Enforcement Can Be Counter-Productive

For decades, I have discussed and consulted on the issue of sourcing for tax purposes, mostly between different state jurisdictions. For example, establishing a tax home in certain states, such as Texas, Nevada, Florida, or Washington, allows individuals to eliminate state income taxes on much or all of their income.

Manhattan District Attorney Robert Morgenthau is on a crusade to ensure that individuals and corporations pay as much tax to the State of New York as possible and is prosecuting (some may say persecuting) corporate executives who take steps to avoid State and/or Federal taxes.

As Bruce Bartlett explains in this piece, the results of Mr. Morgenthau’s efforts may just be to encourage more businesses to flee from his jurisdiction rather than hang around and wear a bulls-eye.

Mr. Bartlett’s essay also includes the quote from Judge Learned Hand that has been my guiding light for my entire career. It’s on the back of my business cards and is usually quoted at the beginning of my seminars.

“Nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.”

KMK