Tuesday, November 20, 2007

Like Jeter, I love NY too . . . from afar

The link probably won't work because it's to a subscriber only editorial in the WSJ, but the synopsis is this:

New York State is prosecuting Derek Jeter as a tax cheat.

Seriously.

Like most sports figures in New York, Jeter doesn't have his primary residence in the state. And for good reason: state income taxes max out at 6.8%, city income taxes in NYC put the burden at 10.5% combined for city and state. Put that on top of the 39.1, 38.6 and 35% rates Jeter had in 2001-03 respectively from the Federal government, and nearly half of every dollar he makes over about 150K (probably about a game or two, with his salary) would go to a government . . . if he maintained his domicile in NYC.

He didn't. Because he's not a fool.

Like numerous other sports stars, Jeter makes his home in Florida; many more make their permanent homes in Texas. The reason, other than mild winters, is simple to discern -- NO STATE INCOME TAX. Oh yeah, the property and sales taxes are lower too.

Think about the burden: Wongdoer and I had a favorite teacher in high school who lived in New Jersey. He paid state and local taxes in Bergen County or wherever but also paid state and city taxes to New York. He received some credit from New Jersey for what he paid to New York, but nonetheless, each dollar he made was taxed six times -- state, city, state, city, federal, social security.

It's worse for Jeter and high income earners who work at any time in New York but don't live there, as the WSJ shows:

New York tax laws also take a notoriously wide view of "residency." Literally tens of thousands of people only work in-state Tuesday to Thursday each week to avoid spending the requisite 184 days per year that would subject their full income to the state tax regime. And Albany's taxmen try to catch them with things like travel records, credit-card usage and phone logs.

New York doesn't claim that Mr. Jeter has avoided taxes on the salary he's earned in-state -- i.e., his 10-year, $189 million Yankee contract. New York's complaint is in pursuit of the additional millions a megastar like Mr. Jeter makes from endorsement deals and the like, as well as from his investments.

According to court filings, state auditors don't dispute that his primary residence was in Florida before 2001 or after 2003, or even that he spent most of the year down south over the target period. Rather, they're employing the more subjective "domicilery test." They point to Mr. Jeter's Manhattan apartment, his "numerous public statements professing his love for New York," and allege he has "immersed himself in the New York community." Gosh.


There's something depraved about the government chasing Jeter in this manner. Between this type of nonsense, and the various jock taxes that Jeter and most athletes have to pay in the various states where they play road games, the administrative hoops that athletes must jump through border on the preposterous. But it is the nature of the taxman to chase down every last dollar he can.

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