
Forget Boeing, Microsoft's Tax Break Costs $776M - kitskid
http://jeffreifman.com/2016/05/05/forget-boeing-microsofts-tax-break-costs-776-million/
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rusanu
States/Cities offer tax breaks to attract/keep the business in the first
place. The Pacific NW city wanted to become a tech city and offered incentives
(=tax cuts) many years ago for companies like MS to settle here. Successful
companies bootstrapped satellite dependent businesses (the myriad small IT
shops in area, like SourceDynamics Inc) and attracted in the area subsidiaries
from big SV (FB, Google etc). The affluent workforce they foster spends their
disposable income in the area and this benefits all other businesses in the
area. And both MS and Boeing can decide to move to other locations, taking
with them huge swat of tax paying employees and a myriad of satellite smaller
businesses that depend on the 'mother ship'.

Here is a simple thought exercise: salaries -> area desirability -> high
property taxes -> high budget.

I don't think this is a case of corrupt WA politicians being in the pocket of
Big Business Co and writing off tax breaks for kickbacks. I think is a
calculated deal in which tough negotiators for both sides reach an agreement
benefiting both the state and the business. At 83.4 billion $ budget ([0]) WA
state does not seem to get the short end of the stick...

[0]
[https://en.wikipedia.org/wiki/List_of_U.S._state_budgets](https://en.wikipedia.org/wiki/List_of_U.S._state_budgets)

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nightski
A state's budget will likely remain the same regardless of who pays the bill.
If Microsoft did not enjoy the tax breaks, everyone else would including its
employees.

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ptaipale
If Microsoft did not enjoy the tax breaks, it might have settled somewhere
else in the first place, and the overall economic activity and tax revenue
would be smaller. Everyone else would have to pay more, or be happy with
smaller public spending.

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Retric
Lower taxes, but also lower needs for spending due to lower population.

There is an argument that attracting company's that compensate well has a net
positive impact. But, it takes a lot of of people to make up for these costs.
If you assume an extra ~3,000$ per person per year _over the areas average_
that's 230,000 workers which seems unlikely.

Remember everyone involved wants to make this seem like a great thing. But,
even negative sum games can make someone rich.

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spacemanmatt
So, long term, every sizable company moves or merges to get a preferred tax
rate, while smaller companies who don't have the clout to stiff their local
tax base pay the full rate? I wonder how this doesn't add up to a competitive
disadvantage? Couldn't small business owners do something collectively about
this screwjob?

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jessaustin
Small firms can still compete due to the crushing inefficiencies inherent in
large firms. (In certain types of manufacturing, there are "economies of
scale". That is irrelevant to this discussion.) Anyone who has worked at a
large firm has seen the stacks of deadwood. Not much of that in firms directly
managed by their owners!

By consistently increasing the tax and regulatory advantages for large firms,
society is effectively paying for their inefficiencies. That society "chooses"
actions contrary to its interests is an indictment of the political process.

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spacemanmatt
Yeah, I can't really get on board with rewarding large firms for their
inefficiency.

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wslh
We talk too much about people inequality but not about business inequality and
the power to lobby and use loopholes. A similar problem happen in the startup
world when well funded companies risk lifetime value of a customer against the
total acquisition cost. This attitude predates startups or established
businesses that can't afford this "game".

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rayiner
Microsoft isn't lobbying for favorable treatment for doing nothing or
exploiting loopholes. Microsoft is free to move wherever they want. They're
getting tax concessions from the state in return for exercising that freedom
to stay in Washington. Both sides are getting something out of the bargain.

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blisterpeanuts
Boeing has over 77,000 employees in Washington state, and Microsoft has over
40,000 employees there. It's hard to imagine that the state does not already
benefit so enormously from the presence of these two giants that a few hundred
million is literally a drop in the bucket.

Washington state doesn't have a corporate or personal income tax, but they do
have something called "Business and Occupation Tax", a tax on gross receipts
which all corporations must pay, regardless of profit. There are all sorts of
exemptions and exceptions, and of course MSFT and Boeing have their share.
However, MSFT last year was singled out for the closing of a loophole to the
tune of $57 million; they weren't named specifically but the law was directed
at "software businesses with greater than 40,000 employees", an unusual
maneuver to get more taxes from a specific company.

