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State Tax Knife May Slice Amazon, Microsoft

NEW YORK ( TheStreet) -- Washington is a near-mythical state, where the trees tower higher than most buildings, pot is legal, and beaches or state parks are omnipresent. The state also offers another big reason people choose to live there: taxes, or rather a lack thereof.

In the state of Washington, residents don't pay state income taxes and companies don't pay corporate income taxes. As for companies, they're required to pay a gross receipts tax that's fairly low -- 0.13% to 3.3%. The state also offers a variety of other tax breaks for corporations, making it a popular spot for companies to be headquartered, especially those in technology. Point in fact, Amazon (AMZN) and Microsoft (MSFT) both call Washington state home.

However, that could all be changing.


Gov. Jay Inslee is proposing to cut the tax break on business and occupation taxes by 25%. Granted, Inslee's efforts are all part of a bid to patch together the more than $1.5 billion deficit projected for the budget ending in mid-2015 and respond effectively to a Washington Supreme Court ruling that the state isn't contributing enough to public education -- but he seems to have invoked a much broader reaction.

Politicians in Washington are looking to make up a deficit while concentrating on public education -- prompting Democrats in the Washington House to propose similar changes at the state level. The bill on the table right now would narrow Business & Occupation (B&O) and sales tax exemptions for import commerce. The technology sector would be hit the worst, as the Democrats seek to narrow the high-tech research & development (R&D) B&O credit and repeal the R&D sales & use tax exemption.

Education is a hot button cause that is hard to argue against -- but that doesn't mean the companies in the state are going to be supportive.

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