State income tax for active duty military needs an overhaul.

Great Debates
1

I’m active duty USAF. I have been for 14 years. I’m one of the few people in the military that think we get TOO much consideration and compenstation (not just our paychecks) but that’s another story.

I’m here to talk about how state tax is handled. For those not in the know here’s how it works.

You have a home of record. This is where you entered on active duty. You can retain your residence there for as long as you like as long as you are on active duty.

You also have the state you are currently stationed in. You can change your residency to that state at any time.

You can also change your residency BACK to your home of record at any time.

Your state tax debt is based on your state of residency.

Here is the problem: My state of residency is Colorado. I haven’t lived there in 14 years. I haven’t used their services. I have no intention of moving back there after I get out of the service. My ties are cut. BUT, I have paid a LARGE amount of state tax to CO over those 14 years. This is free money to the state. My question is: Why?

There are more than a handful of states that don’t tax military incomes. If I ever get stationed in one I will quickly change my residency to there. In the meantime I’m working with guys who are lucky enough to not have a state in which they don’t reside sucking off their teet. This amounts to a SIGNIFICANT difference in take home pay for people with identical service records. I’m tired of CO leeching money off of me.

I see two fair solutions:

  1. Absolve all active duty military of state income tax regardless of their state of residency or home of record as long as they are on active duty. A handful of states currently do this.

  2. REQUIRE all active duty military members to pay state income tax to the state in which they are officially stationed at the time. This keeps everyone’s compensation equal for identical service records. You pay state tax to the state in which you are currently enjoying public services like roads, cops, schools, etc…

I would LOVE option 1 (obviously) but option 2 is the most fair to the tax payers.

Something really needs to change. I’m tired of being forced to send large chucks of my paycheck to a state 2000 miles away from which I get ZERO services.

Thoughts?

2

I thought you said you could change your residency from Colorado to wherever you are currently stationed. If you don’t live in Colorado and don’t want to pay Colorado state income taxes, why don’t you do that?

Ed

3

Because it’s a wash. I’m in VA right now. They have state tax. So does CO. There is no benefit to me for changing my residency to VA. Now, if I was stationed in IL I would change my residency in a heart beat because they don’t tax military income.

I’ll gladly change my residency to VA if the rest of the military here do the same. In the meantime a fairly large % of the AD force holds on to residency in the states from which they entered active duty 15+ years ago, or happened to be stationed there in the past, that have no income tax.

All I’m saying is that it should be uniform across the board. No matter how they do it.

4

I think the current situation is pretty fair.

I was a legal resident of Texas when I entered the military. The U.S. Navy sent me to several different states during my time in the service. Most of them had state income taxes, and I had no choice but to accept my orders, like all other military personnel.

Texas has no state income tax. I remained a legal resident of Texas the whole time I was in the Navy. Why should I have had to pay income tax to Connecticut or Rhode Island, when I was ordered there to meet the needs of the Navy? Unlike your typical civilian, I had no choice but to go where I was ordered.

Also, if you were to force military personnel to change their state of residency every time they move, it would impose quite a hardship. When I was going through my training pipeline, I moved between four states in two years. I would have been quite onerous changing my driver’s license, license plates, figuring state income taxes, etc. Instead, I maintained my Texas legal residency throughout.

Then change your state of residency to your current state of residence. Colorado, the state you hail from, has chosen not only to tax its residents, but military personnel claiming that state as their legal residence (but not living in the state). I suggest you complain to the government of your home state, and leave the rest of us out of it.

BTW, historically, the laws governing all of this assumed that people did not cut their ties to their home of record, and typically moved back there after being discharged.

Also, realize that the military already compensates local school districts for servicemember’s children.

P.S. I do think that military personnel tend to be overcompensated, though (except for those in combat zones).

5

You basically seem to think that the current situation is unfair because you come from a state that taxes military income, even for out-of-state servicemembers.

If I’m from Texas (which has no state income tax), why should I be penalized because you come from Colorado? Your problem is with the State of Colorado, not those servicemembers who come from states that don’t happen to have state income tax.

Personally, I think its a load of crap that Colorado taxes your income. You’re not currently costing them anything in state or local services, after all. However, the military can’t fix this–the legislature in Colorado needs to.

6

Of course you feel this way. You aren’t being taxed.

Do you feel I should be paying taxes in VA? If so would you feel the same way about someone from TX?

If you don’t think I should be paying taxes to VA then do you think it’s fair for a state to tax someone who hasn’t resided there in 14 years?

I guess I should’ve been born in TX.

7

Let me ask the question a different way.

Do you think active duty military should be required to pay income tax to the state of their home of record after the federal government requires them to move out of state? Should we be required to give up our residency to a state we may still love and/or call “home” just to avoid paying taxes into a black hole?

