In 1997, Microsoft et al. lobbied to reduce Washington State’s Royalty Tax from 1.5% to .5%, a threefold reduction. This wasn’t low enough. The company decided to open a small Reno, Nevada office to dodge the tax completely.
Between 1997 – 2011, the company used its Nevada office to avoid $1.51 billion in Washington state taxes, interest and penalties. If you include impacts from the company’s lobbying and calculate its savings at the original 1.5% rate, it’s saved $4.37 billion.
Since 2008, Washington State has cut $4 billion from K-12 and Higher Education. We rank 31st in K-12 spending. 18% of University of Washington freshman are now foreigners (because they pay more) up from 2% six years ago. We rank 47th nationally in 18-24 yo college enrollment and 48th in K-12 class size.
In 2010, after we raised these issues to the legislature, Democratic State Representative Ross Hunter, Chair of the Finance Committee and a former Microsoft executive, led the Legislature to change the state’s Royalty Tax from a tax on sales to worldwide customers to just a tiny tax on sales to Washington State customers. This reduced Microsoft’s effective Nevada tax dodge by about 99%. He also included language that gave Microsoft amnesty on its back taxes.
Shortly after, Democratic Gov. Gregoire appointed another Microsoft Executive, Suzan Delbene, to run the Washington State’s tax department. Delbene is married to Microsoft President Kurt Delbene.