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Harold Ford Tennesee Tax Resident, New York Political Resident

Harold Ford Harold Ford, who is seeking to get elected to the United States Senate from New York has been filing his taxes in Tennessee instead.  Or, more accurately, not filing them since the Volunteer State doesn’t have income taxes.

Gawker‘s John Cook:

When it comes to his shadow run for Senate, Harold Ford is a New Yorker through and through. When it comes to paying taxes, though, he’s still a Tennessean — he’s never filed a New York return.

Ford claims to have moved to New York three years ago, and says paying “New York taxes” makes him a New Yorker. But his spokeswoman confirms to Gawker that he’s never filed a New York tax return — meaning that he’s never paid New York’s income tax, despite keeping an office and a residence in New York City as a vice chairman of Merrill Lynch since 2007: “He pays New York taxes and will file a New York tax return in April for the first time,” Ford’s spokeswoman Tammy Sun told Gawker. “He will file all necessary personal disclosure and tax forms that candidates are required to file if he chooses to run.” (According to Sun, Ford admitted to the tax dodge yesterday at a press availability in Albany, but we can’t find any news accounts mentioning the remarks.)

Ford presumably decided that his real home was Tennessee, which conveniently has no income tax. Which means that, despite the fact that New York law requires part-time and nonresidents to pay income tax on money they earn in the state, Ford has shielded his entire Merrill Lynch salary from New York’s tax collectors for the past three years. In fact, it seems like Tennessee’s lack of an income tax may be the best explanation for Ford’s rather complicated two-state life since 2007 — he clearly wanted to live in New York, and married a woman in 2008 who did live in New York. But he made sure to keep a foot in a state whose tax code is friendly to rich guys like himself.

When Merrill Lynch announced Ford’s hiring in 2007, it said he would be keeping offices in Nashville and New York City. Ford has said that he’s basically lived in New York since then, though he never technically lived here until last year since he didn’t “spend the requisite number of days” staying at his wife Emily Ford’s breathtakingly yellow apartment in the Flatiron district. (“Moved is such a legal term,” he told the New York Times). Ford was clearly thinking of New York’s 184-day rule, which requires that part-time residents who spend 184 or more days living in the state pay New York taxes on all their income.

What he seems to have forgotten is that New York has gone to great pains to prevent wealthy people like him from spending time and earning money in the state and then jetting off to a tax haven come April 15: It also requires nonresidents and people who live there fewer than 184 days to pay New York income taxes on whatever portion of their income they earned in the state.

Open Left‘s Adam Bink:

I believe John is mistaken when he says there is no income tax return to file in Tennesse- there is- it’s just that Tennessee’s state law exempts salaries and wages from income tax. You only pay it on interest and dividend earnings. That may mean Ford did file in Tennessee, but that despite maintaining a residence and a job in New York State, he has not paid state taxes on his multi-million dollar income altogether since 2007. Or hasn’t file state returns at all.

TPM’s Rachel Slajda:

Ford’s platform, as described last month to the New York Times, includes cutting taxes for corporations and employers.

“I think immediately, we need to lower the corporate tax rate from 35 to 25 percent. We need to make clear that dividends and capital-gains taxes not go up — we do not want to see decisions made that are rash. We should have a broad payroll-tax cut. A three month payroll-tax holiday for businesses and workers,” he said.

“I think tax cuts for employers, particularly small businesses, is critically important right now,” he said. “I think there ought to be a huge-tax cut bill for business people, not only in New York but across the country.”

This is all potentially quite embarrassing politically and possibly even illegal.  But it’s pretty standard stuff.

States and localities have written interesting tax laws in recent years to extract as much money as they can from people who can’t vote.  Thus, the rise of ridiculously high hotel taxes, commuter taxes, and the like.   They especially love to target athletes and entertainers, so that, for example,  players from the Dallas Cowboys owe 1/16th their annual salary to New York for the three hours they play the Giants.   It’s criminal but has stood up to legal challenges.

Ford’s situation is much less sympathetic, since he was getting what one presumes was a handsome salary from a New York firm whilst working in their New York offices and living part of the year in New York.   But he was still, presumably, a Tennessee resident — whether out of outright tax calculation or because he wanted to maintain political viability there.   (He had, after all, been elected to Congress  and narrowly lost a Senate bid from there.)

