What word is on the lips of every businessman and woman as they enter New York? A hint. It has three letters, and ends in X. That’s right: TAX.
Not satisfied with bleeding their own citizens white, the tax authorities in Albany want a bite out of any business that crosses the state line to a meeting in the Big Apple. Whatever fraction of the work year a businessman/woman spends in New York, then he/she owes that proportion of income tax. This tax law has been in place for decades, but it is enforced only on celebrities and sports stars because chasing them is cost-effective. However, the net is now widening, and they can do it because the technology is in place to track down defaulters.
In the past it was too expensive to trap anyone other than big earners. Lots of states are doing it. Their taxmen used newspaper reports to track movements of stars. But now they have big brother data files on real-estate deals, license plates, IRS files, CCTV, contracts, company audits etc.; and data mining can bring them all together. Tax officials routinely request travel logs for highly paid employees during payroll audits. Government contractors pass on the information as a legal requirement, and withhold the tax at source. As far as every authority is concerned, the best tax is one that somebody else pays to collect.
The only good news is that there is no double taxation. Although there are no interstate agreements, it is general policy to allow the deduction of income taxes paid to another state. The real problem is the huge administrative overhead. 50 states means 50 different sets of laws; it’s a nightmare to keep on top of this – particularly for small to medium sized companies.
Of course not all states are aggressively chasing taxes. However, once the word is out, the dog in the manger attitude means they’ll all be at it. The end result will be no net gain in tax revenue, but a huge tax overhead that will make Corporate America less competitive.
Is this the beginning of the end of the American Dream?
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