Writing in the International Business Times, investigative journalist David Sirota reports that Microsoft admits keeping $92.9 billion offshore to avoid paying $29.6 billion in taxes, according to the most recent filings with the Securities and Exchange Commission.
He writes:
“Microsoft Corp. is currently sitting on almost $29.6 billion it would owe in U.S. taxes if it repatriated the $92.9 billion of earnings it is keeping offshore, according to disclosures in the company’s most recent annual filings with the Securities and Exchange Commission. The amount of money that Microsoft is keeping offshore represents a significant spike from prior years, and the levies the company would owe amount to almost the entire two-year operating budget of the company’s home state of Washington.
“The company says it has “not provided deferred U.S. income taxes” because it says the earnings were generated from its “non-U.S. subsidiaries” and then “reinvested outside the U.S.” Tax experts, however, say that details of the filing suggest the company is using tax shelters to dodge the taxes it owes as a company domiciled in the United States.”
He adds:
“Apple and General Electric, which also employ offshore subsidiaries, are the only U.S.-based companies that have more money offshore than Microsoft, according to data compiled by Citizens for Tax Justice. In all, a May report by CTJ found that “American Fortune 500 corporations are likely saving about $550 billion by holding nearly $2 trillion of ‘permanently reinvested’ profits offshore.” The report also found that “28 of these corporations reveal that they have paid an income tax rate of 10 percent or less to the governments of the countries where these profits are officially held, indicating that most of these profits are likely in offshore tax havens.”
“Microsoft’s use of the offshore subsidiary tactics has exploded in the last five years, with the amount of Microsoft earnings shifted offshore jumping 516 percent since 2008, according to SEC filings.”
That kind of money, repatriated to the United States, could underwrite prenatal care for low-income women, provide early childhood education for all low-income children, underwrite medical clinics in low-income communities, and save public education in cities like Detroit and Philadelphia, where it is in dire peril. Imagine $550 billion invested in the well-being of our children! Imagine using that money to reduce our child poverty rate, which is currently the highest among the advanced nations of the world.
Diane Ravitch's blog 
Perhaps it’s time for Bill Gates teflon coated self be put in jail for tax evasion, after he coughs up back taxes…..One can have hope or fantisize
Jerry,
If this tax arrangement continues to become embedded in the DNA of American culture, it will lead to violent revolution. I have great fears about that, even if it’s not in my lifetime . . . .
Ahh, capitalism. Anyone see the recent article in which Bill Gates predicted the eradication of global poverty by 2035? Perhaps that means in the US too, in which case school improvement will just take care of itself and we won’t need the harsh, test-based accountability systems that are destroying the morale of students, teachers and administrators alike. Gates could stand to brush up on some basic political economy, namely the inevitable consequences of the drive to profit and capital accumulation. Not sure why he doesn’t make the connection in his brain . . . maybe it has something to do with the inevitable blindness that comes from being a key player in the perpetuation of the “march toward progress” delusion.
Bill and his wife are monsters. . . . pure bloated, reckless, egotist monsters. . . .
Planned Parenthood likes Bill and Melinda.
All the beneficiarees of the Gates can go screw themselves. . . . .
Well, that’s why they dispense condoms.
I can’t beat that one . . . . But still, little do the beneficiarees know that there is an immediate and overall societal price to pay when you take money from Bill and Melinda.
But in this day and age of individualism, everyone is out for their own cause and does not care about EVERY cause. They don’t see the monster’s orientation, just the treasure trove he throws their way.
If only Bill’s parents had used excellent protection when they tried to conceive him . . . . .
Lesson not learned.
Gates MUST continue to tax evade. Otherwise, how will he afford a ridiculous mansion, of his many residences, and many other real estate inventments? . . . . .
When you don’t pay the taxes, you have leftovers to pay for this and many other “essential public infrastructures”:
http://thedailybanter.com/2013/10/bill-gates-house-is-a-lot-fking-bigger-than-your-house/
Who needs taxes to pay for public schools when they basically aid in facilitating Bill and Melinda’s grotesque and hideous disconnect? The house in the link is merely a metaphor for it . . . .
