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March 30, 2005

More stupidity from the courts

From the Associated Press via Newsday.com:

The Court of Appeals said that computer programmer Thomas Huckaby who lives in Nashville, Tenn., owed New York income tax for his full salary, not just the time he spent working at his employer's New York offices.

Huckaby paid tax on about 25 percent of his income over two years for the time he spent working in New York state. But the court upheld a state tax department ruling that all his income should be taxed. That amounts to $4,387 plus interest. However, the ruling could lead to much greater income for the state as it is applied to the growing field of telecommuting.

For some odd reason the Ass. Press didn't bother to find out whether this decision will have an effect on how much income taxes Huckaby would then be liable for in his home state. Kinda think that matters, don't you.

Be that as it may, let's assume that the court is successful in establishing the principle that income tax must be paid to the state one is employed in, rather than the state one lives in. Seems to me that will seriously affect the ability of business in high tax states, like New York, to attract quality employees. Thus it would force many business out of the state.

But then what if no precedence is established, or it takes a really long time to sort it out, and other states insist on taxing the income of residents, regardless of where they work? Double taxation? If the states fighting over the income of the employee are under different appeals courts, then you could have competing decisions.

In the end this was a really bad decision by the New York courts. State taxes are collected, for the most part, to pay for the things a state provides its residents. A telecommuter would, then, not be benefiting from his taxes, and also not being allowed to vote on how those taxes are spent (“taxation without representation” now where have I heard that before?)

Posted by Danny Carlton at March 30, 2005 08:45 AM

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