Microsoft: Obama's tax plan may hurt U.S. jobs
Microsoft CEO Steven Ballmer offered an unwelcome economics lesson to the Obama administration this week: Higher taxes have consequences that Washington policy-makers may not especially like.
Ballmer said Wednesday that if Congress enacts President Obama's plans to impose higher corporate taxes, a sensible thing for Microsoft to do would be to move jobs offshore.
"It makes U.S. jobs more expensive," Ballmer said, according to Bloomberg News. "We're better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S."
Last month, the president announced a plan to rewrite tax law by preventing U.S.-based multinational companies from "deferring" and keeping profits offshore, which can lower their tax bills.
The current U.S. corporate tax system is unusual because it taxes income that Microsoft and other companies make in other countries, even if they already paid foreign taxes on that income. That makes U.S.-based companies less competitive than, say, Irish firms that don't pay taxes on foreign income and aren't hit by double taxation; deferred taxation is a way to lessen the sting.
If deferred taxation is eliminated, it becomes more tempting for a company to move its headquarters from Seattle to Dublin. That's voting with your feet.
That's why business groups have opposed the president's plan. The U.S. Chamber of Commerce says it will "impede growth in the U.S. economy, (and) cause the loss of jobs." The National Foreign Trade Council called it "counterproductive."
Microsoft says it employs about 95,000 people worldwide, and about 56,500 in the United States.
Declan McCullagh is a contributor to CNET News and a correspondent for CBSNews.com who has covered the intersection of politics and technology for over a decade. Declan writes a regular feature called Taking Liberties, focused on individual and economic rights; you can bookmark his CBS News Taking Liberties site, or subscribe to the RSS feed. You can e-mail Declan at declan@cbsnews.com. 
In fact, since 1999, 40% of campaign contributions went to Democrats, only 14% went to Republicans. Source: http://www.campaignmoney.com/microsoft.asp
I mean, come on, they're a Seattle-based company, they are required to be liberal. They have given millions to education programs here and Bill Gates is always contributing big bucks to the schools.
If you make something more expensive, you get less of it. Water seeks it's own level. etc. etc. This isn't hard to understand.
I left California, as my place of primary residence, due to the crazy high taxes. So now they get $0 from me.
When the govt tries to attack everyone with high taxes, it's easy to argue that the result is less taxes as people do what's in their best interest.
That would suck if MS shipped off jobs to avoid having their money stole by Washington but I wouldn't blame them for doing so.
Microsoft and any other for-profit company in existence is all about making money. If they're being taxed more, they're going to do something so that that doesn't affect them as much. It's simple economics. Obama doesn't ever realize what the long term effects of any of these things will have, which is why he's a liberal. Liberalism is all about instant gratification, never the long term effects of that.
This is not Republican, Demorcrat, or other. It's simple math. While it's easy to say when you don't have a lot of money that the "rich" should pay a lot more, the rich, at some point will use their greater means to move away. Honestly, how often have you gone to the local hardware store to support a local small business, as opposed to going to Lowes or Home Depot or one of the majors. This is true with Wallmart, and every other type of store. When you shop at a discount store, you are doing the same thing. Does that make you a Republican; shopping for the best deal? No. That makes you fiscally responsible; something I do not attribute to either party over the last few years.
Don't confuse the poor guy with facts that don't jibe with his preconceived notions. I am just amazed that Ballmer has said something I can agree with. Economics courses should be required of every congressional representative. They just can't seem to wrap their head around the idea that the more they tax the more people will find creative ways to get around the taxes. Just wait and see what happens if they ever do pass a VAT. The barter economy will soar. People aren't as stupid as the government seems to think they are.
Is CNN Liberal?
What the heck is Microsoft's Ballmer taking about now when the world knows that it was Microsoft that almost "killed off IBM" (but for the Linux Operating System and the Lotus Development Corporation that Lou Gerstner bought). Which country's executives now have the former IBM's PC Company in their pockets as the result of Microsoft's past dealings with IBM.
DUBLIN!? That's even worse weather.
Corporations do not pay taxes. Never have and never will. The consumer of that companies services / products pay that tax. So whenever you hear a politician say we should tax and punish those "evil" corporations, you are in effect asking for a tax increase on the people who consume those products / services.
I guess we can put Obama in the "against" category right?
I find it interesting that Toyota moved car production to the US while GM moved out out of the US and Toyota came out on top. Apparently keeping your jobs where you sell your product isn't fatal.
If corporations don't pay tax on profit like I would (and do) as a citizen, they don't deserve to exist.
