Not that Cali’s system is awesome but give me a break, OP jumps into having W2s yet complains that Congress needs to pass laws and no one should hire in CA?
I was not aware that hiring a remote employee there required that my business file an income tax return, which is completely unrelated to employment. My income is none of California's damn business if I don't sell anything there and have no other nexus with the state.
Plus, no other state has California's absurd franchise fee, even for small businesses with zero revenue.
50% of your business (and to be frank probably 80%+ of the value add based on your write up) was done in California but you act like it’s crazy for California to make the above claim.
Literally your income is California’s business. You are doing business in California.
How are they supposed to know you’re not selling anything there… if you don’t report it?
Is it questionable phrasing? Yes. Is it wrong? No. Your business clearly and directly derived income from California, and per California law, the state is owed income tax on that.
(But is it kind of ridiculous in a modern economy? ...ehhhh it depends. California is one of the few economic powerhouses amongst the states, and there's good arguments to be made for having this system in place. You can argue about the threshold, but the idea that states should not be allowed to recoup economic loss from people being hired out of state without the employer paying back taxes over the income generated through that hire to the state that got them that hire, is not quite thinking it through)
This is technically true in the sense that zero is a substantial part of zero :)
> well over 25% of the business income can be attributed to a Californian workforce
The argument is that the company in question had 0 total revenue. If you want to attribute 25% of that to a California source, sure, but it's still $0.
So yes: California absolutely wants you to show that the over 25% contribution by one (or more) of its resident(s) amounted to an income of $0. They are not going to take your word for it, because your word is no good: fill out the paperwork to prove your claim. If you don't, it would be far more reasonable to assume that your business had enough income to pay for their employee (which typically costs a company twice what they actually pay in gross salary), which by definition is a non-zero amount (because under contract law there has to be an exchange of value for a contract to legally exist: you cannot be contracted to work for free).
It's their state, so they can pass whatever laws they want obviously. People living there just be aware that this is incentivizing not hiring remote from California.
My personal opinion is that we spend too much on lawyers and accountants. Our society should be optimized to let people focus on their ideas - bring in cash flow - and lift the entire society up when possible.
That said - I'm not sure I have a good solution here. I don't think we should tax income (don't punish people for working). I go back and forth on sales taxes (I kinda like use taxes, but again, that negatively affects a significant amount of the population un-proportionately). A chunk of the world uses VAT. I'm researching VAT closer.
We can make this a more fair, easier to operate in world than we have now. I'm a supporter of that.
But we do need them to run a business, because --and this is the part that explains why-- your brain is finite, and you cannot be an expert at accounting, and law, and your actual profession. The willingness to outsource expertise to other people is what makes society possible.
As for calling income tax a punishment: that's a bit weird, because you're not paying taxes on "your money", your money is what's left after taxes, the amount before taxes was your employer's money. Only some of that is going to be yours. If you live in the US, you unfortunately live with an idiotic system in which you are handed the full sum, being way more than is actually yours, and then making you responsible for splitting it up correctly and punishing you if you don't. However, if you live in a more modern country, at least in terms of how tax is handled, you wouldn't need to do this at all. The taxes will be withheld as part of the transaction, paid by the party doing the paying, and what is received is 100% the receiver's money, with no further taxes owed. (we see the same idiocy vs. sensibility with sales tax: some countries like Canada or the US have the insane habit of listing untaxed price in stores, with an inflated price at the till. More sane countries instead list the actual price of goods, with the tax processing taking place in the computers that handle the payments)
Remember: your country needs to make money for it to stay a country. Setting a rule where any monetary transaction taking place in the nation (made possible only because there is a working national economy in the first place) has to include a portion that gets used to fund the nation that makes the economy possible isn't too crazy. Sales tax, income tax, capital gains tax, etc. are basically all the same thing (money changes hands, the nation gets a portion of it so it so that it can keep operating) using different rates (mostly) adjusted to be appropriate to how much is necessary to prosper. Of course, in a good tax implementation, you don't "get that money and then you have to pay taxes", instead those taxes are withheld as part of the payment and when the tax date rolls over, you have nothing to do (something that a number of countries actually do).
It's when you get into levies (property tax, fuel surcharges, etc) that things become a bit more questionable, and one of those "what kind of country do you live in" differentiators.
Except this was done across state lines. There's a term for that: interstate commerce. The federal government has the sole power to regulate interstate commerce. California should pound sand here.
I think an out-of-state employer funneling money into CA via its employee is a benefit, but you make it sound like a drain.
California does not own the employee, it is no longer the time of slavery. Or it is still slavery in a different form, where states own almost everyone, especially their revenue?
I have no doubt that you can find some sort of analogy that explains how slavery and taxation are equivalent. Good work. I'll be moving on.
I'd also like to note that the term "slavery", in a colloquial or non-rigorous sense, has been applied to serious topics both on and off HN.
e.g. wage slavery [1], overwork of graduate students, unpaid internships, medical residency practices, etc.
I'm quite sure we still have a shared language despite the lack of rigor in those cases.
[1] Applied strictly, the term is self-contradictory
Why not just ban remote work from CA to elsewhere then? The CA citizen, apparently, belongs to CA in your view.
If you're operating a business there employing people then yes of course it's their business. It's like this is the first time you're hearing about 'the government'.
Is that what the law actually says, as stated by someone with some expertise about your situation (including the cross-jurisdiction aspects)? Because you don't really get to be your own judge an jury.
I perceive civil business law to be a big pile of known and unknown unknowns (to me), and I certainly wouldn't trust my interpretations of it for anything important.
Your business is generating revenue from a resource of California (their resident). You better believe they’re going to want a piece of that.
The point is not that this situation is the exact same as yours. The point is that each state has bizarre, unintuitive tax and employment law. Even if you ask, you'll likely get incorrect information from the state until an angry letter shows up. As long as your paperwork is organized, these problems can be made to go away. This is the cost of running a business. It should be easier, but it's not. Some states are easier to work with than others. Even "business friendly" states like TX are aggravating and much more so than other states that I've done business in.
Also OP posted a rant but doesn't seem to know what is going on or whether he actually needs to do anything. For all I know the demand from the CA FTB is mistaken and can safely be ignored.
For the record, I do have to deal with the FTB because I have a California LLC, and they are a major pain and cause of expense in that situation.
When only the rich and powerful can start companies, it is not a fair world.