GOODY TWO SHOES: Higher Taxes For Thee, But Not For Me
Internet gaming company Zynga is making threatening noises about moving its headquarters to Silicon Valley unless San Francisco officials waive a tax on employee stock options, reports The Bay Citizen:
Zynga is just one of many burgeoning tech companies that have approached the city in response to a proposal to grant Twitter a payroll tax exemption as an incentive to persuade the company to remain in San Francisco.
In a meeting last week that included San Francisco Mayor Edwin Lee, Board of Supervisors President David Chiu, Zynga CEO Mark Pincus and CFO David Wehner, company executives indicated that without their own exemption Zynga may convert its 270,00 square-foot office into a call center and relocate its headquarters – including its programmers and highly paid staff – to Silicon Valley, according to people present at the meeting. In the week since, the company has contacted a number of supervisors to argue a similar case, said at least two supervisors who have met with the company.
Zynga, creator of popular online games like Farmville, is expected to go public within the next few years. The company is particularly concerned about a payroll tax provision unique to San Francisco that allows the city to tax gains on employee stock options.
Unless it is granted an exemption, Zynga would essentially receive a tax bill from the city when its employees opt to exercise their options. The company, with about 1,200 employees, is now valued at $10 billion.
Interestingly, Pincus is a Dem – he donated $10,000 to Reid Victory Fund – who supports tax-and-spend candidates with his wallet and his vote. Pincus doesn’t want his taxes to go up, just yours.
Similarly, General Electric – which supported Congressional Dems over Repubs by a 2:1 margin in the 2010 campaign, and whose CEO and board chair Jeffrey Immelt is a member of the President's Economic Recovery Advisory Board – is getting a $3.2 billion refund from Uncle Sam on wprldwide profits of $14.2 billion, of which the global conglomerate claims only 5.1 billion was earned by its U.S. operations. The New York Times reports:
The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.
Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress. …
Minimizing taxes is so important at G.E. that Mr. Samuels has placed tax strategists in decision-making positions in many major manufacturing facilities and businesses around the globe. Mr. Samuels, a graduate of Vanderbilt University and the University of Chicago Law School, declined to be interviewed for this article. Company officials acknowledged that the tax department had expanded since he joined the company in 1988, and said it now had 975 employees.
At a tax symposium in 2007, a G.E. tax official said the department’s “mission statement” consisted of 19 rules and urged employees to divide their time evenly between ensuring compliance with the law and “looking to exploit opportunities to reduce tax.”
Transforming the most creative strategies of the tax team into law is another extensive operation. G.E. spends heavily on lobbying: more than $200 million over the last decade, according to the Center for Responsive Politics. …
While G.E.’s declining tax rates have bolstered profits and helped the company continue paying dividends to shareholders during the economic downturn, some tax experts question what taxpayers are getting in return. Since 2002, the company has eliminated a fifth of its work force in the United States while increasing overseas employment. In that time, G.E.’s accumulated offshore profits have risen to $92 billion from $15 billion.
“That G.E. can almost set its own tax rate shows how very much we need reform,” said Representative Lloyd Doggett, Democrat of Texas, who has proposed closing many corporate tax shelters. “Our tax system should encourage job creation and investment in America and end these tax incentives for exporting jobs and dodging responsibility for the cost of securing our country.”
All of which makes you wonder just what kind of advice Immelt is providing President Barack Hussein Obama on how to turn the U.S. economy around.
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