I’m no tax expert. In fact my lowest grade in law school was in … income tax. Big surprise. But I pay enough in taxes to qualify me to opine, I think.
President Obama earns a $400k a year salary. This makes no sense, as I’ve noted in Taxing Astronauts and the President (see also Why is it okay to pay an intern $0? or, liberal hypocrisy on the minimum wage), because most people would pay lots of money to be President; if anything, they should receive no salary, and be taxed on the imputed income they receive for being permitted to be President. But there you have it.
Now Obama pays federal and presumably D.C. income tax on his salary, because he resides in D.C. (Instead of taxing them on the stolen tax dollars paid them, why not just pay them the difference, tax free? Nah, make ’em file the tax returns like us plebes.)
But when Obama travels outside D.C.—to another state, or country—he is “always on the job” and usually performing official duties that he is being paid for. Apparently this is technically subject to local income tax in the state or country one performs activities in that earn money. This is why it’s okay to visit the US on a tourist visa, for example, but you cannot earn money while here. And so on.
Consider how pro athletes and famous performing artists are treated when they travel around making money in various states and countries. As noted in an L.A. Times article a couple years ago, “The taxing life of a pro athlete” (tagline: It’s one of life’s certainties: Athletes have to pay for income earned on the road):
For eight of his first nine major league seasons, Angels pitcher Darren Oliver worked in Texas, where the stars at night are big and bright and, more important, there’s no state income tax.
Yet, each April, he pays a small army of accountants to file more than a hundred pages of returns — and sometimes checks — to as many as a dozen states and one province in Canada, covering taxes on income he earned on the road.
In the tax world, it’s no secret that athletes are treated differently from other highly paid workers — investment bankers and corporate lawyers, for example — who also work in multiple states. The jock tax, critics say, is poorly targeted, arbitrarily enforced and unrealistically burdensome — and also completely understandable given the current economic climate.
“No, it’s probably not fair,” says Ralph Espinosa, a Miami-based accountant who has done tax work for several NFL and major league players. “But they make more money than most of us. Their information is easily accessible online. Most people know their salaries [and] they can go in and see their schedules.”
Athletes are taxed based on “duty days” they spend in each state. In baseball, there are approximately 181 “duty days,” meaning a player earning $1.81 million would make $10,000 each duty day. Therefore, if that player’s team had three games in California, he would be responsible for taxes on $30,000 of income.
At that point, all the tax collectors have left is a math problem to figure out that Ichiro Suzuki, the highest-paid baseball player in Washington, a tax-free state, will have to pay more than $218,000 in California taxes for the 25 games the Mariners will play there this summer.
The salaries and schedules for lawyers, bankers, entertainers and other professionals who might be subject to nonresident taxes aren’t as accessible. But that hasn’t stopped some states from trying to reel in CEOs and other well-paid executives by auditing corporations for their travel records, tax professionals say.
Touring entertainers such as singers or comedians often have taxes withheld by either the promoter or the venue. But collecting from film crews can be trickier since shooting schedules aren’t publicized and are frequently changed and actors aren’t on the set every day.
(See also The Tax Significance of Place of Residence for Professional Athletes.) So it appears that anyone who travels out of their home state as part of their income-earning job, technically is supposed to file multiple tax returns pro-rated by jurisdiction, but most people don’t do this because it’s hard for the other states to know. Sort of the same reason states have trouble enforcing the “use taxes” that residents of the state are supposed to pay on sales-tax free purchases of goods from Amazon. But for pro athletes, ” Their information is easily accessible online. Most people know their salaries [and] they can go in and see their schedules.” For normal people, however, like film crews, “shooting schedules aren’t publicized and are frequently changed”. So states focus on the big fry.
However: President Obama has a somewhat high salary, it’s publicly known, and it’s known publicly when he’s in another state or country. So when Obama meets with the President of France, in Paris, France should go after him for the French income tax due on the portion of his income attributable to his time in France. Or Canada, or California, or so on. I demand rectification of this outrage!
Or, better yet, he should be brought up on tax evasion charges.
And the same applies for other prominent politicians, like governors, members of Congress, Secretary of State, and so on.
And while we’re at it, politicians ought to have their Amazon accounts audited to ensure they are voluntarily paying use taxes in their state for all items bought sans sales tax.