Taxed where you work, not where you live
Reader comment on: Bridgewater's Incentives
Submitted by GMR (United States), Aug 19, 2012 21:53
The reason the state is doing this is to get the income taxes from the current workers. When a company is located in CT, all of its workers pay income tax to CT, even if they live in NY. If this hedge fund were to move to NY, then all the workers, even those that lived in CT, would pay income taxes to NY.
Since there are some highly compensated people at this fund, they pay a lot of income taxes, so the state is going to make sure that the fund doesn't leave.
It's not fair to smaller firms, obviously, but with incomes taxed first where you work, you're going to get these types of situations, and the companies know that if they are large enough, they can game the states against each other. Since MA and CT do have income tax reciprocity, you don't get this happening on the MA/CT border.
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The Future of Capitalism replies:
New York has higher income taxes than Connecticut, so there's not much threat of CT-based hedge funds moving to NYC. It may have happened a few times, but not often.
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