I suggest bookmarking Robert Reich’s blog. Here is an article (not his latest which should be read as well).. that addresses this very topic:
http://robertreich.org/post/93122315065
I am wondering if Reich’s concluding suggestion on “this one” plays right into the hand of what appears to be Microsoft’s strategy…
Reich writes:
“Which brings us back to American companies that are morphing into foreign companies in order to lower their U.S. tax bill.
“I don’t care if it’s legal,” said the President. “It’s wrong.”
It’s just as wrong for American corporations to hide their profits abroad – which many are doing simply by setting up foreign subsidiaries in low-tax jurisdictions, and then making it seem as if the foreign subsidiary is earning the money.
Caterpillar, for example, saved $2.4 billion between 2000 and 2012 by funneling its global parts business through a Swiss subsidiary (a ruse so audacious that one of its tax consultants warned Caterpillar executives to “get ready to do some dancing” when called before Congress to justify it).
And what about American corporations that avoid U.S. taxes by never bringing home what they legitimately earn abroad – a sum now estimated to be in the order of $1.6 trillion?
Rather than focus on the newly-fashionable tax-avoidance strategy of changing corporate nationality, it makes more sense to tax any global corporation on all income earned in the United States (with high penalties for shifting that income abroad), and no longer tax “American” corporations on revenues earned outside America. Most other nations already follow this principle….”
(end of excerpted Reich comment).
While I often nod my head in agreement with Reich and do for most of this commentary (and what I cut and pasted is not the entirety).. this time.. I am wondering about his last comment where he suggests no longer taxing “American” corporations on revenues earned outside America, but instead having high penalties. Will Microsoft find a way to avoid paying these penalties too???? The problem is that companies like Microsoft ARE ALWAYS figuring out ways to game the system instead of operating fair and square.
We need to call these corporations what they are: unpatriotic, unAmerican, and traitors to the country that gave them every opportunity to succeed. Instead what they’re doing with their excessive wealth is either sitting on profits, not hiring, and setting up foundations to dictate how the rest of us should live and learn. This must be stopped.
They’re libertarians when it comes to how the the rest of us should live–no social programs, no safety nets, no services, but they think they are entitled to every tax break possible and business loan possible. When people say to me, well they’re just following the law–the answer is really this: via ALEC, their lobbyists, high-paid attorneys, and bought-and-paid for congressmen and women, they’ve written the laws to give themselves these insane tax write-off and loopholes, and allowed them to move their factories and profits overseas with no consequences, while they sell their products at excessive costs in the states and make products of such poor quality that the planned obsolescence of their products is shorter and shorter. I’m sick of free markets and trickle down economics–nothing trickles down–it stays at the top; how about fair markets where we all benefit.
The question is not whether Microsoft legally shelters its money offshore. They are doing it in response to existing tax law. How do we as a nation come to terms with the laws as they are now written? They are by most accounts unfair and unbelievably complex. The Progressive tax system is not working. It is not progressive and is in fact overly burdensome not just for corporations but for individuals, which is why income of any variety is put in institutions in Switzerland and the Cayman Islands. Suggestions such as the Fair Tax, National Sales Tax and lowering of all tax burdens should be investigated without ideological biases. Results from Keynesian economics, as well as Friedman thought, should be evaluated honestly with the goal of coming up with both tax and economic policy. The ultimate outcome should be a more equitably shared tax burden which serves the country’s needs, including those educational needs at the local level.
Utah went to a flat income tax six years ago. It is estimated that Utah schools have lost at least $200 million each year in school funding. Some of these tax ideas are not the panacea that the libertarians make it out to be.
And Utah schools are already grievously underfunded. A head tax for schools is the only way to fix that…
It would also be good if Utah universities were not funded through the Uniform School Fund, but funded separately, as they were until about 15 years ago.
You may very well be correct about the Utah flat tax. I don’t know the positions or the reasons for taxing citizens of individual states. That is for the people of each state to decide. My comments are directed towards the federal taxing system.
