Archive for the ‘New York’ Category

The Real Impact of the Wynne Decision

Tuesday, May 19th, 2015

Yesterday’s decision in Comptroller of the Treasury of Maryland v Wynne Et Ux generated some reporting in print media. Yet much of what I saw was incorrect in part or in whole.

New York does give full tax credits for individuals with out-of-state income; I do not believe they will be impacted. However, many states do not give credits for local taxes. Joe Kristan highlighted Iowa today; Kentucky is another state that does not currently offer such tax credits. Under Wynne I believe they’ll be required to offer such credits. (I only know about Kentucky because I had a client impacted by this.) Joe noted that Tax Analysts saw that North Carolina and Wisconsin (along with a host of local governments) also don’t offer such credits. That’s where I think the real impact will be.

The 2015 State Business Tax Climate Index: Not Much Has Changed

Tuesday, October 28th, 2014

I guess I could have called this, “Bring me the usual suspects,” but I’ve been using that phrase over and over. Yet not much has changed, so the usual suspects have good tax climates and the usual suspects have bad tax climates. That’s according to the Tax Foundation and their 2015 State Business Tax Climate Index.

Let’s look at the ten best states for business:

1. Wyoming
2. South Dakota
3. Nevada
4. Alaska
5. Florida
6. Montana
7. New Hampshire
8. Indiana
9. Utah
10. Texas

This list is remarkably similar to last year. The only state dropping out is Washington. The Evergreen state fell from 6th best to 11th; it was hurt by its sales tax ranking (48) and corporate tax ranking (28). While Washington does not have an individual or corporate income tax, it does have a Business & Occupation Tax. That’s a gross receipts tax on business income.

The bottom ten is also mostly unchanged:

41. Iowa
42. Connecticut
43. Wisconsin
44. Ohio
45. Rhode Island
46. Vermont
47. Minnesota
48. California
49. New York
50. New Jersey

Why are states ranked poorly? Here’s what the Tax Foundation says:

The states in the bottom ten suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates. New Jersey, for example, suffers from some of the highest property tax burdens in the country, is one of just two states to levy both an inheritance and an estate tax, and maintains some of the worst structured individual income taxes in the country.

Maryland and North Carolina rose out of the bottom ten, while Iowa and Ohio fell into the bottom ten. North Carolina’s improvement was dramatic: from 44th to 16th. Why?

In this year’s edition, North Carolina has improved dramatically from 44th place last year to 16th place this year, the single largest rank jump in the history of the Index. The state improved its score in the corporate, individual, and sales tax components of the Index, and as the reform package continues to phase in, the state is projected to continue climbing the rankings.

As for why states rank where they do, consider my old home of California. The Bronze Golden State has complex taxes for individuals (it ranks worst in the country), corporations, and also has a complex sales tax system. If the Tax Foundation looked at flow-thru entities, California would rank even worse. In most states a single-member LLC does not have a state tax filing requirement. That’s not the case in California.

Kudos to the Tax Foundation for their annual report. It’s clear that policy makers do read this report. North Carolina saw drastic improvement. There’s improvement forthcoming in New York, with a major corporate tax reform implemented this year which should have a dramatic impact on at least one New York tax in the future.

There Are Better Methods of Paying Off the IRS than Bungling a Burglary

Sunday, September 1st, 2013

Let’s assume you owe the IRS $10,000 in back taxes. What would you do? Perhaps obtain a payment plan? Maybe you can negotiate an Offer in Compromise? Or maybe you have so little funds on hand than you can go into Currently Uncollectible Status. Or maybe you will elect to attempt to steal welding equipment, and then become the prototypical demolition derby driver. And yes, someone actually did this.

Joel Grasman (and his wife) apparently owed the IRS $10,000. Instead of doing one of the obvious things to resolve the tax debt, he first stole welding equipment from the MTA (New York’s transit system), then on his way out drove his truck into power lines. That caused thousands of Long Island power customers to be powerless.

This New York Post article notes that Mr. Grasman has confessed. He faces a multitude of charges; frankly, his tax debt is the least of his current problems.