The blogger complains about a few hundred million and then goes on to
fantasize about how this extra money could pay for all sorts of wonderful
services in the state.

The fact is, however, in the real world, that chunk of tax revenue does not
exist; you have to work with what you have, and in this case, Washington has
to work within their $37 billion budget. Also worth noting is the unfortunate
fact that public funds do not efficiently flow to an earmarked pool of
deserving causes; much of it is sucked up by the bureaucracy, a certain amount
stolen through graft and embezzlement and dirty contractors, a certain amount
wasted, a certain amount subtly reassigned to other needs. $57 million
designated for schools in underprivileged areas makes a great sound bite, but
at the end of the day the deserving schools will see very little of that
money.

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rusanu
Case in point: (much of the) $100M donated to schools in Newark NJ evaporated
into union contracts: [http://www.businessinsider.com/mark-zuckerbergs-
failed-100-m...](http://www.businessinsider.com/mark-zuckerbergs-
failed-100-million-donation-to-newark-public-schools-2015-9) Sure, it
benefited the teachers and perhaps many deservingly so, but it failed to make
the expected dent into the _system_.

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lobo_tuerto
Correct title is: Forget Boeing, Microsoft’s Tax Break Costs $776 Million

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dang
Yes, we changed to that.

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PakG1
I honestly don't get why tax breaks of this level matter for companies of
Microsoft's level. I get it for a company like Tesla building a huge battery
factory when they are not yet really profitable. Every penny counts at that
point. For Microsoft, it seems like the millionaire superstar who refuses to
tip the waiter nicely.

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Retric
This is ~7% of Microsoft's annual profits which is huge for them. More widely,
it costs little for company's to get these handouts, and the people handing
out the money don't need to pay for it out of pocket. Remember, Corruption is
the default it takes care to avoid this kind of backroom deal.

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joshuaheard
Private companies negotiate volume discounts all the time. What's wrong with
the government doing the same?

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matt_wulfeck
People talk about tax breaks like these companies are emptying the pockets of
the state. Why isn't there ever mention about how beneficial it is to have the
huge number of jobs these companies bring in?

Even if they paid zero local taxes, the money is still flowing into the local
economy.

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kartan
> Even if they paid zero local taxes, the money is still flowing into the
> local economy.

That's also true for my salary. My salary moves the local economy. Not so
much, but if you get together $1B of taxpayer money we are talking about
thousands of workers.

Some one has to pay for the cost of workers education/transport/police
department/etc. So the argument doesn't makes so much sense. In the end this
companies are the ones that get more benefits from the public infrastructures
and services. Why they should be absent of paying for them?

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blisterpeanuts
WA charges property tax, so anyone living in WA is funding the state, unless
they're camping out in a state park.

The populist slogan "You didn't build that" doesn't stand up under scrutiny.
Directly or indirectly, the companies in your state have paid for every inch
of the roads, water pipes, and power lines, and they paid for every brick of
every schoolhouse.

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matt_wulfeck
Exactly. The economy is so interconnected. Even going to a restaurant (workers
after all have to also eat) they are funding an additional local business,
which in turn needs to hire other people and purchase local produce from
another business.

People -- not corporate taxes -- are the drivers of wealth in a local economy.
WA state is wise to recognize this, not foolish.

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awinter-py
msft is a state-like actor; they oversee massive resources in the form of
employees, real estate, patent IP, brand value, and recurring license
agreement revenue. Their leverage for negotiating with another state actor
(the IRS) is way greater than an individual or SMB.

If you think this is bad, look at last year's chevron v ecuador arbitration:
[http://www.corpwatch.org/article.php?id=15978](http://www.corpwatch.org/article.php?id=15978).
When small countries negotiate with large companies, they are on equal legal
basis.

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infocollector
Can we ask them to pay back that money, with interest please ;)

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guest
It is okay because they are good negotiators and make useless product.pay
America tax! We have sugar and electronic beep sounds!