Simple possible solution with many man-made barriers:
Get congress and the senate to OUTLAW offshore tax haven procedures. . .. change it in the law and in the tax code. . . . . Reform the law.
It will ONLY be the people who push for this and get it done.
All the public infrastructures these corporations use are paid for by the rest of us largely. These companies did not become rich in isolation. The roads, bridges, tunnels, and mass trasnsit their employees use to get to their place of work are paid for with taxes. The water, electricity, and communication systems put into the public infrastructure and the price for doing so is paid for with taxes. These are just some of the publicly financed public instrastructures that are paid for with taxes, and what Gates and Caterpillar are doing is becoming unjustly unriched at the expense of the taxpayer.
TAKE TO THE STREETS. . . . . .
Years ago, as a young associate, I did a short stint in the tax group of a major law firm. Tax code reform may be a good thing, but it’s far from simple.
However, I am increasingly convinced that the tax code should be dramatically simplified. Its complexity makes enforcement very difficult. The code’s complexity is also anti-democratic in the sense that the vast majority of people, and indeed the vast majority of lawmakers, don’t understand it and thus are unable to participate in informed debate about tax policy. It gives too much power to the priestly class of big-firm tax attorneys and consultants.
You’re correct about tax code reform being far from simple, but the alternative is to keep the mess we have now. And excuses for having offshore accounts would be blatantly obvious since they would be unnecessary.
What is even more corrupt is that there is very little appetite to revise the tax code because these same tax avoiding companies own Congress. The infusion of big business money lobbying our representatives has hijacked our democracy. We now have a government by, for and of big business.
And what you state is EXACTLY WHAT NEEDS TO CHANGE as a FIRST PRIORITY in this country . . . . It’s our only chance. It’s not at all without hope . . . .
Teachout wants to work on changing the tax code in New York state. Another one of the many reasons, she has my vote.
She also has great plans for John King, common core, and high stakes testing. http://www.teachoutwu.com/education
Vote Teachout in the Democratic primary on September 9th!
For a deeper understanding of this, read Nicholas Shaxon’s book “Treasure Islands, Uncovering the Damage of Offshore Banking and Tax Havens”. He says: “over half of the world’s trade, half of all banking assets. 1/3 of all foreign investments, 1/4 of all global wealth equivalent to all the U. S. GDP, 11.5 trillion dollars held offshore by wealthy indviduals, all, more, identified in his book is routed through these tax havens. Shaxon is an English author and he gives an historical account of how this began etc.
This was written a few years ago and virtually NOTHING has been done about it.
To the streets with torches and pitchforks . . . . !!!!!!!!!
How effective are torches and pitchforks against AR-15’s, and all the other toys the Pentagon has provided our police?
Yes, think “Hunger Games” and “The Purge” . . . .
But torches and pitchforks are a metaphor for our strong ability (not yet realized) to voice ourselves, vote, and be vigiliant.
How can the ignorant masses in the US be so blind to the false leaders and greedy corporate slime. Capitalism has led us down a destructive path that can only continue to Revolution. We have become sheep. It is indeed “Bread & Circuses”!
“We must stop buying stuff we don’t need with money we don’t have to impress people we don’t like.”
End Capitalism, pray for Socialism….. and start taxing the 1%.
How do we organize a strong Socialist Party in the US?
We already have one. It’s called the Democratic, and the Republican Parties. How well has that served us? Incidentally, where have any of the forms of Socialism been successful?
Let’s not forget who the power is behind the CEO throne of Microsoft.
“During this time of transformation, there is no better person to lead Microsoft than Satya Nadella,” Gates said in a statement. “Satya is a proven leader with hard-core engineering skills, business vision and the ability to bring people together,” he added.
Gates will remain on the board, but pass the chairman’s gavel to Virtual Instruments CEO John Thompson. Gates will be tasked with “supporting Nadella in shaping technology and product direction,” the company said.
I want to repeat: “Gates will be tasked with ‘supporting Nadella”.
http://appleinsider.com/articles/14/02/04/microsoft-officially-names-satya-nadella-ceo-bill-gates-steps-down-as-chairman
And to think that the CEO’s of these corporations go around touting their interest in education. What a sham!
