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Originally published September 24, 2011 at 9:00 PM | Page modified October 11, 2011 at 4:02 PM

Corrected version

Danny Westneat

Microsoft doesn't need our tax break

When you go through the state budget with that question in mind — who really needs it? — you find most of the money already goes to people who plainly do. But there are glaring exceptions to this "needs" test. Take, for example, Microsoft.

Seattle Times staff columnist

quotes I guess you will agree that means the Seattle Times no longer needs our sales tax break... Read more
quotes nbaisdeadtome: "A study once found that every job at Microsoft created 6 other... Read more
quotes I'm a Microsofie. I respect math. You give breaks when you have surplus cash to dangle... Read more

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Now that state lawmakers have been smacked upside the head with yet another budget shortfall, they say they really are going to get serious about it this time.

"We're going to have to admit there are things we simply, as a state, can no longer do," said a stern-sounding Gov. Chris Gregoire last week.

All snark aside, that actually is a good organizing principle for how to dig out of the state's budget hole. It means: prioritize. I would phrase it like this: Who out there truly needs help from state government?

When you go through the state budget with that question in mind — who really needs it? — you find most of the money already goes to people who plainly do. School children, for instance. The poor. The disabled. Prisoners (in the sense that we all need to keep them locked up).

But there are glaring exceptions to this "needs" test. Take, for example, Microsoft.

Each year, companies that get special preferences in the form of tax breaks are required to disclose, to the state, the value of that break. The most recent list, covering 2010, is now available from the state Department of Revenue.

Microsoft reports it is getting a $104.5 million break in its sales taxes — a threefold jump compared with what it reported the year before. The tax break comes as part of a program established in 1994, under then-Gov. Mike Lowry, to promote the fledgling high-tech industry. It lets companies get out of paying sales tax on building research-and-development facilities, including the equipment used in them, such as computers.

The high-tech sales-tax incentive program cost the state $109 million in 2009, with the breaks spread across 73 companies (including Microsoft, which reported getting a $34.3 million tax reduction that year). Microsoft now is claiming such a huge break that it is almost as big as the entire program cost the year before. Meaning the price to the state is going up sharply, at the worst possible time.

The state says Microsoft's tax breaks could have come from projects built over a number of years. The company's most recent filing cites its construction of data centers in Quincy, Grant County, along the Columbia River.

Now, in a perfect world — such as we lived in back in the 1990s when this tax break was concocted — I probably wouldn't have much to say about it. We give developing companies a little something, they build stuff here, the state takes a modest hit to its budget. Everybody goes home happy.

But a lot has changed since 1994, when these tax breaks were passed.

Microsoft is hardly a fledgling company that needs a hand up. It announced last week it has stockpiled $52.8 billion in cash and short-term investments. That's billion with a B.

Put it this way: If we didn't give Microsoft the $104.5 million tax break, it would have $52.668 billion cash on hand.

Second, the state has never found any evidence these high-tech tax breaks produce many jobs, at least not jobs that wouldn't have been created anyway. One study by the Department of Revenue found it took $588,000 worth of tax credits for each local job created.

The other big news since 1994 is that state government is now in serious trouble. It's true this is largely its own fault, for bloating up when times were good. But since 2008, the government really has shrunk. It now spends a billion dollars a year less, and has 6,500 fewer workers.

It all can be trimmed further, and will be, in a special session later this year. I don't mean just to single out Microsoft. It's a great company that shouldn't be taken for granted, and it's only one of many that gets special tax favors.

But before the ax falls again in Olympia, the call has gone out: Who truly needs the help of government?

I don't see how one of the richest companies in the world could be the one answering "I do."

Danny Westneat's column appears Wednesday and Sunday. Reach him at 206-464-2086 or dwestneat@seattletimes.com.

This story was corrected on Oct. 10, 2011. The size of sales-tax breaks claimed by Microsoft in the 2010 reporting period has been corrected by the state Department of Revenue. The state had tallied $132 million for the software company, as reported in a Sept. 25 column. The department has revised that to $104.5 million, after finding what its spokesman described as a double-counting error.

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