Report: Microsoft, Boeing stash money offshore to dodge tax bills

SEATTLE -- What would you do with an extra $1,000?

A local non-profit says taxpayers lose out on that money every year because of offshore tax loopholes.

"America's largest corporations and wealthiest individuals basically take advantage of accounting gimmicks to shift profits offshore to avoid paying taxes," said Micaela Preskill, state advocate for the Washington Public Interest Research Group. "Small business owners and American taxpayers are left to pick up the tab."

WashPIRG, a local non-profit, released a report Thursday, saying the loopholes cost federal taxpayers $150 billion dollars each year, leaving small businesses to fill the void.

"This is cheating. When you misrepresent yourself, you're cheating," said Barbara Elza, owner of Daily Dozen Donut Company, a Pike Place Market mainstay for nearly 30 years. "I don't even have enough to meet my expenses this month, let alone stash something offshore."

The report contains a state-by-state analysis, listing some of the largest corporations in the U.S. that allegedly used tax havens to shrink their tax bills. As of 2008, 83 of the top 100 publicly traded corporations in the U.S. stash money offshore to dodge tax payments, the report found.

Boeing, Microsoft, and the now-defunct Washington Mutual are among the Washington companies listed in the report.

In Microsoft's case, the report alleges the company skirted $4.5 billion in federal income taxes by shifting income to Puerto Rico, a tax-friendly commonwealth, over a three year period.

"We comply with the tax laws in each jurisdiction in which we operate," the company said in a statement. "Our tax results follow from our global business which requires us to operate in foreign markets to compete in worldwide trade, grow, and create US jobs. Last year, Microsoft paid over $5 billion in taxes worldwide, and our effective tax rate was approximately 24 percent."

The report also alleges that Boeing paid a tax rate of just 0.3 percent -- or $13 million in federal taxes on a $4.3 billion dollar profit in 2010 -- due to 42 subsidiaries based in tax havens.

A spokesman vehemently denied the numbers, pointing to tax returns and arguing the company's tax payments are often deferred in states and countries where they do business.

"Boeing is the largest manufacturing exporter in the country. We earn almost all of our revenue right here in the United States and pay associated taxes here," said Chaz Bickers, communications director for Boeing. "In 2010, more than 95 percent of our earnings was taxable in the U.S. with state and federal tax expense of just under $1 billion."

"Boeing is the largest manufacturing exporter in the country so tax havens simply are not a relevant or meaningful part of our business," he added.

Elza, who struggles to support her four employees, hopes that federal lawmakers will step in and correct the laws to go after the worst offenders.

"(I'm) struggling now like I haven't ever struggled," she said. "It hurts everyone when the state has to cut back on things like meals on wheels or rides for people with cancer to get their treatment. That hurts every person."