It’s no secret that lawmakers use legislation like state tax credits to implement change, such as standardizing the legal drinking age or attracting new business to their state. Most of the time, credits and incentives DO cater to specific industries or desired activities, like increasing employment or attracting corporate headquarters to states. But do legislators ever take this method of wielding influence too far?
I’ve included two interesting examples in the news I recently found and included my thoughts; let me know if you agree!
Washington: Microsoft Requests More State Tax
In Washington state, Microsoft is asking the legislature to increase state tax collected from tech companies in an effort to increase funds dedicated to workforce education. The request includes a provision that specifically targets two companies that make more than $100 billion in annual revenue: Microsoft itself and Amazon.
While the state would greatly benefit from this expanded revenue, Microsoft’s request is also self-serving. As Geekwire reports:
Microsoft, like the rest of the tech industry, has a vested interest in training more technologists. The Bureau of Labor estimates that there will be 1.4 million computer-science related jobs and just 400,000 graduates with the skills needed to fill them by 2020.
Incidentally, 2020 is when Washington state would increase taxes to fund workforce training if the new bill becomes law. Starting that year, Microsoft and Amazon’s business taxes would increase by 67 percent to expand financial aid and capacity to train more students in high-demand fields like tech.
Microsoft also gains a competitive advantage by positioning itself as a corporation with a conscience. New initiatives over the past few months, such as Microsoft’s $500 million affordable housing pledge and support for a privacy bill in Washington state, set the company apart from peers mired in a techlash. The contrast is particularly sharp in Washington, where Amazon and other tech companies resisted a Seattle tax on big businesses to fund affordable housing in a fight that made national news.
It’s no secret that corporations and special interests employ lobbyists to try to convince legislators to back their agenda with new legislation. Personally, I think this example is a clever way Microsoft found to benefit itself and the state while sticking it a bit to their rival.
Illinois: Rep. McAuliffe Wants to Withhold Tax Credits
In Illinois, state representative Michael McAuliffe said he’s introducing a bill that will withhold tax credits from companies that work with actor Jussie Smollett, who claimed he was the victim of a hate crime. However, after investigating, law enforcement said it was a hoax. Although the actor was arrested and hit with 16 criminal charges, the Cook County State’s Attorney’s Office announced it dropped all charges.
Regardless of your opinion of Smollett’s or the state’s attorney’s office’s actions, do you think a legislator should single out specific individuals in state tax credits? While Rep. McAuliffe may not even have enough support for the bill to gain traction, it does distract from other legislating he and the rest of his colleagues could be doing instead. I would argue that this is proposed legislation gone awry!
State Tax Legislation: What Do You Think?
Have you seen any instances in the news of state tax credits and incentives that seemed very narrowly focused on an individual or just a couple of companies? Do you think the legislators are on track with them, or using them to try to overstep? I’d love to hear your thoughts in the comments!
In the meantime, please contact me if you have any questions about state tax credits and incentives, or any other multi-state tax issues that may affect your business. I’m happy to help!
Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects. To learn more, contact us today at www.MilesConsultingGroup.com.