The only reason corporations should exist is that they can provide some benefit that I and other business owners who aren't incorporated can't provide.
Oh, and by your logic, you agree wiht the OP since it's a rise in corporate tax that has MicroSoft saying "gee, we can just go overseas".
I'm not sure I understand your statement "If corporations don't pay tax on profit like I would (and do) as a citizen, they don't deserve to exist. " Corporations do not pay taxes. They will make the profit margin they want and they do that by passing the cost of doing business, including taxes, onto the consumer. Because the taxes will go up, in order to keep their profit margin they'll need to either A) increase the cost of the product or B) move to where the taxes are lower. Microsoft is saying it'll leave is so that it can keep the price of their products the same, which helps the consumer.
And where did you come up with that line about "The only reason corporations should exist is that they can provide some benefit that I and other business owners who aren't incorporated can't provide. " The only reason modern corporations exist is because the Supreme Court in the 1860s created "corporate personhood". They are a construct of the government and exist because of government. Otherwise, they would just be normal businesses.
Oh, sorry, the answer is obvious! (and the death knell for America)
Don't type that crap and accuse others of being retarded.
Let's look at the abuses of your beloved capitalist system.
Let's look how corporations run the whole damn country.
Let's look how they keep wages down and people poor.
Is capitalism was so wonderful, we wouldn't need to keep moronic businessmen of a tight leash lest our country take a nose dive like we are in now.
Um how does that jive with capitalism being good.
So they take what they want and f*ck everyone else?
Nice
How much does it cost MS to print out a disk and a license for that disk? I can tell you now, it's not anywhere near the amount they're asking for it.
Now, how much does it cost to patch that OS? Still doesn't justify the cost of the OS because the price per unit is still exorbitantly high.
MS isn't trying to continue to make ends meet, it continues to try to rake in obscene profits.
There's a reason I use Linux, any cost for my machine depends on me. It cost me $10 for 50 CDs, means I can burn copies of my OS and give them away and it means I can continue to burn the newest release as it comes out. That comes out to $0.20 per CD plus a few pennies for electricity. It cost me a little time at the start to get used to the system but I got that time back by not having so much maintenance to do on my system.
So, we'll say it cost me roughly $0.30 to download and install Linux.
If I can download and install an OS that cheaply, don't you think a corporation as large as MS can do so for even less by now? If they produce at a rate of 500 copies per hour, they still come out cheaper than me. Even putting in packaging, it doesn't cost them $0.30 yet. Throw in the transportation for those units and it may come out to $0.35 and yet the price is how much again?
OEMs pay $15 per license. If I sold my burned copies of my favorite distro for $15 per copy, even if I took the time to go through and check each one, make sure it works properly (which I do anyway), I'd be making a profit of more than 50/1.
That is, I'd be making back $0.50 for every $0.01 that I spent.
Maybe MS can learn to be a not-for-profit business, open up the code for Windows and get rid of most of the bugs. That would solve the problems both for the consumer and for MS. Not-for-profits don't get taxed.
Let's look at the abuses of your beloved capitalist system.
(yeah the USA largest supplier of donated wheat in the world)
Let's look how corporations run the whole damn country.
(as opposed to dictators, fascists, or communist governments ( even china has realized that doesn't work)
Let's look how they keep wages down and people poor.
(its called competition, you are just complaining because you suck at competing and think you deserve as much as someone doing better than you)
That logic, while ideal, is a proven fantasy. Even Lisa Simpson joked about:
'running a land where everyone was equal in every way, but that she'd have to be in charge --well because someone has to'
It doesnt work because it requires the top to make up the slack for the bottom. And the top shrinks while the bottom grows. This isnt opinion but studied fact.
When he calls people who think with retarded opinions rather then actual studies, yes, you do deserve to be called retarded!!
He wasn't apologizing, Faux News just edited it seem that way. Besides, the US has much to apologize for.
Corporations do not pay taxes. The consumers do.
1) Should MS start paying that 25% in foreign currency?
2) Does MS simply have to shell out more USD from local profits to pay the tax?
3) Or does this force MS to convert EU to USD?
3a) If that's the case then you get into an semi-arbitrage situation playing on the market of when you convert your currency. Will the US gov designate the rate and specify a bank to conduct the transactions for auditing purposes?
3b) This also means MS would have to basically pay a 3rd tax on the currency exchange. The bank always wants their cut.
I can see why Ballmer said they would be further incentivized to move jobs offshore. It has a double effect. It lowers the employee cost and reduces the foreign tax base.
