Republicans always favoring the rich...hmm

Runner_Guy said:

PVW said:

Runner_Guy said:
I don't want to take things any deeper about states taxing non-residents' income, so I have another question for you all:

 I don't know, I think it's actually an interesting question, as it gets into why people think taxation is justified (or not).
I actually think it's perfectly justified to tax people based on where they earned their money rather than where they reside. The idea here being that, to my mind, what justifies taxes is that organized work of the community you are laboring in (eg "government" plays a large part in making it possible for you to create wealth in the first place. Therefore, it makes sense that this community has some claim on my resultant wealth. (how much? A harder question, but not zero -- taxation is not theft in this view, though excessive taxation arguably is).
Thus it's perfectly fair, to my mind, that non-citizens of a state (or country) pay taxes. It's even fair that undocumented immigrants pay taxes. Any money they earned, they earned at least in part because of the labors of the community they are working in.
That justifies having a citizen of NJ who works in NY pay NY taxes. Why should they pay NJ taxes? Arguably, because of a similar justification -- they are part of their home state community, so that community also has a legitimate claim to their wealth, having made the creation of that wealth possible. Again, how much of a claim is an open question, but certainly a claim.
I think though that NJ has a claim to less of that wealth than NY does. Also, both NJ and NY are smaller parts of the national community -- though I suppose they could look to their narrow individual interests and both try to extract as much tax from commuters as possible, that would be counter to the broader goods of the shared NY-NJ (and national community) -- NJ may be missing out on some taxes by not trying to collect what NY already has, but that would discourage a lot of people from living in NJ, to the detriment of the NYC metro as a whole.

 I see your point when you say "The idea here being that, to my mind, what justifies taxes is that organized work of the community you are laboring in (eg "government" plays a large part in making it possible for you to create wealth in the first place. Therefore, it makes sense that this community has some claim on my resultant wealth" but this begs the question of what the justification is for a state to tax someone's non-wage income.
Let's say that you get $5,000 a year in dividends from a variety of companies that operate across the USA and globally.  What involvement does the State of New Jersey have in your receiving of that money?  
I would argue nothing.  
And yet the State of New Jersey taxes your dividends, plus other non-wage income like capital gains, money you inherit from out-of-staters, pensions from out-of-state employers, among others.
The moral basis for New Jersey taxing your non-wage income, even though New Jersey has nothing to do with the creation of that income, is that you as a resident of this state have an obligation to carry a proportionate share of New Jersey's socioeconomic problems, plus a small but non-trivial share of your income taxes will directly benefit your community and neighbors anyway.  
Since I see the justification for state income taxes being that we have obligations to low-income communities in our own state, in my mind, someone should pay income taxes on wage income to the state he or she lives in, even if the source is an employer in another state.  
But let's say that we agreed on your premise that where someone is laboring in that is critical.
If that is the case, when what is the justification for New York State to tax commuters based on their household's gross income?

New York further squeezes nonresident taxpayers by putting them in the bracket that corresponds to their gross incomes--including wages, capital gains, interest, and dividends earned (and taxable) solely in their home states. Thus, for example, a New Jersey married couple filing a joint return and reporting salaries of $75,000 from one spouse's job in Manhattan and $75,000 from the other's job in Jersey City will be subject to the same (higher) New York state rate as someone earning $150,000 entirely within the borders of New York.

Let's say your spouse works in NJ and you work in New York.  
Your spouse's income is derived from NJ, but that income increases your own New York State tax bracket?  
Let's say your spouse is a good investor and realizes $50,000 in capital gains, which is non-wage income made by someone who might rarely set foot in New York.  
If state income taxes are justified by where someone works, by what justification does New York put your income in a higher bracket?  

it's one of the arguments for progressive tax brackets.  That the marginal utility of an additional dollar to a person with a lot of money is less than it is for a person who has very little.

to turn your example around, what about a single NYC resident making $50,000.  Should that person be taxed at the same rate as a NYC worker making $50,000 and living in NJ, married to a person who makes millions of dollars a year in NJ?

I don't think it's an obvious answer that the NJ resident and the NYC resident should necessarily be in the same tax bracket with their annual $50K salary.  These issues aren't as cut and dried and you seem to want them to be, and determining some sort of Platonic ideal of "fairness" can be elusive.

Runner_Guy said:

 I see your point when you say "The idea here being that, to my mind, what justifies taxes is that organized work of the community you are laboring in (eg "government" plays a large part in making it possible for you to create wealth in the first place. Therefore, it makes sense that this community has some claim on my resultant wealth" but this begs the question of what the justification is for a state to tax someone's non-wage income.
Let's say that you get $5,000 a year in dividends from a variety of companies that operate across the USA and globally.  What involvement does the State of New Jersey have in your receiving of that money?  
I would argue nothing.  

