Originally published on Forbes.com Nov 6th, 2013
Yesterday, U.S. Sens. Sherrod Brown (D-OH) and John Thune (R-SD) introduced the Mobile Workforce State Income Tax Simplification Act. The Act would simplify and standardize state income tax collection for employees who travel outside of their home state for temporary work assignments. I have mixed feelings about the legislation. First I’ll discuss the upside.
The Problem
In my brief tenure at a national firm, I really tried to be compliant. One of the things we were supposed to be careful about was including a location code whenever we entered our time. I may have overdone it a bit. I did some work in the midst of my vacations and in the interest of thoroughness, I entered the city where I happened to be.
Then there was the national leadership conference in Arizona. So for 2012, I had to file in Massachusetts where I mostly live and work, Arizona, and California. (It actually didn’t bother me that much, because my covivant has done my return the last two years). I have to say I was impressed by the thoroughness of the firm.
I tried to imagine what it was like for somebody who was more peripatetic than I. It made me a little less of envious of the people with mysterious functions who did not have to worry about client service and billing and collection who wandered the nation inspiring us to apply the leverage model and fill in the white space.
It also made me happy that most of my away-from-home work was in Central Florida, where you have a right to carry and stand your ground and no stinking state income tax. I don’t carry and I am sure that I would run like hell, but one more state income tax return might have pushed CV past the tipping point.
Over the years I have studied the rules for what invokes state income tax withholding requirement. It varies substantially from state to state. Nobody was really getting with much of anything, but in Southern New England, it is hard to drive more than 50 miles in most directions without crossing a state line. Smaller companies tended to blow off or be blissfully unaware that they were out of payroll compliance because they were not reporting payroll in four or five states each of which had different thresholds.
A Reasonable Uniform Standard
The legislation would establish a clear 30-day threshold test for state income tax purposes, preventing individuals from having to sort through the complicated tax reporting burdens from the multiple states where they travel for work. This legislation will greatly simplify state income tax filings. There are exceptions for professional athletes and public figures who get paid on a per-event basis.
Gaming The System
Much as I love the prospect of even more major corporations establishing their headquarters in my home away from home – Orlando – I think this bill should only apply to the little people. You can be pretty certain that CEOs based in low and no tax states will be extra careful to count their days to make sure that they are not in New York or California more than thirty days in the year. If you are going to let the states keep picking on the baseball players, you should probably let them continue to get something from executives with million-plus salaries. Maybe they should consider a dollar limit rather than a days limit.
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