On Wednesday, I read that Rep. Hunter called Senate measures to close budget gap “gimmicks and pretend” as opposed to “honest,” “responsible” and “sustainable.” but Rep. Hunter’s track record at predicting budget law is poor.

In 2010, Hunter said apportioning the royalty tax would actually generate more revenue for the state (up to $11.8 million more by 2012) and “encourage companies to remain in Washington and perhaps even move some of their royalty operations back here.” (the latter from talking points Hunter circulated in 2010 to debunk my reporting.) Today, Mr. Gowrylow sent me actual data since Hunter’s bill passed in 2010 … royalty tax revenues actually declined from $6.8 million to $6 million (see table at right). And, as of yet, Microsoft’s Nevada lawyers and accounting teams are still skiing up at Squaw, not Snoqualmie.


Year Royalty Tax Collections
2005 $6,627,534
2006 $5,720,708
2007 $5,995,049
2008 $7,365,650
2009 $5,873,563
2010 $6,813,949
2011 $6,041,744
2012 $6,253,309


But the point of adding only royalty tax apportionment (out of scores of other B&O classifications) to the 2010 services apportionment bill was never meant to generate additional revenue, it was meant to eliminate the issue of Microsoft’s worldwide licensing revenue being taxable. Hunter’s apportionment of the royalty tax shielded all of Microsoft’s licensing revenue (except sales to Washington State customers) from taxation.

Here’s a visual summary of what Washington State’s royalty tax revenues would have been if the Department of Revenue had challenged Microsoft’s Nevada accounting – the red bars represent the magnitude of our generous corporate welfare program to Microsoft shareholders. These figures are based on Microsoft’s actual reported licensing figures (and estimates after they stopped providing the raw figures in annual reports). The figures do not include interest and penalties. All of these back taxes are now shielded by Hunter’s “field audit” amnesty in the 2010 bill.


In September 2010, Microsoft Nevada ran a job listing on its site “Are you interested in leading the vision and strategy of an organization which processes in excess of $30B annually?” The ad implies that half of Microsoft’s revenue is from licensing (much more than than the 31% I used in estimates above). In fact, if you use that estimate, Microsoft’s savings from lobbying and tax dodging exceed $6 billion. “It’s amazing what you can do here indeed” – especially with friends like Rep. Hunter leading the budget deliberations.


Posted by Jeff Reifman

Jeff is a technology consultant based in the Pacific Northwest.

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