Claiming residency is a tax haven while living in a high tax state isn’t somehow an exclusive province of the rich, either.   Certainly, I know a lot of people in the Army who were residents of Texas, Tennessee, Florida, and other states that either had no income tax or exempted military personnel living outside the state from paying taxes.  And many, if not most, of those people were not originally from those states — they either established residency while assigned there by the Army or simply claimed a post office box or the like in one of those states as “home.”

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About James Joyner
James Joyner is the publisher of Outside the Beltway, an associate professor of security studies at the Marine Corps Command and Staff College, and a nonresident senior fellow at the Atlantic Council. He's a former Army officer and Desert Storm vet. He has a PhD in political science from The University of Alabama. Views expressed here are his own. Follow James on Twitter.

Comments

  1. jpe says:

    Based on most methodologies I’ve seen, he should pay tax to NY based on the days he’s worked there. So if 1/3 of his time spent working for BoA was in NYC, then he should be paying NY income tax on 1/3 of that income.

    Alternately, if he’s spent more than half the days of the year in NY, he’s a resident of NY regardless of what he says.

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  2. yetanotherjohn says:

    Based on Obama’s cabinet, not paying taxes should not be a bar to holding office as a democrat.
    I would be interested to know how the current senator voted on confirmation on the tax cheats in the cabinet. That won’t prevent her from beating up on Ford, but it could expose her hypocrisy a bit.
    Are you sure about the Dallas cowboys payinf NY taxes? That doesn’t ring true. At a minimum, I would argue that the salary represents the training time and the game time, which would dilute the 1/16. Also, don’t the NY teams play in NJ now?

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  3. jpe says:

    yetanotherjohn: you’re right about NJ, but the point is that tax is due to the state in which the labor is done. Professional athletes, consultants, traveling salespeople, etal, all file (or should file) in every state they’ve earned their money.

    There’s typically some kind of immateriality standard: one day of work in a state often won’t lead to a return filed, but it looks like Ford was in NY a fair amount. In fact, if he was there > half the days of the year, he’s a NY resident, and will have to pay income tax on all of his income, regardless of where it was earned.

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  4. Dave Schuler says:

    We may have reached the point where we need to define residency constitutionally. I’d prefer that for purposes of running for the Senate or House it be defined as wherever you sleep 183 nights per year.

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  5. Pete says:

    How about pass the Fair Tax and this issue never comes up?

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  6. Eric Florack says:

    So Harold Ford is yet another Democrat who in his zeal to raise our taxes to grow government, never remembers to pay his own.

    Ho-hum. Nothing to see here, Citizen. Move along.

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  7. Herb says:

    Ah, c’mon, Eric. Harold Ford is a pretty conservative Democrat. Indeed, a couple more ticks to the right and the guy would be a full-on member of the Republican caucus. What would you say then?

    I’m not defending Ford. He can be criticized for many things. But it just strikes me as lazy and partisan to criticize him for being “yet another Democrat” who wants to “raise taxes to grow government.”

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  8. JKB says:

    So who has been stopping enforcement on Ford? He’s earned millions of dollars in pay in NY but never filed a return. Was his employer not reporting his pay as it does the peons? Did NY and NYC not see a discrepancy between the reported earnings and tax returns?

    When I was stationed in California for less than a year, I got a tax demand letter within 60 days of the tax due date based only on having an apartment since my earnings statement went to a federal address. Surely NYC is as aggressive as Cali in tax mining. Except perhaps for politically connected rich people?

    BTW, TN has what I call the wealthy widows income tax, i.e., on dividends and non-bank interest. They want an earned-income tax but no one believes they’ll reduce the other taxes to adjust.

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  9. Drew says:

    “I’d prefer that for purposes of running for the Senate or House it (taxpayer residency) be defined as wherever you sleep 183 nights per year.”

    Wow. What a windfall for the bordellos.

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  10. Andy says:

    Dave,

    The alternative is repeal of the 17th amendment.

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  11. Drew says:

    JKB -

    I’ll see your story…..and raise you. And I’m “rich.”

    I lived out east for 6 years. Because our investment partnership is in NY, they get tax revenues, even if you are a resident of another state. Especially for the CT, NJ, NY tri-state region, people’s tax accountants are used to making these offset calculations.

    But no. After moving back to IL, and even giving effect to days in NY, I was audited BECAUSE I WAS A RESIDENT OF NY. Of course, I wasn’t. Never was. I was a resident of the green leafy state of CT, and then back to IL.

