If there were a Pulitzer Prize for failing to cover vital issues facing a community, The Seattle Times would win for its lack of coverage of Microsoft's 13 year Nevada tax dodge throughout this year's budget session in Olympia.
Since 1997, Microsoft has avoided the state's royalty tax on its now $20.7 billion annual software licensing business by recording these sales in Nevada. I estimate the company has saved more than $750 million dollars through this practice (with interest and penalties, the amount balloons to $1.2 billion). This year, Rep. Ross Hunter, Chair of the Finance Committee and a 17 year former veteran of the company, helped push through a change in the royalty tax that essentially legalized Microsoft's tax practice.
With Washington State facing insolvency and a record $2.8 billion deficit, The Seattle Times never told its readers about Microsoft's tax dodge despite its considerable impact on the deficit and Rep. Hunter's efforts and potential conflicts of interest. Senior Microsoft executives like Hunter often leave with tens of millions of dollars of company stock. (Hunter is pictured below-right)
With the demise of the print-edition of the Seattle Post-Intelligencer, Seattle is a one daily newspaper town. If The Times chooses not to report on an issue, it's quite likely residents won't hear about it.
The Times also failed a key test of the new media landscape. If it lacked the resources or inclination to cover an important story, would it highlight a credible citizen blogger's report online or somewhere in print? Apparently not. The only coverage given to Microsoft's Tax Dodge was in a passing one sentence mention, made without much explanation or context, near the very end of the budget session.
Meanwhile, the Microsoft Tax Dodge blog received a wide variety of other mentions. Local coverage included: Seattle Weekly (print and online), detailed coverage at TechFlash.com and Crosscut.com and online mentions at The Stranger's Slog, SeattlePI.com and local political blogs Publicola and HorsesAss. The Seattle NPR radio affiliate, KUOW, covered the issue in two of its shows: Weekday and The Conversation, which interviewed Mr. Reifman, the publisher of this blog. Other online mentions were made at The Guardian UK, BoingBoing, Huffington Post, Slashdot, Digg (popular), Reddit (hot) and Sometimes Daily which produced an introductory video. There were even April Fools' stories and a cartoon mocking Microsoft's tax practices.
I know Times reporters knew of the issue because I began making calls to reporters at the paper back in October 2009 and continued peppering them with emails throughout the budget session.
On the same day that a technology reporter for The Times told me that he would want to investigate the issue for himself before he'd write about it and that he just didn't have time, I noticed he found time to post a video of the Windows 7 logo made with dominoes to his blog.
In general though, I do not want to make this post about individuals. I've had detailed discussions with Times reporters on the phone and in email. I have personal and professional respect for their talent, skill and the challenges they face. Yet, at this point, the paper's record on Microsoft's tax dodge stands on its own.
At a time of fiscal crisis when Seattle readers really needed to know that their taxes would be raised and Microsoft's cut by $100 million dollars annually, The Times was essentially silent. As the largest print paper in the state, voters all over Washington State were left in the dark.
The Times regularly reported on the growing deficit, lawsuits over education funding and evolving budget proposals to raise taxes on businesses, beer, candy, soda even bullion; but it never told readers how Microsoft dodged more than a billion in taxes, interest and penalties.
I do believe that this is one case where having two newspapers in town would have helped drive coverage. The Seattle PI's Microsoft blogger mentioned Microsoft's tax issue several times even re-publishing one of my editorials.
Last week, The Atlantic asked if anyone could replace the local beat reporter in uncovering local corruption and misdeeds, including whether bloggers might do this. I believe that they can, but it helps a lot if print journalists pay some regard for their effort.
Frankly, I'm amazed at the quantity and breadth of online coverage this blog generated for Microsoft's misdeeds this year, but extensive online coverage is not yet a replacement for local ink. Few people in Washington State seem to know about Microsoft's Nevada tax dodge and how it relates to their own increased taxes this year.
As for why the Department of Revenue ignores legal precedents that seem to indicate Microsoft's past tax practices were illegal, we still don't know. Stay tuned, one Times reporter emailed me that they've been meaning to get back (sic) to this topic.
Disclosures: Last week, my OpEd submission "Balancing Microsoft's Interests with Our Own" was rejected by The Times. Earlier this year, a Times reporter had suggested I submit one. I am also an ex-employee of Microsoft and one of its grateful millionaires.