Wednesday, January 2, 2008

Robinhood Lives! - Paying School taxes to another State

Just when I thought I could not possibly be asked to pay any more tax, I have been notified by my employer that I owe income tax to the State of Alabama. I live and work in Texas, where there is no state income tax. Instead, we have outrageous property taxes. But that’s another story.

Anyway, it turns out that if you work more than 30 days of the year in Alabama, you will be taxed on all income earned during that time. The 30 days do not need to be consecutive or full work days. As a frequent business traveler, I find it very easy to work 2.5 days per month (30/12= 2.5) in another state.

Who pays?
Fortunately, my employer is very reasonable and since they sent me out of state to work, they will pay the tax to Alabama. And they plan to pay it directly to Alabama. No money will pass through my hands for this transaction. The HR rep explained that the company will pay the tax but does not trust employees to then use that money to pay their own state taxes!

Even More Tax
Of course, the IRS has to get into this and levy an additional tax on the money used to pay the state of Alabama. I am being taxed for money that I have never received. Once again, my employer will also pay that portion of my federal tax to the IRS. All I have to do is file state income tax for the state of Alabama and reference my W-2 withholdings to satisfy the tax collectors.

Who gets the tax dollars?
I tried to identify where my tax dollars will be appropriated in Alabama. But, I didn’t have much luck. After some searching, I found on the state’s website that the money will go to the general fund and the education fund. Hmmm. It seems a little ridiculous to have a Texan paying for schools that are in another state. Especially since just recently, Texas was forced by law to scrap its robinhood style
school funding. Robinhood funding takes money from a rich neighborhood and gives it to a poor neighborhood. That was ruled unconstitutional in Texas.

Legal issues aside, it just seems reasonable that the people who benefit from a tax by having schools built to educate their kids and neighbors are also the same people who should pay the tax.

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