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James Hong

Sunday, February 13, 2011

Considering an out of state Pied-à-Terre? Think again!

Well here we go. It's clear that States and Municipalities are in trouble. You hear examples about even here in the bay area. Half moon bay is considering disbanding their police department to avoid bankruptcy. I think I heard there was talk of even unincorporating there. San Carlos already disbanded their police department. Vallejo declared bankruptcy in 2008.

The problem is that the municipalities can only be propped by the states for so long.. California is on track for a $25 Billion deficit this year... and neither the states or the cities have the ability to print money like the US government can.

The only way to deal with this problem is to either scale local and state government down (expect crappier roads and lower quality of services) or to raise taxes. Expect both.

In an astounding example of how aggressive states are getting (and this is likely just the beginning, check out this Wall Street Journal article.

Apparently NY is getting technical on their definition of what sort of residence can be excluded as a permanent residence. The generally accepted policy is that one owes taxes to a state only on income generated in the state even if they have a vacation house that they use less than 180 days a year. But apparently a vacation house must be a "mere camp or cottage".. so if like in the case mentioned it is deemed suitable as something someone could actually live in (in this case, an 1100 sq ft house), then NY feels it can now go after ALL income.

In other words, because this family owns a house in NY, NY wants to tax them on all income on top of the taxes they are already paying in their home state on the same income.

WOW. more to come i'm sure.

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