What gives the state of MD a right to tax income earned out of state

[TuborgP]

Originally Posted by tech2enable

I know that D.C. isn't allowed to tax commuters, but states are allowed to, in the case of Virginia they have agreements not to tax other states that have income taxes, however if a person lived in Tennessee and worked in Virginia , they would pay virginia tax, if the Virginia person worked in Tn same thing.

You made a great point of something being allowed because nothing forbids, I wonder if congress can forbid it, or if the states are not allowed to do so because its not their right despite nothing statutory forbidding it, I wonder if there have been any cases in which a person refused to pay income tax based on their solely non-resident income.

Very interesting.

Because congress has jurisdiction over DC they can forbid a commuter tax. That was one of the links I provided. They don't have that jurisdiction over the 50 sovereign states

[TuborgP]

Originally Posted by MadManofBethesda

Actually, it is not interesting at all.

States can tax their residents in any manner they see fit.

They can tax residents' income earned within the state.

They can tax residents' income earned in neighboring states.

They can tax residents' income earned in foreign countries.

They can tax residents' on the value of their real property.

They can tax residents' on the value of all of their personal property, such as boats, furniture, and automobiles.

They can tax residents based on the value of the items they purchase.

They can even tax residents' money sitting in a bank account or brokerage firm.

Different states choose to tax their residents in various ways.

If one doesn't like the tax structure of a particular state, they can always move.

It is really not a difficult concept.

This has been like pulling teeth but I think we have gotten there.

[FlyDrive100b]

Originally Posted by MadManofBethesda

Actually, it is not interesting at all.

States can tax their residents in any manner they see fit.

They can tax residents' income earned within the state.

They can tax residents' income earned in neighboring states.

They can tax residents' income earned in foreign countries.

They can tax residents' on the value of their real property.

They can tax residents' on the value of all of their personal property, such as boats, furniture, and automobiles.

They can tax residents based on the value of the items they purchase.

They can even tax residents' money sitting in a bank account or brokerage firm.

Different states choose to tax their residents in various ways.

If one doesn't like the tax structure of a particular state, they can always move.

It is really not a difficult concept.

Yes and no, I wonder how the state enforces taxing out of state or foreign money, it must be done in cooperation of the other state, in which the other state has an income tax and has double taxation agreements,

I think the above user turbo did bring up a great point, but we've held that courts have invalidated state taxing measures directed at non-residents, so your argument that states can tax however they feel like it is wrong, and hence this debate is not exactly simple or closed.

[janetvj]

Originally Posted by tech2enable

Yes and no, I wonder how the state enforces taxing out of state or foreign money, it must be done in cooperation of the other state, in which the other state has an income tax and has double taxation agreements,

I think the above user turbo did bring up a great point, but we've held that courts have invalidated state taxing measures directed at non-residents, so your argument that states can tax however they feel like it is wrong, and hence this debate is not exactly simple or closed.

The state has many tools available to enforce the tax laws. The IRS shares information with the state, so anyone with a MD address who files a federal return is reported to MD to verify that a state return has also been filed. If not, the taxpayer is contacted to determine why a return was not filed. If the taxpayer has a legitimate explanation (for example, he or she is in the military and just temporarily stationed in MD, moved to MD after the close of the tax year, etc.) that's the end of it. However, if the taxpayer does not respond, and/or does not voluntarily file a MD return, an estimated assessment is issued based on the information on the federal return.

The state also compares information on the W-2 to it's records, so anyone who was issued a W-2 and has a MD address is contacted, and the same process as just described is followed.

The Commerce Clause prevents a state from imposing a higher tax burden on an out-of-state taxpayer than that imposed on a resident, but does not prevent a state from taxing a non-resident. There is a case currently in the MD courts that is addressing the constitutionality of the special non-resident tax. Although this creates a higher state tax than on a resident, the overall tax burden is the same, because residents are subject to the local tax whereas non-residents are not. The case is currently at the Court of Appeals level (the highest state court in MD).