8

Well, actually I am, now. When I got out of the military, I settled down in Connecticut, which has a state income tax. FWIW, Connecticut was not my last duty assignment–I moved there after getting out.

I think that since we live in a republic, everyone needs to be a legal resident of some state. You vote in that’s state’s elections (including for federal offices), and get a driver’s license and vehicle license plates from that state. If that state’s laws require it, you pay taxes to that state, even if you don’t actually reside there due to your military service.

I think that the current situation is about as fair as it can be. You can remain a legal resident of your original home of record (i.e. your home state), or you can switch your residence to that of any state you happen to find yourself, just like any civilian living and working in that state.

Yup. Or at least get transferred there for a duty assignment. :smiley:

9

You are not required to maintain residency and pay taxes to your home of record. You are free to change your state of residence to any state you live in, just like anyone else–including civilians.

If you want to remain a legal resident of the great State of Colorado, you need to follow the laws of that state. If you don’t like those laws, write your representative in the state legislature.

10

It’s the same as living overseas. I use no US services and will continue paying US taxes for the rest of my life even if I never visited the US again. Since I have no option for local citizenship here, even giving up US citizenship is not possible. Fortunately, I come from Nevada which has no state income tax.

Ask for a transfer to Nevada?

11

Right. The assumption all along has been that the majority of people serving would be in for their required minimum active duty tour and no more, then go back “home”. And that if they would not want to go “back to the farm after they’ve seen Paris”, well, they could make THAT move once they were back on civvie street.

Now, it may be that pure chance precludes some servicemembers from ever winding up eligible for residency in a tax-exempt state, and well, that’s just bad luck. Like Desert Nomad mentions, many polities, including the USA Federal Government itself, impose taxes on ALL those with the legal status of citizenship in that polity, wherever they may be located.

12

Yup. Your argument is that it’s unfair not because CO gets money, but that they get money for nothing. So switch to VA. It doesn’t matter monetarily to you, but by your logic, it should matter ethically.

FWIW, PA taxes you only on income made within the state. Out-of-state income, military or otherwise, isn’t taxed.

13

Except the US is the only country in the world that taxes based on citizenship rather than residency. I suppose this carries over into the sates themselves too.

14

I am not a military person, so I apologize in advance if I am talking rubbish. That being said, based on the facts presented in the thread so far I think I make a pretty good argument :slight_smile:

There appear to be two valid arguments here that seem irreconcilable:

[ol]
[li]It is unfair to impose state taxes on someone who is not living in the state and therefore not using any state resources.[/li][li]It is unfair to enforce different state’s tax regimes on people as they have no control over which states they will be stationed in.[/li][/ol]
The current system sounds like a good attempt to compromise. At the end of the day, there are no surprises: if you are from CO or TX you can continue to pay tax as if you had never moved, no matter where the military sends you. This is particularly important if you started in a state with low or no taxes. It really does not seem fair to subject you to another state’s additional taxes after a forced move.

That being said, if you object to (1) above, you can still choose to pay taxes in the state you actually live in. There does not seem to be a way that you can be worse off than any regular civilian that needs to choose the state of residency as the state that they actually live in. That you were already in CO implies some level of acceptance of CO taxes, and the ethical issue becomes no different from a regular Joe who chooses to live in either CO or TX. You enter the military knowing which state you are from and implicitly accepting its tax regime (although you do have this “bonus” option of choosing a different state based on not liking paying for services not used).

15

Bolding mine.

And that’s just one part of what’s wrong with the OP’s argument. The other part is that the OP also has a representative in the federal House of Representatives, as well as two senators in the federal Senate. Those individuals are providing the OP a service.

16

Keeping in mind that rules change and enforcement varies, but when I was in the military and wanted to change my state of residence there were conditions. You basically had to establish that the new state is the one where you intended to live at the completion of your term of service. It wasn’t as simple as just pick a state. It was as simple as filling out a form with the required informaiton.

Of course, I don’t think anyone ever checked to see if I had registered to vote, etc. in the state. No one seemed to care that my plans changed when I got out based on a number of factors.

17

I agree that some changes are needed although I don’t have any great plan. I get sick of listening to my brother-in-law bitch about how low his pay is when he doesn’t have to pay anything for housing and medical and he get a reverse income tax from Alaska every year. Something like $1000 per family member.

I live in VA as well. There are a huge number of cars driving around with Florida plates - military folks that pay not one thin dime in income tax into this state or any other.

18

Ya Colorado taxes suck. I just had to pay back taxes from when I was living and working in Texas but my residency was in Colorado. Good thing I was in Texas or I would have been taxed twice.