They must be taxed and definitely not allowed to influence our educational system. A wolf in sheep’s clothing.
We advocates for public schools and the public sector should direct incessantly at Bill Gates, “PAY YOUR TAXES!” Print posters of the darling philanthropist and his angelic smile with the simple demand in large letters, “PAY YOUR TAXES!” Print thousands and thousand of these, all of us put them at our workplaces and neighborhoods. Have a special march in each locale for “Bill Gates, PAY YOUR TAXES!” Only by lots of noise and action at the grassroots can we get the word out, break the imposed silence of the mass media who protect the billionaires, arouse mass indignation, expose Gates, Broad, Zuckerberg, etc., for the frauds they are…corporations not paying taxes, hiding profits abroad, having up to $4 trillion on cash now in hand but refusing to raise wages, hire more unemployed, invest here at home…and they say that teachers are hurting America. I pledge $200 to print the Gates poster–who else can pledge and get this off the ground?
Bill Gates pays Social Security taxes on only the first $117,000 of his income. The rest of his vast income is not subject to SS taxes. We should lift the cap on SS taxes, that would solve any problems for generations to come.
BINGO!
The Bill and Melinda Gates Foundation is far from the altruistic purpose they would have others think. No, it is a tool to promote themselves to the public, while “covertly” supporting Microsoft hoarding billions abroad to avoid paying US taxes.
This covert Narcissistic family of Bill Gates has done more to destroy this county than any war America has ever fought.
It is time to recognize this Wolf in Sheep’s Clothing and send the tax man for a visit.
“Tax experts, however, say that details of the filing suggest the company is using tax shelters to dodge the taxes it owes as a company domiciled in the United States.”
I usually stick up for journalists, because it’s a hard job that doesn’t pay well and offers less security with each passing day. But let me lodge a gripe here. Don’t write that “tax experts” say X or Y when all you’ve done is talk to one person (who may or may not actually be a “tax expert,” but let’s leave that aside). I’m not saying you have to write something like “A tax expert, however, says that details of the filing . . . .” Or even worse, something like “One guy I talked to, however, says that . . . .” That just sounds goofy, which of course is why reporters want so badly to write “tax experts” to suggest that the reporter has conferred with a big panel of impeccably-credentialed experts who all agree on the point at issue. But do not do it. It’s misleading.
If corporations are the people, Microsoft deserves exactly the same scrutiny as some people who seek residency outside the US by finding legal loopholes for tax dodging. Or otherwise, they should be de-listed from American ‘corporate’ citizen.
How in the world can this happen? The government wants every dime we middle class people make. If they think we made too much, middle class families even have to pay into the government. How can Gates be protected like that? The rich get richer..the poor get poorer…I can’t believe it.
Meanwhile here in Washington State, Bill Gates whines about not having enough qualified workers, yet won’t pay the state taxes needed to educate them. Our school districts sued the state over the inadequate funding of our K-12 system. We won, but the legislature has yet to pay up. Instead they are playing shell games, moving funds from here to there and saying they have increased funding for K-12, all the while granting tax cuts to corporations like Boeing, another company that doesn’t pay it’s fair share of state taxes. Just think how well funded our K-12 system would be if both Microsoft and Boeing paid their taxes like they should, the way the rest of the middle class American public does.
To me, these companies are unAmerican hypocrites. They refuse to support democracy, as well as the most important aspect of democracy – creating a literate and informed citizenry. I resent their grants from their foundations that they trot out from time to time in the dog and pony show to purportedly show “how much they care about the community”. If they really cared, they’d pay their tax bill, rather than take more tax write offs from their shallow (all for show) foundation work.
Microsoft admits that they have these billions to avoid paying taxes…. and the Government does not call them on it? It’s up to us now! Scope out the candidates that will be on your ballot in November and vote for those who specifically raise this issue as something they will address as candidates… then hold their feet to the fire to make sure they follow through. Become an activist voter on this! Offshore capital must be repatriated and subjected to taxation… It’s the American Way!