The time has come to balance the budget, I'm ready to do my part, and Microsoft should be ready to do theirs as well. The party is over and it's time to pay the bill. We need to cut spending where it makes sense, raise taxes on everyone (and I mean everyone) and balance the damn budget. Until then any economic prosperity with be fleeting at best.
Oh and I am so sick of the public education funding nonsense. We spend more per child on education than any other country in the world and our education system still sucks. It's time to realize there are deeper problems here than just throwing money at it.
I want to balance the budget too... You should be pretty upset that Obama is spending at levels never every seen in the history of mankind.
Cody
You say Obama's plan is better than the Republican plan? Obama is wanting to spend more than every single President and Congress in the 233 year history of the republic COMBINED during his first 5 months in office! And that does not even include his unconstitutional government run health care, nor does it include the pyramid scheme known as Social Security and Medicare/Medicaid. He's destroying the United States, pure and simple. The republicans aren't any better as their answer to fiscal discipline is to cut a measly $23 billion out of $3.8 trillion. But it least it's more than the $100 million Obama proposed to cut.
I'd still like to know where in the Constitution it gives the federal government the authority to run the education system. Seems like the 9th and 10th amendment prohibit that, but then again it's only a document that allows us pleebs to watch porn and Youporn, right?
You've also demonstrated exactly what happens when income and corporate taxes are lowered, they're just imposed on everything else in a non-means-tested indescriminate manner so the true taxes end up the same for a millionnaire as for a poor man.
What other people have also demonstrated is that the rich are good at tax dodging, although it's something anyone self-employed can do. Raised or not, these people are dodging the taxes anyway so raising or lowering the tax isn't going to make any difference to them. I've seen millionnaires who manage to claim an income of only £5,000, these rises aren't going to touch them. It's the people who make these high amounts on payroll who have to pay and unless they're working from home they'll find it very difficult to just move elsewhere.
What's also true is that it that these people don't want to pay _any_ tax so if they're going to be fiddling the figures then they're doing it already. This makes no difference.
I've also been reading interesting articles on the fallacy of offshoring. The USA has an extraordinarilly skilled workforce which will be difficult to find elsewhere. It's already been pointed out that US corporations are supposedly taxed quite heavily (even though MS has reportedly paid absolutely no tax whatsoever in some years eg http://crosscut.com/2008/02/02/microsoft/11167/ ) and yet the jobs are starting to move back because offshoring, to a country where you don't know the people or who's good to work with, often produces such poor results that fixing them can cost more than just keeping work in house.
This is, as always, the cry of corporations the world over, the CBI and others, constantly demanding less 'burndensome' regulation and they got it. We're in the middle of the result right now.
Here's a quick analysis of how the sucking-up-to-corporations worked in the UK (warning, coarse language) http://cuntsarestillrunningtheworld.wordpress.com/2009/05/08/stop-me-if-you-think-that-youve-heard-this-one-before/
These same people who keep going on about Obama needing economics lessons are the same people who thought the hyperinflated economy was going to keep expanding forever (I've been warning people this was coming for years but would they listen?). The first law of economics is the same as the first law of Newtonian Gravity and just like gravity, pretending it isn't there doesn't make it go away. The only way to keep the economy strong is to enforce corporate responsibility and regulate just enough that unsafe practices are kept in check. It's what kept the economy stable after the Depression right until those regulations were removed in the '90s and just look at the result of that.
As someone pointed out above, Toyota moved production _to_ the USA but it's GM who needed the bail-out. See if you can find out why.
STUPID LIBERALS!
When governments tax companies, they have to either pass the cost of the tax to their customers in the form of a higher cost for their product, or offset the cost by cutting something else.
In Microsoft's case, they are already the most expensive game in town so moving jobs is a logical move for them.
Corporations exist to make money for their shareholders - period. If they don't offer a better return on investment than "the other guy" then people won't invest their money. And, in this case, if people don't invest in MS, then MS will cease to exist.
Apparently no one in the government took Economics 101 or they would know this.
Governments tax profit (unless they are corrupt). There is no increased cost to pass on to the consumer. Just less profit. However since MS doesn't pay dividents and their stock price is flat, that profit isn't benefiting the shareholders either. Oh and MS doesn't sell new shares all the time. They need to be authorized. Sharholders have already invested their money. IF they "pull the plug" MS doesn't quit existing their stock price goes down to a level where the new investors feel MS may do them some good.
Who needs to ?pull the plug?? When Obama?s administration raise long and short-term capital gains tax to a flat 45% across the board, liquidity will die and Microsoft stock will become worthless. Who needs investors for capitalism to thrive? It seems our fate has already been decided.
