When Republicans say "tax reform," they're usually talking about ideas for shifting more of the tax burden away from the donor class, and to the working class. When Democrats say it, they're picturing the opposite. But there are ideas for tax reform that could be bipartisan, in the sense that they neither raise nor lower overall revenues, nor result in any major burden shifts. They just create efficiencies and make compliance easier. A classic example would be lowering nominal rates while closing inefficient loopholes. Here's another idea, which I haven't heard talked about much: simplify and harmonize laws for people working in multiple states.
You may not even realize it, but chances are, if you travel at all, you break tax law all the time, by failing to pay income taxes in multiple states. You see, every state has its own rules about when non-residents have to pay income taxes in the state, and some of them are extreme.
To borrow an example I found online, picture if you're traveling from your home in Ohio to California for vacation and you have to switch planes in Colorado. While at the Denver airport, you check your smart phone to see if you got any work emails, and you reply to one. Well, according to Colorado law, which has a "first day' rule, you now have to file income tax in Colorado. Colorado isn't the only "First day rule" example. Other places where doing any work in the state triggers state income taxes for a non-resident are AL, AR, CT, DE, IL, IN, IA, KS, KY, LA, MD, MA, MI, MN, MS, MO, MT, NE, NC, OH, PA, and VT.
https://money.howstuffworks.com/per...le-working-and-living-in-different-states.htm
https://www.pewtrusts.org/en/resear...oad-warrior-state-income-tax-laws-vary-widely
Some states have a more sensible rule, where there are earnings or days thresholds before you have to file taxes in the state. That way, if you happen to work for a day or two, or even a week, in a state, you aren't expected to file taxes there. But even those states can screw people up, or screw them over, with weird quirks. Take New York, for example. Let's say you live and generally work out of a home office in Arizona, but you have a particular project in NY that causes you to cross its threshold (I believe it's 14 days in a year). Well, with various caveats, NY is going to not only expect you to pay taxes on the portion of your working days spent in NY, but also a portion of the days you worked out of the home in the other state. For example, my understanding is if you worked 250 days in the year, 20 in NY, 10 in Kansas, and the rest at your home in Arizona, New York will not only expect you to report the 20/250 of your salary as being in NY, but may also claim up to 2/3 of the 220 days you were working at home.
That sounds insane, I know, but read up on it:
https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf
Since the various state tax laws do not harmonize at all, a person can be subject to double taxation.
To give you an example, a tax professor at a NY university telecommuted from his home in Connecticut, a few days per week. NY and Connecticut both considered his time working from his home to be income subject to that state's tax. So, he'd have to pay tax on it twice. He brought suit about the double taxation and lost:
https://www.law.cornell.edu/nyctap/I03_0138.htm
https://blog.oup.com/2011/06/barker/
If you were to make an honest effort to comply with every state's tax rules that you set foot in, and you travel much at all, you might well have to file dozens of state tax returns per year. And you could end up paying taxes on the same dollar many times over -- for example, if you sent work emails and made work phone calls several times during the course of a train trip that crossed ten states in a day, in theory as many as ten states' laws could say you earned that whole day's income in their state and owe taxes on it to them. In theory, you could owe much more in taxes than you earned.
As a practical matter, most people just ignore this bullshit and assume they won't be audited. And, as a practical matter, few people will be. There are some people who are at risk, like pro athletes and touring celebrities, since there's a lot of money at stake there, and the state government would find it easy to establish which days they did work in a particular state. But with electronic metadata, that's more and more possible for any of us. If you do work via phone calls and the Internet, it's not going to be difficult to establish that you worked in a particular state on a particular set of days, even if it did just consist of a few quick calls while on vacation. Moreover, the employee can effectively trigger an audit for the employer, or vice versa, if one reports and the other doesn't.
When the laws are this absurdly impractical to follow, and have the potential for being this unfair in practice, they're bad laws. What we need is for the Federal government to step in and harmonize the laws -- create a single rule that applies everywhere, with regard to which state gets your income taxes for a particular scenario, with no double taxation, and with a high enough threshold that we're not inadvertently creating the need for extra tax returns for incidental bits of work. You could even have some sort of "safe harbor" provision, where, if there is disagreement between states or genuine ambiguity about where you owe taxes for a particular day of work, you can pay a simple flat tax to the federal government for that day (based on the average of all state rates, for example), and that relieves you of tax liability to any contending state for that day. That way a telecommuter or a "road warrior" can have some certainty.