Timothy A. Frey, et al. v. Comptroller of the Treasury - Case No. 62, September Term 2009 (petition and cross-petition both granted).
ISSUES - CONSTITUTIONAL LAW -WHETHER THE LOWER COURT ERRED IN DETERMINING THAT (1) ALTHOUGH THE SPECIAL NON-RESIDENT TAX WAS DISCRIMINATORY ON ITS FACE, IT WAS NONETHELESS A VALID COMPENSATORY TAX UNDER THE INTERSTATE COMMERCIAL CLAUSE OF THE U.S. CONSTITUTION; (2) THE SPECIAL NON-RESIDENT TAX DOES NOT VIOLATE THE EQUAL PROTECTION CLAUSE OF THE U.S. CONSTITUTION; (3) THE SPECIAL NON-RESIDENT TAX DOES NOT VIOLATE THE PRIVILEGES & IMMUNITIES CLAUSE OF THE U.S. CONSTITUTION; AND (4) THE SPECIAL NON-RESIDENT TAX DOES NOT VIOLATE THE MARYLAND CONSTITUTION AND THE DECLARATION OF RIGHTS?

[dkf747]

Originally Posted by janetvj

The state has many tools available to enforce the tax laws. The IRS shares information with the state, so anyone with a MD address who files a federal return is reported to MD to verify that a state return has also been filed. If not, the taxpayer is contacted to determine why a return was not filed. If the taxpayer has a legitimate explanation (for example, he or she is in the military and just temporarily stationed in MD, moved to MD after the close of the tax year, etc.) that's the end of it.

However, if the taxpayer does not respond, and/or does not voluntarily file a MD return, an estimated assessment is issued based on the information on the federal return.

The state also compares information on the W-2 to it's records, so anyone who was issued a W-2 and has a MD address is contacted, and the same process as just described is followed.

I have personal experience with this. They will not accept your explanation. You have to prove that you paid your taxes in the other jurisdiction, and prove you moved after the close of the tax year. In my case, Virginia. It was a huge effort to get Virginia to directly send proof to Maryland, they would not accept anything from me. Virginia said that they never heard of this before, but finally agreed to send something. I have had problems with the Comptrollers office 9 out of the 11 years I have lived in MD. I hate the way MD's comptroller works! Anyways, back to the topic!

[janetvj]

Originally Posted by dkf747

I have personal experience with this. They will not accept your explanation. You have to prove that you paid your taxes in the other jurisdiction, and prove you moved after the close of the tax year. In my case, Virginia. It was a huge effort to get Virginia to directly send proof to Maryland, they would not accept anything from me. Virginia said that they never heard of this before, but finally agreed to send something. I have had problems with the Comptrollers office 9 out of the 11 years I have lived in MD. I hate the way MD's comptroller works! Anyways, back to the topic!

Yeah - you're right. I probably should have clarified that you do have to document your explanation with proof of whatever it is you are claiming.

[sigprn]

I UNDERSTAND YOUR QUESTION. I don't know what gives them the rite. EXample. I live in Illinois. If i get paid in NEVADA WHICH HAS NO STATE INCOME TAX. Then what gives Illinois the lawfull rite to make me pay income tax on money which wasn't made in there state? Just because i live there. Well i pay property taxes. Which i consider lawful. But what gives them the lawful rite to MAKE ME PAY ILLINOIS INCOME TAX ON MY NEVADA PAYCHECK WHEN NEVADA DOESN'T HAVE A STATE INCOME TAX.

[spm62]

Originally Posted by sigprn

I UNDERSTAND YOUR QUESTION. I don't know what gives them the rite. EXample. I live in Illinois. If i get paid in NEVADA WHICH HAS NO STATE INCOME TAX. Then what gives Illinois the lawfull rite to make me pay income tax on money which wasn't made in there state? Just because i live there. Well i pay property taxes. Which i consider lawful. But what gives them the lawful rite to MAKE ME PAY ILLINOIS INCOME TAX ON MY NEVADA PAYCHECK WHEN NEVADA DOESN'T HAVE A STATE INCOME TAX.

Nevada doesn`t have state income tax for it`s citizens. You are not a citizen of Nevada. You are a citiizen of Illinois. You use their roads, emergency services, etc. You pay taxes in the state you reside. That`s why we are the United States, not 50 separate little states. You are free to come and go from state to state, shop in any state, visit any state,work in any state you want,etc. without any hassle.
You can pick up and move anytime you wish to any state of your choosing,if you think it is better. But you can`t live in a state because you like the services they provide, but drive to another state and work because they have no taxes and expect to enjoy the government services of your home state for free. Eventhough a lot of poorer people use the benefits but don`t pay for them. It`s the middle class that get screwed, but that`s another topic.