You want more on taxes: David Cay Johnston’s book “Perfectly Legal: The Covert Campaign to Benefit the Super Rich – And Cheat Everybody else” is required reading.
Some items: How a simple wording change in forms would bring in billions of revenue; antiquated IRS equipment; fewer workers allowing billions in lost revenue; tax loopholes for the richest; the poor and middle class tax forms audited and pursued while the richest get a pass; tax fraud; handcuffing the IRS; whistle blowers intimidated, fired;how billions of revenue are lost every year; powerful super rich controlling Congress.
Someday maybe the American public will awaken and fill the streets. The information is out there, one just must dig for it.
About thirty years ago (or so) corporate taxes made up about a third of tax revenues.
Now, they are about 10 percent. Meanwhile, corporate profits have surged to record levels, and jobs have been off-shored at will.
Corporations and their allies complain (laughably) that corporate taxes are “too high” and inhibit growth, and that if taxes were only reduced MORE, then investment would spike and the “job creators” would be incentivized to hire. But it’s all a big, dangerous lie.
We are where we are because we’ve allowed the nonsense. Too many suckers believed Reagan’s story that he could cut taxes by $750 billion, spend a trillion more on defense , and balance the budget. Never happened. Never even came close. After 12 years of supply-side policy, the national debt more than quadrupled, the rich were much richer, the poor poorer, and the middle class was getting squeezed.
We are where we are because too many people think government – in a democratic republic, for god’s sake – is “the enemy.” Too many people don’t vote. And Republicans want to ensure that people find it difficult to vote. Worse, too many voters have little interest in anything other than their own financial self-interest (remember how that turned out for Enron workers?).
In 1984, Walter Mondale told the American people that Reaganomics (supply-side trickle-down) was a scam, and that taxes would have to be raised. Mondale lost badly. A voter analysis explained why. For example, there were many voters who believed (correctly) that Mondale would make government programs fairer for all citizens, but of those who thought they’d be better of financially under Reagan, 71 percent supported him. A number of voters thought (correctly) that the economy was getting worse under Reagan, but of those who thought they’d benefit financially from Reagan, 70 percent supported him. Nearly forty percent of voters thought taxes had to go up to cope with Reagan’s deficits, but of those who thought they’d be better off financially under Reagan, 84 percent supported him.
The problem is multi-faceted, but there are at least three salient points:
1. Supply-side, laissez-faire economic policies are dangerous to the nation’s economic well-being, but are quite lucrative for corporations and upper tax brackets. In essence, they are sucking the economic life-blood from the country (while those who promote them blame schools and teachers).
2. Public education has become both pawn and opportunity for the “elite.” They use public schools as their “whipping boy” (think A Nation at Risk, or Common Core) and demand that it “perform” better and be “accountable,” mostly for economic ills that the “elite” perpetrated. Meanwhile, they are trying to cash in on public education funds and divert them – as they’ve done in other arenas – to private bank accounts.
3. Public education needs to return to a citizenship education mission that focuses on the core values of American democratic governance (as evidenced from the Constitution, the Bill of Rights, the Declaration, and the Pledge): popular sovereignty, equality, justice, freedoms for all citizens, tolerance, and promoting the general welfare of society.
Education in a democratic society has a unique place and quality, and early advocates believed that democratic citizenship was its chief goal. As Aristotle noted, “the neglect of education does harm to the constitution” [the body politic], the “character of democracy creates democracy,” and “the care of each part is inseparable from the care of the whole.” And that’s precisely why Aristotle favored public education.
Bill Gates,the Waltons, the Broads, the U.S. Chamber of Commerce and the Business Roundtable and their ilk (and that includes Obama and Duncan) promote education “reform” that is just disguised trickle-down for schools. It isn’t just wrong policy and despicable, but it’s – well – stupid. And dangerous for democracy.
Besides the fact that we have an awful of of work to do, the sad thing is that those who support “reform” often wrap themselves in the flag while they spew the nonsense.
