weight in the tax system. Most often, prior tax rulings don’t even carry much weight in the tax system (something that absolutely boggles my mind).

    Under the old law, Microsoft used a LEGAL loophole to avoid paying the tax. Under the new law, Microsoft pays tax on Washington based licensing AND Washington State avoids having the whole thing challenged in both the Washington State and the US Federal court system.

    So, seeing as they didn’t have to pay the tax under the old bill, and they now have to pay tax… that LITERALLY is not a tax cut. That would be like my claiming that this was a tax cut for YOU if they specifically added you to this bill…despite the old law having applied to you.

    The old law did not legally apply. Net tax owed? Zero.
    The new law DOES apply – Any tax owed is an INCREASE not a cut.

    Heck Jeff, that is just basic math.

    Zero plus any positive number is an increase, not a decrease.

    You simply fail to understand tax law. That’s okay, a lot of people don’t understand tax law. However, I have explained all of this, point by point, and very clearly. All you’ve done is ignore the facts and claim that we disagree.

    Yes, we disagree. However my disagreement is based on FACTS. Often the very facts that you yourself quote.

  13. As a Washington State resident and taxpayer, I’m really getting a kick out of these comments.

    I had no idea tax law could be so interesting. No, really!

    1. I agree with kevomatic. This is one of the most interesting comment threads to a “news” article I’ve read in a very long time.

    2. If you think this is interesting, you should look at the Federal Internal Revenue Code sometime. There is stuff in there that is astonishing. The code is so complex, but it covers virtually any circumstance.

      For example, if your child is kidnapped whether or not you can continue claiming them as a dependent for tax purposes depends on if they were kidnapped by someone who might have a legal right (under the tax code) to claim them as a dependent (such as a parent) or if they are grabbed by a complete stranger?

      It’s pretty chilling to run across that one (which actually is in the 1040 instruction book), but I just found it fascinating that such a question has a readily available answer.

  14. I think the broad problem with the article is with the scapegoating of Microsoft for Washington State’s budget problems. “Broke Ass Washington” has seen revenues rise 7%, but they increased spending 16%. They used budget gimicks (using one-time stimulus to fund recurring entitlements) to create bigger problems. When the deficits got huge, they threatened to close parks and close libraries first rather than standing up to powerful state unions.

    Microsoft (and every other Fortune 1000 company) invests considerably in the best tax lawyers in the world. These guys are risk-averse and know more about US and WA tax law than anyone, including the people who wrote it. So assume that Microsoft’s subsidiary structure advantages Microsoft, but is still absolutely legal.

    So what are we left with? the author’s believe that Microsoft has a duty to bail out Washington State’s budget deficit. Of course they have no such obligation – their fiduciary duty is to their stockholders.

  15. Well certainly, I don’t know much about Washington’s tax woes and spending policies but the more I look things over it just keeps coming back to me that Jeff is a former Microsoft employee who has set up a non-profit

    “to help call attention to the ethical and legal issues surrounding Microsoft’s tax practices and Washington’s projected $2.6 billion state budget deficit.”

  16. Jeff sez… where? I’m trying to find the source of this quote, and I can’t find it on Jeff’s web site or any of the links linked from this blog post. Yet this blog post is almost entirely one long quotation. Really frustrating! Where can I find the original?

    1. Hey Anon, Cory linked the blog post beneath the quote:

      Watch Amanda Congdon’s video on the subject, it’s a good intro:

      You can also check out the Fact Sheet on Microsoft’s Nevada Tax Dodge here:

      Rep. Chase’s email to the house democratic caucus also details the issues of Rep. Hunter’s tax cut and amnesty for Microsoft:


  17. Good question. Probably just an email to Boing Boing being quoted, since he is also the author of the blog in question.

  18. I’m still confused at why you are so excited about this? Is Microsoft the only big company that gets tax breaks from the government? Don’t they all? Do you really think, for example, that Apple or Google happily pays the standard amount of tax on all the money they make? This is crappy, but only in that it’s crappy that every huge company gets away with it–not just Microsoft.

  19. Well, I think most of the fuss comes from Jeff’s incorrect assertion that Microsoft has been illegally be EVADING a Washington State tax. If you look at his website, you can understand why someone would get worked up over the items he posts, if the information was actually accurate.

  20. Welcome back Jeff,
    I’m disappointed that, while you cling to your mistaken belief, you have not even attempted to respond to my disassembling of your entire premise.

    I am left to believe it is because you simply cannot. Indeed, you cannot because several of the points I have made go directly to you saying one thing about the Bill and the Bill itself saying another.

    Even your Fact Sheet, written by YOU speaks to your own mistake. Line 6 of your fact sheet speaks of “Tax Avoidance.”

    Jeff, Tax Avoidance is legal. You may think it unethical, but it is perfectly legal.

Comments are closed.