FAIRFIELD, Connecticut (Lynnley Browning) - If you want to know why tax from surging corporate profits isn't making much of a dent in the United States' crippling budget deficit, a glance at Microsoft Corp's recent results provides some clues.
Things were rosy in the giant software company's just-ended fiscal fourth quarter, which produced record sales of nearly $17.4 billion, a 30 percent increase in after-tax profit, and a 35 percent gain in earnings per share.
But for the Internal Revenue Service and foreign tax authorities, things weren't so rosy. Microsoft reported only $445 million in taxes in the U.S. and other foreign countries, just 7 percent of its $6.32 billion in pre-tax profit.
Given the rancor in Congress and in the country about how to tackle the nation's budget deficit and debt, including how companies stash profits overseas and enjoy lucrative tax breaks, it is instructive to see how the top brass at Microsoft's Redmond, Washington, headquarters achieved this eye-popping tax result.
Partly it was because the company had a one-time refund of $461 million from the IRS for previous overpayments and because of its over-estimation of tax rates in previous quarters. There may be increased sales of products to consumers overseas, though it is not clear from company disclosures how much of a factor this might be.
But Microsoft is straightforward about the core reason for its lower tax bill: It is increasingly channeling earnings from sales to customers throughout the world through the low-tax havens of Ireland, Puerto Rico and Singapore.
Good for Microsoft. The money does far greater good in the hands of that company, its investors, and its employees than it does in the hands of politicians.
ReplyDeleteThe larger point here is that, while the IRS will chase middle-class wage earners, trying to cope with the economic issues in this country, to the ends of the earth over $200, companies like Microsoft (and there are MANY others just like them), continue to scream and complain about how their tax burden (and future, POSSIBLE taxes) causes them to limit expansion and hiring. Riiiight... Rich people WROTE the tax code (our elected "leaders", representing only the rich) FOR rich people. How's that "voting" thing working out for ya? Seen a lot of changes that benefitted YOU? Wait til your credit card interest hits 40%+, prices on EVERYTHING skyrocket, and home loans become impossible to get. And, of course, unemployment stays around 10%. If obama gets another 4 yrs, we are finished. The pain is unavoidable now. But take heart. Your congressman, being a millionaire, understands your problem. He just doesn't worry about it too much. It's YOUR problem. Keep buying ammo. Its gonna be HUGE.
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