There have been attempts to reform the laws in these ways, but they never go anywhere. These days, though, when most things are too partisan to move forward, maybe it's a rare chance for both sides to come together for the sake of common sense.
https://www.govtrack.us/congress/bills/113/hr1129
More information:
https://www.mobileworkforcecoalition.org/problem/
You may not even realize it, but chances are, if you travel at all, you break tax law all the time, by failing to pay income taxes in multiple states. You see, every state has its own rules about when non-residents have to pay income taxes in the state, and some of them are extreme.
To borrow an example I found online, picture if you're traveling from your home in Ohio to California for vacation and you have to switch planes in Colorado. While at the Denver airport, you check your smart phone to see if you got any work emails, and you reply to one. Well, according to Colorado law, which has a "first day' rule, you now have to file income tax in Colorado. Colorado isn't the only "First day rule" example. Other places where doing any work in the state triggers state income taxes for a non-resident are AL, AR, CT, DE, IL, IN, IA, KS, KY, LA, MD, MA, MI, MN, MS, MO, MT, NE, NC, OH, PA, and VT.
https://money.howstuffworks.com/per...le-working-and-living-in-different-states.htm
https://www.pewtrusts.org/en/resear...oad-warrior-state-income-tax-laws-vary-widely
Some states have a more sensible rule, where there are earnings or days thresholds before you have to file taxes in the state. That way, if you happen to work for a day or two, or even a week, in a state, you aren't expected to file taxes there. But even those states can screw people up, or screw them over, with weird quirks. Take New York, for example. Let's say you live and generally work out of a home office in Arizona, but you have a particular project in NY that causes you to cross its threshold (I believe it's 14 days in a year). Well, with various caveats, NY is going to not only expect you to pay taxes on the portion of your working days spent in NY, but also a portion of the days you worked out of the home in the other state. For example, my understanding is if you worked 250 days in the year, 20 in NY, 10 in Kansas, and the rest at your home in Arizona, New York will not only expect you to report the 20/250 of your salary as being in NY, but may also claim up to 2/3 of the 220 days you were working at home.
That sounds insane, I know, but read up on it:
https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf
Since the various state tax laws do not harmonize at all, a person can be subject to double taxation.
To give you an example, a tax professor at a NY university telecommuted from his home in Connecticut, a few days per week. NY and Connecticut both considered his time working from his home to be income subject to that state's tax. So, he'd have to pay tax on it twice. He brought suit about the double taxation and lost:
https://www.law.cornell.edu/nyctap/I03_0138.htm
https://blog.oup.com/2011/06/barker/
If you were to make an honest effort to comply with every state's tax rules that you set foot in, and you travel much at all, you might well have to file dozens of state tax returns per year. And you could end up paying taxes on the same dollar many times over -- for example, if you sent work emails and made work phone calls several times during the course of a train trip that crossed ten states in a day, in theory as many as ten states' laws could say you earned that whole day's income in their state and owe taxes on it to them. In theory, you could owe much more in taxes than you earned.
As a practical matter, most people just ignore this bullshit and assume they won't be audited. And, as a practical matter, few people will be. There are some people who are at risk, like pro athletes and touring celebrities, since there's a lot of money at stake there, and the state government would find it easy to establish which days they did work in a particular state. But with electronic metadata, that's more and more possible for any of us. If you do work via phone calls and the Internet, it's not going to be difficult to establish that you worked in a particular state on a particular set of days, even if it did just consist of a few quick calls while on vacation. Moreover, the employee can effectively trigger an audit for the employer, or vice versa, if one reports and the other doesn't.
When the laws are this absurdly impractical to follow, and have the potential for being this unfair in practice, they're bad laws. What we need is for the Federal government to step in and harmonize the laws -- create a single rule that applies everywhere, with regard to which state gets your income taxes for a particular scenario, with no double taxation, and with a high enough threshold that we're not inadvertently creating the need for extra tax returns for incidental bits of work. You could even have some sort of "safe harbor" provision, where, if there is disagreement between states or genuine ambiguity about where you owe taxes for a particular day of work, you can pay a simple flat tax to the federal government for that day (based on the average of all state rates, for example), and that relieves you of tax liability to any contending state for that day. That way a telecommuter or a "road warrior" can have some certainty.
There have been attempts to reform the laws in these ways, but they never go anywhere. These days, though, when most things are too partisan to move forward, maybe it's a rare chance for both sides to come together for the sake of common sense.
https://www.govtrack.us/congress/bills/113/hr1129
More information:
https://www.mobileworkforcecoalition.org/problem/
Illiterate dishonest punk thinks he is a "smarter" poster. 