Nite Moves Asks Supreme Court to Rule on Constitutionality of Taxing Pole Dances in New York

Sunday, August 11th, 2013

When I think of “Night Moves” I think of a Bob Seger song. That’s not what this post is about. It seems that the upstate New York adult entertainment facility named Nite Moves isn’t happy with a New York state sales tax on pole dancers. The essential question: Is a tax on just certain kind of music or entertainment legal?

New York’s highest court, the Court of Appeals, held in a 4-3 decision that a sales tax on pole dancing is just fine. The owner of Nite Moves, Stephen Dick, has filed a writ of certiorari with the US Supreme Court asking the Court to overturn the tax. The question of whether pole dancing is a form of art or something that doesn’t promote culture (and so can be taxed) might be argued next Spring in Washington.

Speaking of Night Moves:

The Flow of AGI from One State to Another

Saturday, July 20th, 2013

From comes an interesting interactive map showing how money has flowed from state to state. Back when I moved to Nevada from California, I noted this issue. Here’s yet more verification that this is real.

The five biggest losers were:
1. New York ($68.10 billion in annual Adjusted Gross Income (AGI))
2. California ($45.27 billion in annual AGI)
3. Illinois ($29.27 billion in annual AGI)
4. New Jersey ($20.62 billion in annual AGI)
5. Ohio ($18.39 billion in annual AGI)

The five biggest winners were:
1. Florida ($95.61 billion in annual AGI)
2. Arizona ($28.30 billion in annual AGI)
3. North Carolina ($25.12 billion in annual AGI)
4. Texas ($24.94 billion in annual AGI)
5. Nevada ($18.17 billion in annual AGI)

Sure, some of this is retirees moving from the snow belt to the sun belt. But California is anything but part of the snow belt; it’s clear that successful individuals are fleeing high tax states for low tax states. We here in Nevada are appreciative of the $9.59 billion in annual AGI that has moved from the Bronze Golden State to the Silver State.

Interestingly, the interactive map allows you to look county-by-county. The areas that one would think would show AGI growth are losing AGI. The area around Silicon Valley has lost AGI; so have Los Angeles and Orange County. Sure, some of this is retirees moving to the desert (Riverside County, which includes Palm Springs, showed an increase in AGI). However, there is no chance that this is just caused by retirees.

Taxes matter, and individuals absolutely do relocate because of taxes.

What Happens When Cigarette Taxes go Through the Roof?

Sunday, December 16th, 2012

While Alan Greenspan noted, “Whatever you tax, you get less of,” the New York legislature seems to not understand. In one of the least shocking reports I’ve seen, the New York Association of Convenience Stores (NYACS) noted that the state is losing $1.7 billion of tax revenue each year and 6,700 jobs because of cigarette tax evasion. Why would this be?

New Yorkers who can buy cigarettes elsewhere. The study found that many are buying cigarettes from surrounding states, military bases, Indian reservations, and duty free shops. Add in smuggling from low-tax states (there’s undoubtedly a black market) and you have tax avoidance.

Meanwhile, Cook County, Illinois (Chicago) is conducting cigarette raids to enforce the $2 county cigarette tax. A picture is coming into my mind, that of prohibition, where organized crime prospered when alcohol was banned. I’m sure the similarities are just superficial…or maybe they’re not.

Of course, the NYACS would like New York to begin raids like those in Chicago; after all, convenience stores that are obeying the law stand to sell more cigarettes than most other locations. Still, the unintended consequences of increased taxes are obvious to most of us.

Ref Fouls Out

Wednesday, December 12th, 2012

Last year I reported on the rather brazen scheme of some referees at New York’s Chelsea Piers. Instead of reporting their $40 income per game, they decided to commit identity theft and use false names for reporting their income. This isn’t the identity theft that normally makes the news–fraudsters using someone else’s identity to obtain a tax refund. Rather, this was a scheme to avoid paying taxes on income the referees clearly earned. And this wasn’t a one-time thing: The scheme ran for twelve years.

It was judgment day yesterday in Manhattan
. Peter Iulo was one of the individuals who committed the fouls, er, crimes. Besides his involvement with the referee scandal, he also elected to not file his own tax returns. That didn’t sit well with Judge Barbara Jones: He was sentenced to two years at ClubFed and must make restitution of $80,000. All told, the four individuals involved in the scheme must make restitution totaling $200,000. As always, it’s far, far easier to just pay the tax you owe…but that thought rarely occurs to the Bozo mind.