Two answer, the first with a slight tweak. If we keep it on the original example, of say someone working in NY but living here, I'd argue that having a place to sleep at night, raise a family, etc, is surely part of being able to then go into NY and ply your trade. I'd agree that NJ really should get less of that, but not zero (here I agree with your point further in your reply, and disagree with ML1, that it doesn't really make sense to base the tax rate on gross income rather than that actually earned in the jurisdiction -- I think someone who earns 50k in NY but is married to someone who earns a million in NJ should owe NY some of that 50k, not the million).

A wrinkle you introduce here is dividends, not labor. What "work" are you doing exactly to earn the income of dividends? Don't these actually represent income you are making off of someone else's labor? In that case, I could see the argument going a couple of ways -- perhaps strict fairness demands that every jurisdiction the company whose stock you own has a presence in is entitled to a share of that investment income. This seems impractical, though, so perhaps for the sake of administrative ease it does actually just make sense for that income to be taxed by the state you reside in. I'm not sure.

PVW said:

I think someone who earns 50k in NY but is married to someone who earns a million in NJ should owe NY some of that 50k, not the million). 

that person would not owe any tax on the millions.  Only the $50K would be taxed.  But at the percentage that a millionaire would be taxed.

ml1 said:

PVW said:

I think someone who earns 50k in NY but is married to someone who earns a million in NJ should owe NY some of that 50k, not the million). 

that person would not owe any tax on the millions.  Only the $50K would be taxed.  But at the percentage that a millionaire would be taxed.

 Indirectly those millions are being taxed, though, if they are paying a higher rate on that 50k than they otherwise would, no?

strictly speaking, no.  NYS determines our state tax rate on our federal taxable income.  My point however isn't that, as much as it is that "fairness" regarding taxes is a kind of slippery term.  Is it fair to tax a single New Yorker making a modest middle class income the same as a person making the same NYS income who has access to a great deal more income from other out of state sources? Or is it fair to tax someone at a higher rate because they may have a lot more income coming in from outside NYS?  I think your point is valid that it's not fair to tax at the higher rate based on out of state income, but I think my point is just as valid, that taxing at the higher rate if someone's overall income is very high is "fair" as well.

Part of New Jersey's problem vis-a-vis New York in state taxation is "self-inflicted," ie, we have a much more progressive rate structure than New York and therefore capture far less revenue from low-income, middle-income, and even highly affluent taxpayers than New York does.

These are New York State's tax brackets for single filers

New Jersey tax brackets for single filers

Someone making $30,000 per year in NJ would pay $438 in income taxes (ignoring the EITC), but someone working in New York would pay $1080.

Someone making $60,000 a year in NJ would pay $1767, but someone in New York would pay $2979.

Someone making $100,000 a year in NJ would pay $4180, but someone making $100,000 in New York would pay $5538.

Someone making $150,000 in NJ would pay $7365, but someone making $150,000 in New York would pay $8823.

Basically, a single filer would have to make about $650,000 before he would owe more in NJ than in New York.

Anyway, the New Yorkers who work in NJ pay their $600 million to Trenton, get their credit from that, and then pay additional income taxes to Albany, since New Jersey's income taxes are lower for anyone making under $650,000.

Thus, if New Jersey actually raised its bottom bracket, it would increase the income taxes New Yorkers pay to New Jersey and be a net-gain for Trenton at the expense of Albany.

It wouldn't even cost the New York-New Jersey commuters anything directly, since their NJ tax credit would increase.

I don't think that your analysis is correct.  Bear in mind that NY actually offers deductions that result in the calculation of taxable income whereas NJ offers almost no deductions, therefore rendering increasing one's taxable income.

ml1 said:
strictly speaking, no.  NYS determines our state tax rate on our federal taxable income.  My point however isn't that, as much as it is that "fairness" regarding taxes is a kind of slippery term.  Is it fair to tax a single New Yorker making a modest middle class income the same as a person making the same NYS income who has access to a great deal more income from other out of state sources? Or is it fair to tax someone at a higher rate because they may have a lot more income coming in from outside NYS?  I think your point is valid that it's not fair to tax at the higher rate based on out of state income, but I think my point is just as valid, that taxing at the higher rate if someone's overall income is very high is "fair" as well.

 Sure, I can see that.

I laid out my view of what makes taxes legitimate -- I'd be curious to hear yours, and how that feeds into your sense of what makes for fair or unfair taxes.