Why do you think the idea that US corporate tax rates are too high is laughable?
because they’re not…..because profits are at record highs….because companies engage in all kinds of schemes to negate paying their fair share of taxes…..have you not been paying any attention of late?
http://www.washingtonpost.com/business/economy/corporate-tax-dodgers-leave-the-rest-of-us-to-foot-the-bill/2014/07/11/de311d1a-06c2-11e4-a0dd-f2b22a257353_story.html
I can’t argue with “because they’re not.” But US corporate tax rates are relatively high compared to the rest of the world. Many people who have been paying a lot closer attention to this you or I have believe high corporate rates coupled with a non-territorial corporate tax system are responsible for a lot of the tax avoidance behavior by corporations. Others disagree, but there’s a difference between “rebuttable” and “laughable.”
No FLERP….it’s sadly laughable.
As Edward Kleinbard (USC school of business) wrote recently, the “U.S. multinationals’ ‘competitiveness’ arguments” advocating more tax cuts “are almost entirely fact-free.”
They always have been.
The World Economic Forum ranks nations each year on competitiveness. The U.S. is usually in the top five (if not 1 or 2).
When it drops, the WEF doesn’t cite education, but stupid economic decisions and policies. When the U.S. dropped from 2nd to 4th in 2010-11, four factors were cited: (1) weak corporate auditing and reporting standards, (2) suspect corporate ethics, (3) big deficits (brought on by Wall Street’s financial implosion) and (4) unsustainable levels of debt.
There was nothing about exorbitant tax rates.
In the last several years major factors cited by the WEF are a “business community critical toward public and private institutions,” a lack of trust in politicians and the political process, a lack of transparency in policy-making, and “a lack of macroeconomic stability” caused by decades of deficits and debt, “increasing inequality and youth unemployment.”
Nothing about tax rates that strangle competitiveness.
And, as I said, if tax rates are so high, then why are corporate profits booming. As Reuters reported in April of this year, “Corporate cash piles have never been bigger, either in dollar terms or as a share of the economy.”
Hard to know where to begin. International “competitiveness” may be one yardstick by which to determine when corporate tax rates are too high. Another yardstick might be revenue maximization. Another might be the degree of tax avoidance behavior we see. It’s certainly true that US corporate tax rates are higher than in most of the rest of the world, but that’s just one of many yardsticks. In my view, it’s not clear that increasing corporate tax rates would increase the amount of taxes the federal government collects from corporations. And it’s not clear to that reducing corporate tax rates would decrease the amount of taxes that the federal government collects from corporations. But you may have a much better understanding of tax policy and economics than I do.
@FLERP
U.S. tax rates are NOT too high, not matter how you slice it and dice it.
You seem to be arguing that they are….or maybe you just like to argue.
I repeat: As Reuters reported in April of this year, “Corporate cash piles have never been bigger, either in dollar terms or as a share of the economy.”
So how can tax rates be too high or harming competitiveness?
And that’s not a trick question…..
I would agree that I do like to argue.
I truly do not know whether US corporate tax rates are too high or too low. I do not know what the optimal maximum tax rate is for corporations. I don’t know whether a territorial approach to corporate taxation (like most of Europe uses) is better or worse than a “worldwide” approach (which the US uses). I do know that the US corporate tax rate is among the highest in the world. I also know that the actual rates that US corporations pay are a lot lower than the statutory corporate income rates. I know that’s because corporations try to minimize their tax burden, and I know that the tax code provides a whole bunch of ways for US corporations to do that. That’s pretty much what I know. Beyond those things, I’m receptive to persuasive arguments, but not so much to bold cut-and-paste assertions from laymen.
I don’t know what Reuters meant by “corporate cash piles.” Cash reserves?
“U.S. tax rates are NOT too high, not matter how you slice it and dice it”
If that was the case, these companies wouldn’t be moving their taxable income elsewhere. You seem to have this disconnect between what should be and what actually is.
Tax rates are high for corporations but they do not pay that rate. Dig deeper into what is going on. Tax havens, tax breaks in the IRS code ad nauseum and they do not pay the rate that ordinary citizens do. Some companies like the oil barons not only pay NO income taxes but actually receive subsidies. Do not be fooled by corporate propaganda. Do your homework.