New York Extends Tax Deadlines Because of Sandy; Expect the IRS, New Jersey, Pennsylvania and Others to Follow

Monday, October 29th, 2012

The New York State Department of Taxation and Finance announced that they have extended all tax deadlines falling from October 26 to November 14 to November 14th because of Hurricane Sandy. I expect similar actions to be taken by the IRS, New Jersey, Pennsylvania and other impacted areas.

The New York extension directly effects MCTMT tax returns on extension that would be due on October 31st; those are now due on November 14th. Also, third quarter MCTMT estimated payments for 2012 are now due on November 14th. This will likely also impact payroll tax filings.

Tax Foundation Releases State & Local Tax Burdens

Wednesday, October 24th, 2012

The Tax Foundation released its annual State-Local Tax Burden Ranking. In what won’t be shocking to most readers, New York came in first…and that’s not a good thing. Here are the ten worst states:

1. New York 12.8%
2. New Jersey 12.4%
3. Connecticut 12.3%
4. California 11.2%
5. Wisconsin 11.1%
6. Rhode Island 10.9%
7. Minnesota 10.8%
8. Massachusetts 10.4%
9. Maine 10.3%
10. Pennsylvania 10.2%

The ten best states (those with the lowest tax burdens):

41. South Carolina 8.4%
42. Nevada 8.2%
43. Alabama 8.2%
44. New Hampshire 8.1%
45. Texas 7.9%
46. Wyoming 7.8%
47. Louisiana 7.8%
48. Tennessee 7.7%
49. South Dakota 7.6%
50. Alaska 7.0%

One observation that the Tax Foundation made is that most states have similar burdens. Note that the burden being measured is on taxes residents pay and not taxes on tourists (such as hotel excise taxes). Numerous states fall between 8.7% and 9.7%.

One interesting observation I have is that almost all of the low-tax states are “Red” states (they tend to vote Republican) while almost all of the high-tax states are “Blue” states (they tend to vote Democratic). I suspect that this is not a coincidence.

Bad States for Gamblers

Monday, October 22nd, 2012

It’s been a while since I’ve listed out the bad states for gamblers. Here’s an updated list. Make sure you read the notes because while all of these states have tax systems that are problematic for gamblers, some impact amateurs while others impact professionals. Note that I do not cover the laws that impact gambling here (such as Washington State’s law that makes online gambling a Class C felony).

Connecticut [1]
Hawaii [2]
Illinois [1]
Indiana [1]
Massachusetts [1]
Michigan [1]
Minnesota [3]
Mississippi [4]
New York [5]
Ohio [6]
Washington [7]
West Virginia [1]
Wisconsin [1]


1. CT, IL, IN, MA, MI, WV, and WI do not allow gambling losses as an itemized deduction. These states’ income taxes are written so that taxpayers pay based (generally) on their federal Adjusted Gross Income (AGI). AGI includes gambling winnings but does not include gambling losses. Thus, a taxpayer who has (say) $100,000 of gambling winnings and $100,000 of gambling losses will owe state income tax on the phantom gambling winnings. (Michigan does exempt the first $300 of gambling winnings from state income tax.)

2. Hawaii has an excise tax (the General Excise and Use Tax) that’s thought of as a sales tax. It is, but it is also a tax on various professions. A professional gambler is subject to this 4% tax (an amateur gambler is not).

3. Minnesota’s state Alternative Minimum Tax (AMT) negatively impacts amateur gamblers. Because of the design of the Minnesota AMT, amateur gamblers with significant losses effectively cannot deduct those losses.

4. Mississippi only allows Mississippi gambling losses as an itemized deduction.

5. New York has a limitation on itemized deductions. If your AGI is over $500,000, you lose 50% of your itemized deductions (including gambling losses). You begin to lose itemized deductions at an AGI of $100,000.

6. Ohio currently does not allow gambling losses as an itemized deduction. However, effective January 1, 2013, gambling losses will be allowed as a deduction on state income tax returns. Unfortunately, those gambling losses will not be deductible on city or school district income tax returns, so Ohio will remain a bad state for amateur gamblers.

7. Washington state has no state income tax. However, the state does have a Business & Occupations Tax (B&O Tax). The B&O Tax has not been applied toward professional gamblers, but my reading of the law says that it could be at any time.