Personally rather than calling MS a right wing fox news based company, (which couldn't be further from the truth) we should be questioning the tax policies that have lead us to this point.
American companies are at a disadvantage when competing in the global economey because of our tax code. As a result Americans are losing jobs by the half million every month as those jobs go overseas. Americans will continue to lost jobs and our economey will continue to suffer as long as our tax code makes it less costly to work in Ireland than New York.
Seriously.
Read what I'm about to say and try to understand it:
America has to compete for businesses in a global economy.
Microsoft has done great in this over the years, better than most, and consequently some look up to what they have done, and some hate them for it. But since they did go public years ago, they are accountable to their share holders, and also to their employees. If the US is going to do things that make it a lot less favorable to do business in this country, then I think it is a good idea for them to bring it to the administrations attention. I love when people argue that because someone wants to share their point of view on something, that this is unAmerican, I just don't get that.
Personally I think it is too high a price for an entity to have to pay taxes for two seperate/unrelated tax systems. I would point out that for personal income tax, when an employee works in one state and lives in another, that they are required to pay the effective higher of the two taxes. Not the combined tax for those two states, that would be unreasonable for them, and it is unreasonable for a business to do also.
That is absurd. Just because LOGIC may dictate something to be true does not mean the logical thing is always the RIGHT thing. Much too often, the logical thing is the wrong thing to do. This shows how little Microsoft cares for the country that has fostered its ability to grow to the size it has globally. I understand that Microsoft has a duty to its shareholders... but it doesn't have a duty ONLY to its shareholders. If its shareholders all say Microsoft should sell ham sandwiches on every street corner, this does not mean Microsoft should blindly obey. Many Microsoft shareholders also live in the United States, so Microsoft shouldn't ONLY be concerned about stock price... but about how they treat the U.S., regardless of their difference of opinion of certain policies.
Microsoft is threatening desertion, here. Plain and simple. This is getting awfully close to corporate terrorism. In an economic sense, Microsoft is saying "If you take away even a sliver of our power, we will fly planes into your economy." It's a corporation that has no loyalty to people, but only to the dollar... to power itself.
Of course there's also no law saying you can't pay more, so if you think its patriotic to pay more taxes, why don't you not claim any deductions on your taxes, or tax credits, and sign over your whole check to the IRS.
It's patriotic to pay yoru fair share. It's also patriotic to work to fix a broken system. Our tax system needs work, but notbody should shirk their share in the meantime. I know some rich folks who work hard to bilk the government out of tax collections. Then they complain about someone on welfair for being a burden. They don't see the irony.
Oh yeah, and who determines "fair share"?
If the "rich" from your example are doing everything lawfully, they've got every right to complain about welfare recipients. If they're cheats like Tim Giethner and Charlie Rangle, they should be in jail. In Massachusetts they're giving cars and AAA memberships to welfare recipients. I've got to pay for my car and AAA membership. How is that fair? My wife and I had to pay $1000 a month in rent, when the guy across the hall had the same size apartment but only had to pay $25 a month (and didn't pay that either) because he got Section 8 aid. That fair? No.
One person, one vote, one tax rate. No loopholes, no dodges, and everyone pays.
When you've got cities like New York where 40,000 people out of nearly TEN MILLION pay more than 50% of the income taxes you've got a real problem.
Oh, I'd looove to see the evidence for that. Typical anti-taxation argument, utter fabrication. You read like my uncle, he's a racist *********** too. Laziest bastard I've ever had to share a room with. Only reason we can figure my aunt married him is because she can't have children and in those days she settled for what she thought she could get.
Try to keep your arguments based in reality and not the tabloid ******** of the Murdoch empire.
Bull ****.
""In Massachusetts they're giving cars and AAA memberships to welfare recipients."
Oh, I'd looove to see the evidence for that."
http://news.bostonherald.com/news/regional/view/2009_05_07_Free_cars_for_poor_fuel_road_rage/srvc=home&position=also
Steve, might be a genius when it comes to software and business, but you sure don't understand leftist politics. To the leftist, you're the evil greedy capitalist who got everything he has on the backs of the masses, and its up to the leftist to return those ill-gotten gains back to their "rightful" owners.
It also doesn't help matters that the US has the highest corporate tax in the Western World, and when you add state and local taxes, trying to do business in the US is becoming more difficult. Especially when you take into account all the runaway spending that the Feds and State governments are trying to get away with. Somebody has to pay for it, oh your (you the reader) tab to date is about $530,000 and growing. By the time the statists are through with you, you'll be hoping you still have some change in your pockets.
Obama is going to put these businesses in a situation where they have to leave to survive. The fact that he doesn't understand this is staggering.
