May 1, 2006 4:00 AM PDT

The politics of tech's tax breaks

Symantec received what must have been an unpleasant surprise at tax time this year: A $1 billion bill from the federal government.

The security software company revealed last month that the IRS alleged it underpriced intellectual property related to its Veritas acquisition that was licensed to its Irish subsidiary for tax reasons. For its part, Symantec says it paid all appropriate taxes in 2003 and 2004 and plans an appeal.

Every individual and business, of course, tries to pay the minimum amount of taxes legally required. But technology companies that try to minimize their tax burden sometimes draw accusations of hypocrisy from liberal advocacy groups and academics--mostly because the same companies want more government spending on education and research.

Symantec, for instance, is a founding member of a trade association that lobbies for more federal research funding and more government spending to teach children cybersecurity. And when Cisco Systems recently hosted President Bush in Silicon Valley, the president and company executives called for better math and science education. Last fall, Microsoft Chairman Bill Gates did the same.

Yet under one method of reckoning corporate taxes, in one well-known and isolated example, neither Microsoft nor Cisco paid anything to Uncle Sam or state tax collectors in 2000.

Nobody is saying that any technology company has done anything improper. Rather, critics suggest, businesses should voluntarily write fatter checks to tax collectors.

"So many of these high-tech CEOs are out there beating the drums about the fact that the decline in education in the U.S is...hurting international competitiveness," said Michael Mazerov, a tax specialist at the Center for Budget and Policy Priorities, an advocacy group that generally opposes tax cuts. "At the same time, these same companies are seeking and getting huge tax breaks from state and local governments that are negatively affecting the ability of these governments to provide educational services."

The tech industry isn't alone. Government auditors analyzing IRS data in 2004 estimated that between 1996 and 2000, 61.3 percent of large U.S. corporations with at least $50 million in gross receipts reported zero tax liability mostly because of legally permissible deductions. (Similarly, a self-employed individual who makes no money because of no profits may be able to escape paying federal income taxes that year.)

Another favorite complaint of critics is tax breaks that state and local governments dangle to lure valued businesses. A deal between Intel and Rio Rancho, N.M., gave the chipmaker an estimated $645 million in tax breaks, for instance. Intel has also saved hundreds of millions of dollars through tax breaks designed to lure companies into building large manufacturing plants in Oregon and Arizona.

"In the long run these are costly because the state has less money in order to invest in schools and infrastructure and the kinds of things that would be conducive to creating a powerful labor force in the future," said Dave Wells, who teaches in Arizona State University's Interdisciplinary Studies Program.

This view is hardly universal. For one thing, executives have a legal responsibility to shareholders to maximize income within the bounds of the law. Also, nobody would argue that an individual who takes advantage of a legal tax break--such as the adoption tax credit--would be a hypocrite for griping about potholes in roads or poor teachers in schools.

Critics of corporations miss the point, says Lew Rockwell, president of the free-market Mises Institute. "There are a lot of premises in that argument" about companies not paying enough, Rockwell said. "One is that the more government spending, the better the education. If anything, the more money spent on public education, the worse the education. Certainly funding goes in the opposite direction of SAT scores."

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Retirment communities and pork barrel school funding policies?
As the renouned John F. Long was carted off to Dell Web Medical's out-patient facility for a prescription and a check up(circa 1970); their were more "Baby Boomers' wrangling their last dime to invest in Superior Development. Now known as the grandfather extention of tulips in 'the field of dreams'.
Posted by Pop4 (88 comments )
Reply Link Flag
The supposition...
...that somehow public schools are going to aid in keeping us as
a nation competitive is a joke! Public schools get more money
than most private schools and do a fantastic job of wasting the
money in the administrative process and producing
underachieving students who can't spell or do basic math.

Of course, the kids coming out of public schools can tell you
exactly what their rights are and why the government should
have more power to tax and regulate "evil" corporations.

The tax breaks for tech companies are bad in my opinion, but
not because it takes money away from public schools. Tax
breaks are always bad, because they are just another form of
government coercion. I don't want the tax code used to make
people do things the government likes and punishes people for
doing things the government doesn't like.

If there is a market for the products of tech companies, then
they will set up shop and produce naturally. If the government
would just stay out of it and not regulate businesses to death,
we would see far more new business startups, with the job
creation and benefits to the community that go along with it.
Posted by kaisdaddy (9 comments )
Reply Link Flag
Coersion
I have no agrument that spending on schools doesn't necessarily result in better education.

Where my opinion differs is on the whole tax break concept. These companies are going to do business somewhere. If not in your town then someone else's. The way things are going, quite possibly even in another country.

