Corporate tax abuse in our state harming our education system

By JOHN BURBANK

Occupy Wall Street has turned the national conversation to corporate privilege vs. the 99%. The mainstream media has “discovered” the yawning chasm in income, privilege, and well-being between Main Street and Wall Street. No surprise — it is the same thing that we have all understood in the back of our brains for the past decade.

But this is not only a national conversation about a national problem. The roots of corporate privilege have infested “this Washington,” too. Seeds planted by corporate lobbyists in our state’s tax code, and fertilized by an obedient Legislature, have grown to the point where waste, fraud, and abuse in corporate taxation are crowding out our kids’ K-12 education, the paramount duty of the state.

K-12 education isn’t all that’s taking a beating; access to higher education, health coverage for those who have lost it in this stagnating economy, and the preservation and creation of public jobs, like those of teachers, community college professors, nurses, and medical assistants – all have been sacrificed on the altar of corporate privilege and power.

We can start with the banks. It was our own, Seattle-based Washington Mutual that inflated the housing bubble with dishonesty and lies, and then brought the economy down with the collapse of the housing market. And while helping to create the mortgage mess, WaMu also skipped its patriotic duty to pay taxes on the money it made from people’s mortgages. That giveaway in Washington’s tax code costs us about $50 million every year. It’s still on the books,  and we all know that money doesn’t stay here to create jobs. It goes to Wall Street to be gambled in the stock market.

Here’s another special tax giveaway: When non-financial corporations (think Boeing, Amazon, Costco) make money from investment income, it’s tax-free. Washington state loses about $200 million a year — enough to fund tuition for 10,000 students at the University of Washington plus another 30,000 students in our community colleges.

The hits just keep on coming. Microsoft made more than $23 billion in profit on $69.9 billion of revenue in their 2011 fiscal year, a tidy profit rate of 33%! But apparently the company still needs to skimp on taxes. By running their licensing sales through a shop in Reno, they avoid royalty taxes that could be funding high-quality schools for Washington’s children.

The Legislature has enabled Microsoft to continue this ruse. Last year the state budget included a provision to ensure that only Microsoft’s licensing revenue from Washington state customers is taxable. For good measure, the Legislature agreed to an amnesty clause that legally prohibits the state from trying to collect back taxes owed by Microsoft before the narrower definition of taxable licenses was passed.

So how much did public school students and their teachers and professors lose from this ruse? Somewhere between $100 million and $400 million a year for the past 15 years. (We can’t get much more accurate because we can’t see Microsoft’s internal corporate accounting.)

Add the $104 million Microsoft got in tax deferrals from the state in 2010, and the $2 million it received in tax credits, and you are a long way along the path to figuring out the revenue problem in our state.

Microsoft’s corporate counsel, recently weighed in on the state’s budget woes: “It’s important for the state to avoid further reductions in higher education funding… It’s similarly important to maintain investments in K-12 education across the state…” Which, I guess, is (squishily) endorsing the proposed sales tax increase that would directly hit low- and middle-class families in the pocketbook.  But it’s the waste, fraud and abuse in our own tax code that we should be going after — not the students at public high schools, not the students at our community colleges, not their teachers and professors, not their parents, and not their daily purchases.

Corporate profits are at record highs. We need to make sure some of that money comes back to be invested in our kids and our future. It’s time to shift our gaze from the tent cities of the Occupy sites to the campuses and skyscrapers that house corporate boardrooms and their masters. That is where the power lies.

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