Some of my libertarian-minded friends have circulated an article written by Cato Institute senior fellow Daniel J. Mitchell, an anti- flat-tax advocate, claiming that Cam Newton will pay a 200% tax to California on his Superbowl earnings. Mitchell quotes "a Certified Public Accountant" writing in a Forbes article at length, ending with this legerdemain:
If the Panthers ... lose [the Superbowl, Newton] will only net another $51,000. The Panthers will have about 206 total duty days during 2016, including the playoffs, preseason, regular season and organized team activities (OTAs)....
Seven of those duty days will be in California for the Super Bowl... To determine what Newton will pay California on his Super Bowl winnings alone ... looking at the seven days Newton will spend in California this week for Super Bowl 50, he will pay the state ... $101,360 on $51,000 should they lose.
Except that's total bullshit. Did anyone else spot the problem with this?
See, Newton didn't earn $51,000 for losing the Superbowl; he earned over $1.1 million for losing the Superbowl. And a $100,000 tax on $1.1 million seems pretty reasonable to me, despite how unreasonable it seems to the Cato Institute (which thinks any tax on income is unreasonable and wants to repeal the 16th Amendment).
If Newton works 206 days in 2016, and 7 of them are in California, then 3.4% of his annual gross income is apportioned to California. But Newton will probably earn $31 million in 2016, not $51,000; and 3.4% of $31 million is, it turns out, $1,053,398.
(Come to think of it, the $51,000 bonus seems kind of small, doesn't it? I mean, since we're talking about fantasy money and not the compensation that most people earn.)
Mitchell's problem isn't that states like California have higher income taxes than other states. His problem is that doesn't want any income taxes, period. Fine; make that argument. But don't foist patently misleading headlines on completely misleading articles and claim you're presenting a real argument.
I've just spent a few minutes going through all my company's technology expenses to figure out which ones are subject to the completely daft rental tax that Chicago has extended to cover computing services. The City theorizes that rental tax is payable whenever you pay to use a piece of equipment that belongs to someone else for a period of time. This makes a lot of sense when you go to Hertz, but less when you use Microsoft Azure.
My understanding of the tax and the City's might not be completely orthogonal, but here are some examples of things that I've flagged for my company.
Salesforce.com: This clearly falls within the tax ruling. You pay for an online service that runs on someone else's computers. This is exactly what the city was after when they extended the rental tax.
Microsoft Azure: The tax only seems to cover Azure Compute fees, and specifically exempts Storage charges. So how are database hours taxed, then? With Azure, you pay for Database compute and storage together. Clearly Azure Storage is exempt, though. So now we've got a recordkeeping burden that Microsoft can't help us with yet. Great.
LinkedIn Professional: This may be subject to the tax, if you interpret the tax very broadly. But a LinkedIn subscription isn't so much for the use of its computers (which is free), but for enhanced features of the product that seem more like consulting services than compute time. I think we'll see some litigation over services like this one.
JetBrains ReSharper software license: This does not seem subject to the tax, because we're only paying for a license to run the software on our own computers.
Basically, the City is trying to raise revenue any way it can, but they don't have the technical wherewithal to understand why the tax as constituted makes no sense. Some people in my company feel this makes Chicago unattractive to business, but that's true only if you don't count the difficulty getting talented people to move away from all the city has to offer. It's a frustrating new tax, though, and one the City probably wouldn't have to impose if the rest of the state would pay for its share of the services that Chicago provides to it.