    I sent the statements from home sales and purchases from each of the states. Didn’t matter.

    Here’s the punch line: After thousands of dollars in accts fees to defend a bogus NYS charge (eventually acknowledged by NYS) I was advised to “settle” because the cost of further defense would exceed the settlement. You used the phrase, “tax mining.” I’d say “extortion.” Just like the trial lawyers.

    But Ford will get off light, not because he’s “rich” but because he’s politically connected, and politically useful. That’s why trial lawyers, Democrats and other cretins piss me off……….

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  12. Alex Knapp says:

    Ford has no excuse. You’re liable for income taxes in the state where you EARN THE MONEY. Living across a state line, I’ve frequently lived on one side and worked on the other. I filed returns in both states. Anybody with a copy of Turbotax knows better. There’s no excuse for Ford, period.

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  13. Eric Florack says:

    So who has been stopping enforcement on Ford? He’s earned millions of dollars in pay in NY but never filed a return.

    Who is stopping it? Here in the People’s Republic of New York?

    You’re kidding, right?

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  14. Wayne says:

    There is a federal law allowing Army personnel to do what they do. They are obligated to go where the military tells them, even into a combat zone. They simply can’t say that they don’t want to be station in NY or quit if they don’t like it. The federal law protects their right to vote in what they consider to be their home states as well.

    The military situation is very different from what Ford has been doing.

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  15. Maggie Mama says:

    Wayne, thank you for your comments. I hate it when people are so quick to jump on members of the military.

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  16. James Joyner says:

    The military situation is very different from what Ford has been doing.

    Oh, that’s certainly true. My only point is that a lot of folks in the military establish residency in states where they’ve never lived — much less considered “home” — solely for tax purposes. It’s remarkably easy to do and no one much cares.

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  17. Mike says:

    JJ
    Your correct – i know many people who made FL their residence but have never lived nor been stationed there. I guess I was too chicken to do this and ended up paying NC income taxes for my first 6 years in the Army even though I was in Germany for 3 years and in VA for 3 more. I finally got to TX and will never give it up until retirement. I would venture that most folks in the military don’t make enough to make an audit worthwhile not to mention the politics of mass audits.

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  18. Wayne says:

    Mike
    I say again there are special federal laws regarding the military that allowed them to do that. I didn’t choose a lower tax state because I wanted to vote in the State that I would most likely end up end. I “almost” choose Texas since I was strongly considered ending up there and damn near did. Still might.

    It is about like excusing a coal company that took some shady and\or illegal tax exemptions that has nothing to do with renewable energy by saying that a solar energy company took advantage of special tax exemption that are afforded to renewable energy company. Not a fair comparisons.

    Maybe you don’t like the special laws for renewable energy or the military but don’t use that to excuse bad behavior.

    In my case and I know others have also. I paid in a higher tax state while in than the state I ended up going to when I lift. Either way I don’t have an issue with the special laws afforded to the military for taxes or voting . IMO they deserve it. You might not agree but state so if you don’t.

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  19. Wayne says:

    By the way, I think Ford is one of the better Democrats out there. I like him better than some Republicans as long as he is acting from the heart and not from Democrats talking points and to be fair he does that more than many do.

    It still doesn’t excuse this episode.

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  20. Mike says:

    Wayne,
    My understanding is that even for the military folks, they still have to establish residency in that state in the normal way that other folks do – then when they get orders moving them, then they can retain that residency – what I am saying is that many in the military , say from NC, who have never been to FL, let alone lived there – or TX or WA etc… pick those states and they cannot until they establish residency there. So if you end up in TX down the road then you can elect it to be your state of residence and if you later leave you keep it – but you have to follow the rules to get it in the first place.
    And yes I agree with these rules – I use them – once I got stationed in TX, I never gave up my residency b/c there is no income tax – but I had to get there first and could not just elect to be a resident while never having lived/resided there.

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  21. Wayne says:

    That is a little different from what the finance folks told me a time or two but I never felt comfortable with claiming residents in a state I never lived in. It is possible the finance personnel made a mistake or was just trying to help me out. The voting deal was important to me as well.

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  22. Oh no, he’s not being a good role model in terms of paying taxes. And why would he want to cut the taxes of corporations and employers? I believe this is going to cut the revenues of the state and it will cause a negative effect.

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