Make Amazon look bad: Microsoft uses Game Theory to increase Tax

As Amazon closes in on multiple monopolies across it’s business divisions Microsoft has surprised lawmakers in the United States by asking them to increase taxes on both Amazon and itself.

Democratic Congressman Drew Hansen (Bainbridge Island): “I don’t know if I’ve heard of this happening before; it’s not ringing any bells” he told the Seattle Times when asked if a big business has ever come to the State legislature proposing a sizeable tax on itself to help pay for a government program.

Microsoft president Brad Smith speaks at the annual Microsoft shareholders meeting Wednesday, Nov. 29, 2017, in Bellevue, Wash. (Elaine Thompson / The Associated Press)

Microsoft is merely the first of the large Internet giants to go down this route. It comes as it faces entrenched challenges to growth and domination over it’s traditional IT Services space from Amazon, Google, Facebook and of course Apple. The company is much older and well established in legal and political circles and has realized that increasing political influence is the most effective means to control tax policy to help it deal with competitors.

By asking for increased taxes – it causes Amazon to pay substantially more, and to be regulated. Furthermore Microsoft can later extend the precedent set at State level to the Federal level causing it’s competitors billion of dollars in losses, compared to the relatively light hit of a few million from it’s own books.

The company already enjoys extensive tax breaks, and has a stellar track record of prosecuting and defending in courts across the US and the rest of the world. Many of it’s competitors have actively tried to model their legal approaches on Microsoft, and have tried to entice staff away to join their ranks for that exact reason.

The bill, introduced Monday by Hansen and co-sponsored by Pollet among others, is well chosen as a push for funding in higher education. This is a massive PR win for Microsoft, and if Amazon and others oppose their stance it would draw negative news coverage nationwide. The bill would pour about a billion dollars over the next four years into a “workforce education account,” to be spent on more financial aid as well as more degree slots in high-demand subjects such as computer science, engineering and nursing.

The benefits of the legislation in training future Micrsoft workers in software, engineering, and health fields is obvious.

The bill increases the state business tax and occupation tax by 20 percent on about 40 categories of technical services, such as telecom, engineering, medical and finance. And by 33 percent on tech firms with more than $25 billion in annual revenue.

Such bills are usually fiercely opposed by businesses, especially startups and medium sized enterprises. They would be hit hardest, and it thus would be a net benefit to Microsoft and other mega-enterprises who would be comparitively cushioned. It could kill effective competition from catching up in that state.

The bill also sets a top rate, a huge 67 percent business tax increase, for those “advanced computing businesses” with “worldwide gross revenue of more than one hundred billion dollars” per year. This seems to be targeted directly at Microsoft, Apple, Amazon, Facebook, Google and other global tech giants. Microsoft historically has fought such tax increases, alongside it’s rivals, or at least stayed neutral. This time it is advocating fiercely for the tax increase.

Microsoft has realised that the digital business is about controlling behaviour. Traditionally the domain of government – it falls more and more to the tech giants to collect, analyse behavioural data, and modify the outcomes of millions of Americans. People shop online, they look for doctors online, find maps, search for jobs, fall in love, and create – all online.

Gone are the days when a large marble building was were people went for civic engagement – nowadays they get it all in their daily feeds. That means that Microsoft (and the other giants) are de-facto tools for governance, and the more institutional and civic friendly they can appear – the longer they will survive before they are seen as parasitical. Recently they’ve made a point of controlling the job, education, and housing markets with the acquisition of LinkedIn, the reworking of the Lynda platform, and more directly the announcement of a $500 million affordable housing fund in January.

Jeff Bezos, president and chief executive officer of Inc., right, speaks as U.S. President Donald Trump, left, and Satya Nadella, chief executive officer of Microsoft Corp., listen during the American Technology Council roundtable hosted at the White House in Washington, D.C., U.S., on Monday, June 19, 2017. Executives from many of the world’s largest technology companies gathered for the first meeting of the American Technology Council with Trump and his senior advisers. Photographer: Zach Gibson/Bloomberg

Microsoft has had an especially troubled history of being seen as ‘the bad guy’. Stifling innovation, eliminating competition, losing anti-trust cases, and failing to win over the kind of brand loyalty which would have prevented the rise of competitors such as Apple, or indeed Google.

The latest move signals they are willing to go further to deny their competitors long term security, and will pay to preserve their place in the top tier of global technology giants.

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