Corporate tax-dodgers Microsoft, Boeing throw colleges a bone

By JOHN BURBANK

(June 22, 2011) — Two weeks ago Governor Gregoire convened a press conference with two corporate leaders from Microsoft and Boeing.  They were celebrating a breakthrough in higher education.  It was a breakthrough – it was like 60,000 high school graduates walking out onto thin ice and breaking through.  The troika offered a life ring for 1,000, through “Opportunity Scholarships.”  The other  59,000?  Let them swim…. or sink…

Let’s consider what really happened to public higher education this year.  The legislature cut out almost a fifth of funding for higher education:  $617.5 million. Then they raised tuition at the University of Washington by 35% in two years, and by 25% at community colleges.  Boeing and Microsoft?  Governor Gregoire was praising them because they committed $5 million a year each, totaling 1.62% of the shortfall. That contribution wasn’t free – the state, that is the taxpayers, had to make a down payment of $5 million, moving money out of public services and into a corporate-controlled non-profit.  And our state will have to do that year-in and year-out, in order to get the corporate crumbs.

It shouldn’t be a surprise that the Legislature did not touch these companies’ tax loopholes. Each year Microsoft gets to keep at least $26 million in sales tax deferrals and exemptions and business tax credits. That money should go to fund public education. Instead, it pads Microsoft’s profits, which stood at $19 billion last year. Microsoft’s $5 million contribution – that is three one-hundredths of a percent of its profit. It is the equivalent of earning $50,000 and giving away $15.

If Microsoft was really interested in our state’s students, the company would stop hiding its revenue by claiming its software sales are conducted in a License and Operations office in Reno, Nevada. This little sleight of hand has enabled the company to avoid paying more than $750 million in state taxes over the past decade and a half. Now Microsoft is pushing the federal government to lower corporate taxes to 5.25% on money they have been stashing overseas. That is $29 billion which Microsoft has secreted away in other countries,  hiding from taxation and simultaneously withholding investment from job creation and research and development which could be done in the United States.

What does Microsoft get for its $5 million contribution? A tax deduction from its federal taxes. Their insistence of the development of a whole new duplicative non-profit administrative system, apart from the state. And the right to determine which students get the assistance, depending on their choice of courses. That is, if students decide to focus on areas of study that Microsoft deems important, then they may get some help. If not, they won’t. Those who get assistance and do not complete the “eligible education program” (for example, if they switch from computer science to a liberal arts major, like history) may be forced to pay back their grants. Their student loan indebtedness only grows through this program. It is a mockery of opportunity.

And then there is the little problem that the UW just announced tuition increases of 20%.  So even with this new financial aid, students next year will still have to come up with another additional $1,000 on top of this year’s tuition of $8,700 just to take classes.

Boeing’s $5 million contribution represents fifteen one-hundredths of a percent of its corporate profits. Recently the company announced that it expects to receive a net tax refund of $137 million from state and local governments for 2010. That same year, Boeing paid three-tenths of a percent in federal taxes on its pre-tax profit of $4.5 billion. They are skipping away from our state with $3 billion in tax credits over 20 years, building a new 787 facility in South Carolina. Plus they have shown the efficiency of corporate global outsourcing, with overruns on the 787 now exceeding $12 billion.

But they want to appear loyal to higher education in Washington. And that $5 million gives them good cover.

Here is a better idea for good corporate citizenship. Pay your taxes. You don’t even need to wait for the Legislature to act. You can just get out your checkbook. Microsoft and Boeing should both start with $100 million a year. That still leaves them benefitting from tax favoritism. It would give our children a bit of a tuition break, so they can actually attend classes in our public community colleges and universities. That’s what we want, isn’t it – an educated, not a debt-ridden, workforce?

John Burbank is the executive director and founder of the Economic Opportunity Institute in Seattle. He can be reached at john@eoionline.org.