This should be no surprise coming from any large corporation (regardless of the traditional liberalism of MS), especially in these economic times. It'd be no different coming from any number of other sources (corporate or Fox News :) ). I question why this is even "news" worthy of reporting.
They also don't seem to understand that many American businesses are failing because the tax and political situation here makes them less than competitive in the global market, and what Obama has proposed is only going to make that worse.
It's sort of like a new CEO coming into GM and saying "Let's just double the price of all our cars. That will fix our financial problems!" Increasing your products price tag can actually lead to a decline in your revenue. The same is true for tax rates. People need to understand why this is true. Obama needs to understand why this is true.
It used to be that we were by far the best choice when corporations were considering a base of operations. This is simply no longer the case. We can't expect to be charging such a large premium when our "product" is no longer superior to many of our competitors.
Don't try and make this something magnanimous by bringing the founding fathers into this, it's not the same thing at all.
A better plan is to cut corporate taxes. It reduces the incentive for companies to lie about their income, so it won't necessarily reduce money the government takes in. It's better to tax employees than the company - this makes the company create jobs. Employees are also less likely to move to another country for the sole purpose of seeking lower payroll taxes (especially since the U.S. already charges one of the lowest tax rates in the world for personal income).
It's fair to tax profit, even though everone does seem to like sticking employees with all the tax. You have no idea how badly you are screwed over because you can't run or hide (and apparently don't vote since your elected reps are doing the selling out).
When a town gives a company incentives to come there and create jobs (so they can later say "gee, raise my tax and I'll pull those jobs I promised and move them ovesees) all the citizens of that town pay. They do this in the form of payng for water, sewer, power, guranteed income, roads, land donations, special tax districts and such.
Yes, and per my comment above, Intel and MS are having serious trouble finding educated employees. There's also terrible poverty in Dublin and no jobs. I wonder, has anyone ever suggested a connection between poverty, high unemployment, underfunded education systems and an inability to find staff with a decent education?
Thanks once again for accidentally arguing for higher taxes and point out that MS threaten to go where the taxes are lower while thinking of pulling out of Ireland as a result of problems caused partly by such low taxation.
Think it through.
I don't get all of the "Un-American" attitude that is out there. Because I want to keep more of my hard earned money for myself and my family instead of giving it to a wasteful government, I am Un-American?
I have thought about this and I think that everyone should be responsible to pay their own taxes themselves. Self Employed people do this as they have to pay quarterly anyway, but I am saying let W-2 employees be responsible also. Not only make people pay their own income taxes, but also make people responsible for paying all other taxes also (Sales Tax, Use Tax, etc.) instead of having it be part of the transaction. The government likes the automatic collection/withholding of taxes because it reduces non-compliance, but the side effect is that people don't really *know* how much they spend in taxes.
If everyone had to cut a check to government (local, state and federal) every three months for taxes that were due (Federal, State, Local, Sales Tax, Local Tax, Gasoline Taxes, etc.), I think people would realize just how much of their hard earned money goes to the government. I also believe that once people did realize, there would probably be either another revolution or we would be seeing a whole bunch of elected officials not re-elected unless they took action to lower the tax burden or were more transparent in how the collected money is spent.
Once again you use the term "fair share". That cannot be defined and codified into law, so why use that term?
First off, no one is accusing Microsoft of tax fraud. Don't suggest Microsoft is breaking the law without presenting any evidence. Not only is it morally repugnant, it also happens to be illegal.
Second, I'd bet a pretty penny they pay a higher tax rate than you do. If you think this still isn't "fair" then we're going to have to disagree on what qualifies as "fair."
You guys are arguing out of your *********! The tax breaks are ending because the USA CANNOT AFFORD THEM ANYMORE. They were based on INFINITE GROWTH and now THERE IS A RECESSION.
I want to see numbers here! Especially from anyone claiming anything about 'welfare queens'.
You really are retarded.
Let's look at the ending balance of Jan 11, 2001 and compare it to Jan 11, 2009.
Moron.
- by biffhenerson June 5, 2009 7:55 AM PDT
- Obama is a wolf in sheep's clothing. A trojan horse. He will destroy America while always presenting a pleasant smile. He is an angry, bitter man inside. A socialist stuck in a democracy. He will make it more expensive for a company to be headquartered in the USA. This will cause the company to seek a different country to call home. I suppose he could buy them and keep them in the USA. Lol! If he is trying to collect more taxes, he should start with his friends, family and those close to him. They seem to be the biggest violators of the law. The corporations in question are following the tax law.
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