Besides, the whole concept of government IS "coersion." Every law and every ordinance is written to coerce people to behave in the manner that the lawmakers wish. The only difference here is that they're "buying" compliance.
Posted by Jim Harmon (329 comments )
Link Flag
$1 billion difference? I doubt it.
"Right now it costs an average of $1 billion more to open a leading-edge manufacturing facility in the U.S. versus other countries," said Jennifer Greeson, an Intel spokeswoman. "The biggest difference isn't labor or construction costs, it's taxes."

What makes up that average? What other countries? It would be cheaper for Intel to build a plant in Germany or Japan than in the U.S.? Or is Ms. Greeson including countries where Intel would never choose to locate a plant, despite the difference in taxes, because other factors preclude considering that country?

In an otherwise balanced and excellent article, Intel's statement stands conspicuously as a fat target for challenge by the writers.
Posted by Frankwrite (1 comment )
Reply Link Flag
Negative Tax & Free Trade Zones....
Governments in Taiwan, Singapore, Korea, and China often offer negative tax, locations in "free trade zones" (no import tax), and lax environmental regulations. Other perks often include zero or negative personal income tax, relocation expense subsidy, and free tuition for their kids at the exclusive private international schools (that offers diplomas and curriculums equal to and accredited by American/British/Canadian/French/Japanese governments) that are usually worth 10000~20000 USD per kid per year, to expat senior executives working at these local operations.

So one billion difference sounds a bit at the low end for high profile investments.
Posted by shawnlin (75 comments )
Link Flag
Intel's statement stands conspicuously fat
<a class="jive-link-external" href="http://www.analogstereo.com/toyota_paseo_owners_manual.htm" target="_newWindow">http://www.analogstereo.com/toyota_paseo_owners_manual.htm</a>
Posted by Ipod Apple (152 comments )
Link Flag
The facts disprove the storys angle
first: the angle of the story is trying to blame corporations for the poor school performance.

next: it assumes more money will result in more graduates with higher test scores.

while: it ignores the ecconomics of both worlds

I remember hearing (reading, maybe even here) that the school system with the most dollars per student has one of the lowest scores one the standardized tests. this alone blows the story as false and inept

how do the "spelling bee" and "geography test" contestants fare in a check of their schooling? (I remember a couple years back hearing that nine of the top ten "spelling bee" contestants had been HOME SCHOOLED and I believe there are significant similarities to the "National Geograpic Geography quiz" contestants)

pick a national contest based on school subjects, then evaluate the top winners with all winners by type of schooling and the $$$ per student spent in their school district and the teacher/student ratio.

I bet you will find that billion dollar computer studios take a back seat to individulized study taylored on a per student basis in an enviroment that is conducive to study... i.e. no gang activity, respect of teachers, and one subject per year being designed by the student to grab his attention in his chosen field... music, computers, whatever.. but designed to include the major subjects.. reports and math usage (music is VERY mathamatical) and others including public speaking

then we will be able to compete in the accademic arena again
Posted by qazwiz (208 comments )
Reply Link Flag
Former Student
During the 1990s, when I went to school, I absored much of the
subjects shown to me.

Whent the early Internet came about in 1992, I totally absored
that! I started memorizing and studying subjects that I gave a
damn about, and learned much along the way. Even when I think
I've forgotten something, like trig or calc, I see a formula and/or
equation and can spout off the answer or correct process by
which to achieve the answer. In public school it drove my
teachers nuts, and the kept throwing me into basic math classes
at the beginning of every year, only to be moved to AP Math
when the basic teachers got around to talking to me. I never
believed the way math it taught, that the process by which the
problem is solved is more important than the answer thereof.
*** is that? When I see a math problem, I do the answer. If, as a
part-time programmer (for fun) I were to simply do the process
of the code, I'd never have the final result of the coding, ergo,
no program to use in the end.

So, I'm competed in those spelling and geography bees. I usually
just bowed out at the beginning, even though I won every year
on the school's behalf. Whoopee. When, in English classes, I was
always accused of plagurizing because my research, thanks to
the Internet and early AOL, was always better than the average
student. I got hell. Finally, I just took a course where I showed
up for about two to three periods a day and did the rest of the
classes at my own pace at home. When the school held a student
of the month competition, I won every time by the sheer amount
of work I turned in. Still, I was bored. Then, out of nowhere, the
school said my credits were too high and no fair to the other
students, and took away half of them. To hell with that, I went to
get my GED and enrolled in community college, then various
universities since. Business, History and Economics are my
majors with too many minors to give a damn about. Now, it's
nightschool to finish up to my Masters and Doctorate.

