Corporate Tax Dodgers . . . Microsoft
This is the first in a series of articles on corporate tax dodgers that will be presented over the next several weeks. These summaries are taken directly from the report on Corporate Tax Dodgers by Americans for Tax Fairness and the Institute for policy studies
It is a bitter irony that some of the wealthiest people in America, those most responsible for causing government debt, are doing everything in their power to balance the budget on the backs of average workers. Yet this is the case.
Multi-billionaire Steve Ballmer, CEO of Microsoft, one of the largest corporate tax dodgers in America, is on the steering committee of the “Campaign to Fix the Debt,” an organization seeking to cut Social Security, Medicare, and other programs beneficial to middle and lower income people. But Mr. Ballmer, like many corporate leaders, refuses to look at the role Microsoft and similar corporations played in creating government debt.
Microsoft has over 80 paid lobbyists pressuring legislators to support tax legislation favorable to corporations. Companies like Microsoft claim they are simply taking advantage of available, legal tax breaks, but it is never stated that these same corporations virtually wrote the tax laws. The result is a loss of billions of dollars that should have been paid to our government and the citizens of America.
At a net worth of $76 billion, Bill Gates, the founder of Microsoft, is once again the richest man in the world. Mr. Gates is often praised for his philanthropy through the Gates Foundation. It is laudable that the Gates foundation supports worthy efforts, but the $3.6 billion granted in 2013 is dwarfed by the taxes Microsoft avoided in the same year. Perhaps if Microsoft and similar corporations paid fair taxes, we wouldn’t need philanthropy.
The following summary of Microsoft’s tax avoidance is from the report by Americans for Tax Fairness and the Institute for policy studies:
Microsoft’s tax dodging operating system: shift profits to offshore tax havens
Microsoft appears to pay a lot in taxes – it earned $20 billion and paid $9.8 billion in federal income taxes from 2010 to 2012 – a 49% effective tax rate, according to its filings with the Securities and Exchange Commission (SEC). But a closer look reveals that the company has been aggressively shifting profits on sales of products developed and sold in the United States to tax havens like Puerto Rico.
Senator Carl Levin (D-MI), chairman of the Senate Permanent Subcommittee on Investigations, found that 47 cents of every dollar of product Microsoft sells in America gets immediately transferred to the company’s subsidiary in Puerto Rico. As long as that money remains in Puerto Rico or another offshore tax haven it remains untaxed by the IRS. Senator Levin estimated that Microsoft saved $4.5 billion in federal income taxes from 2009 to 2011 – $4 million a day.
Microsoft saved $4.5 billion in federal income taxes from 2009 to 2011 by
Schemes like this, have led to an explosion in Microsoft’s untaxed offshore profits. Its offshore stash reached $60.8 billion in 2012, according to the company’s SEC reports. This represented a $16 billion, or 36%, increase from the year before. Microsoft told shareholders that if it brought this cash back to the U.S. it would owe $19.4 billion in U.S. taxes. This suggests that it has paid foreign governments less than 10% tax on these profits, indicating that much of this money is held in tax-haven countries that impose little or no taxes on corporate profits.
Microsoft has only six foreign subsidiaries, each of them in a tax-haven nation (Ireland, Singapore, Puerto Rico and Luxembourg).
Over the last three years, Microsoft has had in the United States more than 75% of its long-lived assets and nearly 55% of its sales, yet it reported just 26.6% of its sales here. If it had reported 55% of its profits in the U.S. it would have owed $16.6 billion more in U.S. corporate income taxes than it paid. That subsidy is attributable to offshore tax loopholes.
Microsoft fights for a territorial tax system to avoid even more in taxes
Microsoft spent $8.1 million lobbying Congress in 2012, and taxes were its highest priority issue, according to OpenSecrets.org. Microsoft’s highest lobbying priority in 2012 was the Freedom to Invest Act, a bill that would have established a tax holiday allowing corporations to bring their untaxed offshore profits back to the U.S. nearly tax-free. Microsoft lobbied for this legislation more than any other company last year. Nearly 80% of Microsoft’s lobbyists (69 of 87) are former Members of Congress or their staffs, a group that OpenSecrets.org labels part of Washington’s powerful “revolving door.”
Microsoft’s CEO is a leader in campaigns pressing for corporate tax cuts and Social Security cuts
Microsoft was a founding member of the WIN America Campaign, a short-lived effort fighting for a corporate tax holiday in 2011. Many WIN America members joined even more CEOs to launch the Campaign to Fix the Debt in 2012. Microsoft’s CEO Steve Ballmer is on Fix the Debt’s Steering Committee, which supports cuts to Social Security and Medicare and adoption of a territorial tax system, which would establish a permanent U.S. tax holiday on foreign earnings, give a major tax windfall to Microsoft and encourage the shifting of even more profits and jobs overseas. Ballmer is also a member of the Business Roundtable, a lobbying club of more than 200 CEOs who support raising the Social Security retirement age from 67 to 70. That’s a benefit cut of nearly 20%. The Business Roundtable is also pressing for more corporate tax cuts.
Unlike many other Fix the Debt CEOs, Ballmer does not receive retirement benefits from Microsoft. He doesn’t need them; he owns 333 million shares of company stock worth more than $9.5 billion. In contrast to Ballmer’s personal wealth, the average Social Security retiree receives just $1,265 a month.