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Originally published September 21, 2012 at 3:55 PM | Page modified September 24, 2012 at 11:05 AM

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Editorial: Windows foggy on Microsoft $6.5 billion tax skirting

A U.S. Senate hearing on corporate tax policy prominently featured Microsoft and its adroit use of federal law to save billions.

Seattle Times Editorial

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GOP presidential candidate Mitt Romney continues to finesse questions about his payment of taxes, but Microsoft found itself before a U.S. Senate hearing on corporations shifting profits offshore.

The five-hour hearing, covered by The Times, concluded the high-tech giant had avoided paying $6.5 billion in taxes over three years. The company shielded tax-vulnerable earnings from the U.S. Treasury by taking elements of its business overseas.

These are eyebrow-raising numbers, but the context of the question is a bit fuzzy. Yes, the country faces huge deficits and big bills, but no one is suggesting Microsoft, or Hewlett-Packard, also in the spotlight, have done anything wrong.

Congress needs to have an adult conversation with itself. The laws are on the books, and companies have made aggressive use of the options available.

What does Sen. Carl Levin, D-Mich., chairman of the Senate Permanent Subcommittee on Investigations, propose to do, other than hold a hearing before congressional members adjourn to campaign for re-election?

Tax policy is a muddle from state Legislatures to Congress. Lawmakers in Olympia court Boeing’s affection with a tax break. The arithmetic is basic. Jobs created by the presence of a major employer compensate for the leniency.

Microsoft is using the laws passed by Congress to save money. The same tax laws also encourage the company to invest $500 million in YouthSpark, a new global philanthropic youth initiative.

Congress is obligated to answer the question it raised with such drama. Is it time for lawmakers to overhaul the policies they created?

Lawmakers should examine how it taxes the repatriation of corporate foreign earnings, which keeps $54 billion of Microsoft’s cash outside the U.S. Microsoft and others have followed the law to safe havens offshore.

A peek at Romney’s tax returns might reveal this is more common than ordinary taxpayers know.

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