Let's face it: public schools suck. Kids go to school to screw,
socialize, deal drugs, whatever. They don't go to learn. This
writer of the posting (not the article) touches on that.

When you forced something on somebody, expect them to
perform less, because it's against their will.

PS It's BS college really means anything, when almost every
manager I deal with in a drop-out or ex-Service Man, making a
nice income. (Not rich, though some are.)
Posted by fakespam (239 comments )
Link Flag
The facts disprove the storys angle
first: the angle of the story is trying to blame corporations for the poor school performance.

next: it assumes more money will result in more graduates with higher test scores.

while: it ignores the ecconomics of both worlds

I remember hearing (reading, maybe even here) that the school system with the most dollars per student has one of the lowest scores one the standardized tests. this alone blows the story as false and inept

how do the "spelling bee" and "geography test" contestants fare in a check of their schooling? (I remember a couple years back hearing that nine of the top ten "spelling bee" contestants had been HOME SCHOOLED and I believe there are significant similarities to the "National Geograpic Geography quiz" contestants)

pick a national contest based on school subjects, then evaluate the top winners with all winners by type of schooling and the $$$ per student spent in their school district and the teacher/student ratio.

I bet you will find that billion dollar computer studios take a back seat to individulized study taylored on a per student basis in an enviroment that is conducive to study... i.e. no gang activity, respect of teachers, and one subject per year being designed by the student to grab his attention in his chosen field... music, computers, whatever.. but designed to include the major subjects.. reports and math usage (music is VERY mathamatical) and others including public speaking

then we will be able to compete in the accademic arena again
Posted by qazwiz (208 comments )
Reply Link Flag
Eliminate Corporate Income Taxes...
... and apply mandatory across the board wage increases for all US employees.

No matter now you change the tax codes, multinational companies will be able to get away with large amounts of taxes through the use of offshore shell companies. It is much harder for individuals to do that.

So perhaps its easier not to tax companies and force them to pay their employees, who won't be able to get away with taxes as easily, more.
Posted by shawnlin (75 comments )
Reply Link Flag
Supply and Demand
No, no "across the board" wage increases. Let those who earn
the right to more money get more money.

Since companies can't be trusted, enforced the min. wage, but I
feel, after a certain amount of accountability promoted to
something, salary and comission come into play.

After all, nobody trusts a used car salesman anymore that a
short-order cook.

And don't tax the employees, because they're the consumers
you need to buy your goods. If they're taxed, less to spend. Less
to spend, company earnes less.

[swear word], taxes, no matter where it falls, will affect and
effect everybody.
Posted by fakespam (239 comments )
Link Flag
Common Sense
A primitive tech company of sorts, William R. Hearst's newspaper
empire crumbled when Comrade Roosevelt illegally enforced
income tax on all corporations.

Before income tax was enforced, most of the revenue for the
Feds and local govs came from a very high tariff on foriegn
goods. It worked for over 100 years, till some Comrade of a
President created Socialism to employee people during the
Depression. In retrospec, the companies were actually on a
rebound in 1932, before being forced to pay an income tax.
Once Roosevelt got into office and re-wrote the 16th
Amendment's original provisitions, the economy slipped further
into the Depression. The result was economic collapse in places
like Germany and Italy, and you should know the rest of this
story.

Nobody is totally free of taxes, but the current tax structure
makes about as much sense as eating dirt for dinner. Do as they
do in Hong Kong. Lazy-Fair (don't know real spelling, but those
who study economics or business know what I'm getting at)
governance of business creates robust economies and healthy
companies.

I say, then, let's abandon taxes, raise the tariff on anything not
grown in the US or made in the 50 states and PR (exluded the
Northern Mariana Islands in this, because of the totally corrupt
status of gov over there).

As for things like roads and education . . . let the religions
handle education, let the roads become like a utility, so forth
and so on. Nowhere in the Constution is it stated that any gov.
in any capacity is allowed to make roads, run schools, hospitals,
so forth and so on. To do so is un- American and Soviet in
nature. Can anybody tell me why I need a license and pay
property tax? Because the Marxist thought say every I do it a
privlidge at their choice. Strange, the Constitution says nothing
about licenses and in Article 18 forbids direct taxation of the
citizen. Hmmm . . .

Thomas Jefferson said something along the lines if the
Constitution directly forbids it, it can't be done, and if it's not in
the Constitution it can't be done.

Give tech, and other industries, all of the tax breaks they want.
To hell with things like public indoctrination institutions . . . I
meant, schools.

My kids are fine at a Catholic school, and after 8th grade, home
schooling for them.
Posted by fakespam (239 comments )
Reply Link Flag
 

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