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SPOTLIGHT
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Fairness in taxes

Published on -9/10/2013, 10:09 AM

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There is always the outside chance that the crisis over whether to bomb Syria could force members of Congress to start working together. It's a long shot, one we're not overly optimistic about, but it could happen.

A working legislative branch certainly would have a plethora of pressing issues is serious need of action. We could suggest dozens of problem areas, but for today we will limit ourselves to one: The U.S. tax code.

One need only look at this week's announcement from Microsoft to puchase Nokia as a riveting example of squandered opportunity for the country our elected senators and representatives purport to look after.

While many technology watchers view the $7 billion purchase as an attempt by Microsoft to complete an end-to-end vertical integration of products that will allow it to better compete against Apple's iOS platform or Android, a more cynical perspective is that it merely allows Microsoft to avoid paying more U.S. taxes.

Microsoft has a great deal of profits parked offshore. Acquiring Finland's most prestigious corporation will assist Microsoft to solidify its international status. The company's financial analysts determined spending the equivalent of $7 billion in Euros from offshore accounts, even if the deal fails miserably, is cheaper than bringing those dollars back to the United States and subjecting them to a 35 percent nominal rate.

As even introductory business courses hammer home the concept of maximizing profits for shareholders, Microsoft's great fortunes could or should be resulting in large dividends. The 35 percent rate, even if nobody truly pays that amount, is preventing Microsoft from fulfilling its most basic principle. If shareholders did receive such payouts, the resulting effect in the U.S. economy would be in multiples of the original $7 billion.

We believe the U.S. tax code forces companies to shelter profits overseas. It's why Microsoft bought Skype for almost $8 billion. And why Apple borrowed $17 billion to pay dividends rather than bring any of its $140 billion-plus in cash assets back to America. It's why Microsoft, Apple, Google, Facebook and so many others run all their international money through Ireland, which doesn't tax any profits except those made directly in Ireland.

We're not suggesting Congress needs to allow corporations tax-free status. But the current system motivates all the big boys to move a significant percentage of our Gross National Product into parts of the world where the United States never will benefit.

It remains to be seen if Syria's poisonous gas massacre finally will get Congress working together as they're designed. We only can hope. The U.S. tax code needs reform in order for successful U.S. companies to breathe live into our own economy once again.

Editorial by Patrick Lowry

plowry@dailynews.net

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