Microsoft Warns Of Tax Law Consequences

By: Declan McCullagh
Topics: 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 on Wednesday that if Congress enacts President Obama's plans to impose higher corporate taxes, it makes sense for Microsoft 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.

Which is 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 the chief political correspondent for CNET. Declan previously was a reporter for Time and the Washington bureau chief for Wired and wrote the Taking Liberties section and Other People's Money column for CBS News' Web site.
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by gspencer4 June 11, 2009 6:29 PM EDT: Economic value is created only when you grow something in the earth, extract something from the earth, or make (manufacture or construct) something that is consumable (or useful). Transportation, distribution, warehousing, taxes, sales, delivery, packaging and other similar costs are added to the value (cost) of the product that was initially created by these basic creative efforts.

Industrious nations like China grow wealthy and secure by making enough products to support their needs on their farms, factories and mines, plus earn additional currency by creating additional wealth by exporting products that they manufactured. The health of every other business depends upon these productive industries.

Borrowing US Dollars from China and other wealth generating nations to pay US citizens for raking leaves, environmental cleanup, mortgage bailout, union retirements, TARP, wars, business failures, government payrolls, and etc. to stimulate the economy does nothing in the long run solution to the foreign trade deficit problem.

The US Federal Reserve publicly received bids of almost 4% interest for $100 billion of freshly printed paper US Treasury securities issued in May 2009 public auctions. This was about double the rate expected by the Treasury Department. The US government will need to "borrow" at least $6 trillion more US dollars from the industrial manufacturing countries before the end of 2009 by conducting more of these same US Federal Reserve auctions. Who knows how high the interest rates will be bid at these auctions. China, and other wealth generating nations already hold a large portion of all US federal debt securities, and they are exchanging these instruments for title to US real estate, farms, agri-businesses, food supplies, dairies, forests, industries, breweries, hotels, factories, casinos, financial institutions, retail businesses, and most other assets located in the USA that they do not already own, since the US government does not redeem these dollars for gold.

US Foreign Trade Deficit: The USA has created a situation that US gold; US currency; and title to US property and other US assets are leaving the USA in amounts of annual value that are greater than they would be if US citizens were manufacturing the things that US citizens consumed. We must change this situation or we could become a post WWI Germany economically, and this could happen overnight.

A Trade Deficit is created when the USA importing, transportation, distributing and retail sales companies such as WalMart, Home Depot, NTB and etc. pay companies and individuals in foreign countries like China with US dollars to manufacture the things that these US businesses import, distribute, and then sell to the US consumers. Manufacturers such as GM, Ford, GE, Chrysler, GE, Westinghouse and etc. manufacture vehicles, appliances, and equipment made with imported parts that they paid the companies in the foreign countries with US currency to manufacture these parts for assembly of the finished product in the USA that is then sold to US consumers. What is the dollar value percentage of USA manufactured and assembled products that are made with imported foreign manufactured parts and/or sub-assemblies?

The US government also "borrows" US dollars (actually they sell freshly printed-paper T-Bills, US Government Bonds, and other US securities at public auction to China, private individuals, and other industrialized countries that earn US dollars mostly by manufacturing things for international trade) to pay US government expenses including negative balance of trade, wars, military jets with active duty military USAF pilots for the personal use of specially privileged members of congress (Pelosi), employee payrolls, government retirement checks, courts, federal police, failed business bailouts, cash bonuses to the various Wall Street forgers of SEC documents that contributed to political campaigns, Las Vegas corporation junkets for failed corporation employees, house mortgages for big spenders with bad credit, new multi-million dollar French manufactured personal corporate jets for political contributor's bankrupt corporations, pork barrel projects, research contracts, welfare, social security, Medicare, Medicaid, SSI, expensive corporate vacations, new infrastructure, wealth re-distribution, mental health, imported consumer goods and etc., and any other thing that congress and the president decides to use taxpayer money to acquire, build or just give to their political contributors and various other privileged individuals with borrowed US dollars. If taxes taken in each year are not sufficient to pay these expenses, then the government just prints more paper T-Bills, Government Bonds, etc. and borrows US dollars from people who are holding US dollars (foreign manufacturers) in exchange for these freshly printed T-Bills, Government Bonds, etc.; Reply to this comment


by cbsrusso June 9, 2009 4:53 PM EDT: MS$ is full of it. They already off shore jobs. If you have ever been to their campus it is like going to little India.

Not only do these large corporations with their huge war chests of money need to be taxed more they need to be punished for sending jobs off shore and be restricted in bringing cheap labour into our country. Their lobbing should be restricted too especially when it comes to campaign money.

