IP: BYTE-SIZE TAXES

[Dave Farber <farber () cis upenn edu>]

As the U.S. economy continues to shift away from manufacturing
and towards service, IT companies are reaping substantial
benefits from an outdated tax code. Property tax rules, for
decades a primary tool for generating tax revenue from business,
no longer appropriately assess a company's worth because of their
focus on tangible assets. In King County, Wash., although
Microsoft is valued at $500 billion on Wall Street, the county
assesses it at only $1.05 billion and presents an annual tax bill
of about $14 million. Microsoft's neighbor in King County,
Boeing, is valued on Wall Street at $40 million, but is assessed
at $5.5 billion and pays about $70 million in property taxes each
year. The disparity exists because property tax codes have no
means to measure intangible assets, such as software, which make
up the bedrock of the IT industry. Technology companies argue
that their overall success promotes the economy as a whole, and
that their revenue is channeled into the government through the
growing high-tech workforce. (National Journal 11/13/99)