But what about place of earning versus realization? Anyone could just defer conpensation to the extent they can, relocate to FL/TX and avoid paying state taxes
- PT21

You're describing exactly what people with high earnings do. Most people can't defer their comp (they need it now) and don't have the means to just move whenever they want.

This is really only a conversation for those that are already maxing their retirement tax deferment strategies. It doesn't make sense for most people.

What you cannot do (and you will go to jail for) is say you earned 0$ in a particular state, defer your comp to a future date, move, and then receive it in an advantageous tax environment. If you earn a reasonable salary for the work you do at the time, the deferred comp won't be an issue to the relevant taxing authority.

There literally is nothing stopping anyone from being compensated in this way other than it's complicated to setup contractually (expensive with lawyers and tax professionals) and most people are not as important as Jarvis or Ohtani to their companies.

You're describing exactly what people with high earnings do. Most people can't defer their comp (they need it now) and don't have the means to just move whenever they want.

This is really only a conversation for those that are already maxing their retirement tax deferment strategies. It doesn't make sense for most people.

What you cannot do (and you will go to jail for) is say you earned 0$ in a particular state, defer your comp to a future date, move, and then receive it in an advantageous tax environment. If you earn a reasonable salary for the work you do at the time, the deferred comp won't be an issue to the relevant taxing authority.

There literally is nothing stopping anyone from being compensated in this way other than it's complicated to setup contractually (expensive with lawyers and tax professionals) and most people are not as important as Jarvis or Ohtani to their companies.
- atibus

This seems a domestic and geographical variation of the kind of stuff that was exposed in the Panama Papers.

This bit about reasonable salary etc. What does it do? It disincentivizes Ordinary Joes from gaming the system. After they report the reasonable salary, there won't be much left to defer to future years

But there are clear incentives for the very wealthy to game the system this way.

There should be a tax treaty between states.

This seems a domestic and geographical variation of the kind of stuff that was exposed in the Panama Papers.

This bit about reasonable salary etc. What does it do? It disincentivizes Ordinary Joes from gaming the system. After they report the reasonable salary, there won't be much left to defer to future years

But there are clear incentives for the very wealthy to game the system this way.

There should be a tax treaty between states.
- PT21

There are tax treaties between states. For example - PA/NJ are reciprocal states. If you live in NJ and work in PA, NJ will count the PA taxes towards your owed income taxes. (There is actually tension over this because PA tax rate is lower. Every so often NJ threatens to pull out of the arrangement).

I've heard a few tax professionals call it a "smile test". As long as they don't laugh when you try to claim something on your returns and they just smile then it's probably ok.

The closest way average people come to doing the same thing is going out of state to buy things - like Delware. You're theoretically supposed to pay use tax to your home state (It's clearly listed on the tax forms.) But no one does that - it's stupid.

For example, from the PA Department of Revenue:

Example: You buy a desk in Delaware and you bring it into Pennsylvania to use in your home. You owe use tax on the desk.

https://www.revenue.pa.go...%20for%20Individuals.aspx

PA/NJ Tax Agreement - https://www.nj.gov/treasury/taxation/njit25.shtml

There are tax treaties between states. For example - PA/NJ are reciprocal states. If you live in NJ and work in PA, NJ will count the PA taxes towards your owed income taxes. (There is actually tension over this because PA tax rate is lower. Every so often NJ threatens to pull out of the arrangement).

I've heard a few tax professionals call it a "smile test". As long as they don't laugh when you try to claim something on your returns and they just smile then it's probably ok.

The closest way average people come to doing the same thing is going out of state to buy things - like Delware. You're theoretically supposed to pay use tax to your home state (It's clearly listed on the tax forms.) But no one does that - it's stupid.

For example, from the PA Department of Revenue:


https://www.revenue.pa.go...%20for%20Individuals.aspx

PA/NJ Tax Agreement - https://www.nj.gov/treasury/taxation/njit25.shtml
- atibus

I feel taxes should be paid in the state where the work was done.


What is the economic rationale for wage/income taxes? It is your payment to the govt. from income earned for economic work done. This payment allows for the government to continue, among other things, to provide the environment where such economic work is possible.

If you take advantage of conditions in place X, and then abscond and pay taxes in Y for lower tax reasons, then you are in part and in that sense: freeloading.

For all intents and purposes, money really has no value until it's spent. As the late great OJ was fond of saying: "I'm just sayin'!"