The needs of our country comes first not the needs of greedy monopolistic corporations like MS$; Reply to this comment


by McHineguy June 5, 2009 7:27 PM EDT: Won't happen, remember BeOS? DR-DOS?

MS uses its de-facto monopoly to make sure other, better OSes don't make it to market, so getting them out of the way will make it easier for a developer to make a batter OS.
Posted by brianbwb-2009 at 4:07 PM : Jun 5, 2009

Yeah, I remember them. But we are mixing our criticism of Microsoft with the truth they told our government. No matter how they get there, big corporations wont stay on our shores.if the taxes are too high. You can say spiteful things like "good riddance" but the jobs will be gone. You can hope for a young replacement but if you tax that company it will leave too. Sooner or later, our country will be populated with hulks like GM and Chrysler sprinkled with a few graft masters like GE.; Reply to this comment


by McHineguy June 5, 2009 7:08 PM EDT: I still do not see how zero Corporate Taxes can help Americans get out of this debt. What I do see is that Real Painful Sacrifice by all WE THE PEOPLE will do it.
Posted by lovegetpeace at 3:32 PM : Jun 5, 2009

I dont think we should have zero corporte taxes. Im just saying that we cant raise taxes on corporations much farther. There isnt enough tax money to cover our Federal deficit even if we triple taxes and cut corporate profits to zero. so, we have to either 1. Charge the people for what they get/take, or 2. give the people less.

So, you and I have agreed on this before. americans cannot afford to live like we do. Our government doesnt have money to give us free stuff, our companies cant pay for it, and we dont want to. Only thing left is SPEND LESS. And that means the people spend less and government spends less. We already tax business a lot and if we do much more they will move away like Steve Balmer says or die like GM; Reply to this comment


by brianbwb-2009 June 5, 2009 7:07 PM EDT: "...My guess is that guy with the better operating system aint gonna build it here till you offer better tax deals anyway." Posted by McHineguy

Won't happen, remember BeOS? DR-DOS?

MS uses its de-facto monopoly to make sure other, better OSes don't make it to market, so getting them out of the way will make it easier for a developer to make a batter OS.; Reply to this comment


by brianbwb-2009 June 5, 2009 7:04 PM EDT: MS' own business practices will kill it, they first monopolized the market, then they change the kernel of their OS so often that developers cannot write software that works for it, now they shake down the people who code drivers for hardware, forcing them to pay for "MS certification", otherwise Windows Vista will not load it.

Jost like the automakers, they will blame their problems on others, while begging for more corporate welfare.

Let them go the way of GM and Chrysler, it will actually be a relief. Maybe then we can abrogate their patents under "eminent domain" and free the computer industry to return to forward evolution.; Reply to this comment


by labrat9999 June 5, 2009 6:46 PM EDT: Here's a company that certainly understand outsourcing American jobs!! And oh by the way, if they can't get cheap labor that way...they lobby for H1B1 visas instead to replace higher paid Americans.; Reply to this comment


by lovegetpeace June 5, 2009 6:32 PM EDT: Where I think we disagree is you seem to believe that we have huge oportunity to raise taxes without consequences. That is only true if you calculate taxes incorrectly against gross income, instead of net income (which is still different than after tax income).
Posted by McHineguy at 9:54 AM : Jun 5, 2009

Nothing is free. The $13 Trillions and counting Federal Debt means American been getting too much free stuff.

To get out of this deep hole, Americans must swallow a 4th Great Depression or Pay higher taxes to pay what we all own.

Either way, American must Sacrifice because they have no easy way out.

Reducing the Size of the U.S. Government only increases our Debt by Bankfupting WE THE PEOPLE.

Read "The Great Depression of 1990' by Ravi Batra.

I still do not see how zero Corporate Taxes can help Americans get out of this debt. What I do see is that Real Painful Sacrifice by all WE THE PEOPLE will do it.; Reply to this comment


by McHineguy June 5, 2009 5:43 PM EDT: I wish MicroStink would move off shore and we could get a real, functioning operating system. Balmer can KMA.
Posted by nextgenman09 at 2:35 PM : Jun 5, 2009

I think you better reverse the order of these steps. Lets get a better operating system, THEN let Microsoft move away. My guess is that guy with the better operating system aint gonna build it here till you offer better tax deals anyway.; Reply to this comment


by nextgenman09 June 5, 2009 5:35 PM EDT: I wish MicroStink would move off shore and we could get a real, functioning operating system. Balmer can KMA.; Reply to this comment