State Taxes, a Children's Game

Like children squabbling over a toy, state policymakers attempt to take tax dollars from residents of other states. Tax Foundation Tax Counsel Joe Henchman's BATSA brief sheds some light on the situation:

State officials [...] have every incentive to pursue beggar-thy-neighbor tax policies designed to shift tax burdens from voting in-state residents to out-of-state residents and businesses unable to resort to the ballot box. Not only does democracy not prevent harmful tax exporting from occurring, it actually worsens it, since services can be provided to a majority of voters, paid for by non-voters.

Interestingly, taxing nonresidents often encourages other states to inflict the same poor policies in a legal "Oh, yeah? Well, we'll show you!" counter. The Ohio tax code's list of exemptions provides an illustration:

22. Sales of Motor vehicles to nonresidents (Sec. 5739.02 (B) (23), Ohio R. C.). Effective August 1, 2007, Ohio motor vehicle dealers must collect Ohio sales tax on the sale of vehicles to out-of-state residents who reside in the eight states that charge sales tax to Ohio residents. (Motor vehicle leases to nonresidents continue not to be subject to Ohio sales tax.) The eight states are Arizona, California, Florida, Indiana, Massachusetts, Michigan, South Carolina, and Washington (Letter to Motor Vehicle Dealers, Ohio Department of Taxation, July 2007). [Emphasis added.]

At the end of the day, taxpayers dole out more of their hard-earned cash and the tax code becomes increasingly complex. If only state officials could play nice in the sandbox.

[TF Post]