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".
I don't think a lot of people understand the effects that regulation has on small businesses. It's all packaged in a nice little bubble-wrapped package of "this will help the world be a better place" and most people accept it because it's pretty and the intentions noble.
However, being on the other end of this stick, I've slowly been seeing the huge extent that the regulations make it near impossible to start a business. You're almost guaranteed to be breaking some law, regulation or municipal by-law, because you have a preconceived notion about how lightly regulated society is. The only reason we don't hear more about this is because it's selectively applied and the police can't police everything.
On my local scale, what I've noticed with the above is that it penalizes those that actually go out and research the regulations. I.e. they self-regulate. Meanwhile, the "bad" actors simply don't, and rely on the lack of enforcement, giving them an unfair advantage over everyone else.
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.
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.
The magic of state enterprise funds, its like NFL teams threatening cities they would leave for LA but at the corporate level. It works! The idea is similar to anchor-store. You do not charge the big-dawg, but the little ones around it.
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.
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.
> 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?
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.
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.
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...
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.
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.
Maybe, maybe not. We are talking about 30 years ago. It is now one of the largest corporations in the world. Even if you buy into the corrupt world of tax incentives, they generally come with some sort of expiration date.
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.
TFA is not strictly about the fact that there is a tax break, but about a great increase of the break in recent years and some possible shenanigans vis-a-vis some Nevada operations. My reply was driven by the comments here that why breaks exists in the first place, not strictly to the situation presented in the article (of which I understand little to tel you the truth).
I lived in Redmond for ~5 years and saw a ton of small businesses close up shop since they couldn't afford to keep pace with market prices for leases/etc.
Heck we got our lease on our apartment terminated "early"(~2 month lead time) and the 1br/1ba was turned into a 300k condo. No way we could swing that price at the time(and it was crazy in retrospect). So we also moved out of the area.
Oh please! This is Reaganomics, trickle-down nonsense. Why? Because it is a race to the bottom. If WA does not give in, then another state/country will. What happens when the tax rate is 0? Are we to pay these companies for the benefit of a job? Oh wait. We already do!
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.
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...
Sure, it benefited the teachers and perhaps many deservingly so, but it failed to make the expected dent into the system.
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. When small countries negotiate with large companies, they are on equal legal basis.
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?
I don't know what really constitutes low or high taxation for this purpose, but I am only suggesting that businesses pay the same rates rather than using their wealth as a lever to harvest services from community at a preferential rate.
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.
38 comments
[ 4.9 ms ] story [ 69.9 ms ] threadHowever, being on the other end of this stick, I've slowly been seeing the huge extent that the regulations make it near impossible to start a business. You're almost guaranteed to be breaking some law, regulation or municipal by-law, because you have a preconceived notion about how lightly regulated society is. The only reason we don't hear more about this is because it's selectively applied and the police can't police everything.
On my local scale, what I've noticed with the above is that it penalizes those that actually go out and research the regulations. I.e. they self-regulate. Meanwhile, the "bad" actors simply don't, and rely on the lack of enforcement, giving them an unfair advantage over everyone else.
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?
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.
People -- not corporate taxes -- are the drivers of wealth in a local economy. WA state is wise to recognize this, not foolish.
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
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.
This video shows that from times immemorial local authorities tried to attract business: https://www.youtube.com/watch?v=hExE6iLxfEw
Generally, but not always the case.
I lived in Redmond for ~5 years and saw a ton of small businesses close up shop since they couldn't afford to keep pace with market prices for leases/etc.
Heck we got our lease on our apartment terminated "early"(~2 month lead time) and the 1br/1ba was turned into a 300k condo. No way we could swing that price at the time(and it was crazy in retrospect). So we also moved out of the area.
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.
If you think this is bad, look at last year's chevron v ecuador arbitration: http://www.corpwatch.org/article.php?id=15978. When small countries negotiate with large companies, they are on equal legal basis.
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.