I’ve generally been a supporter of Tim Pawlenty. This one kinda stinks though. This one can’t be called a fee, it’s clearly a tax, no way around that one. Perhaps they’ll call it an Old Tax since its on old money? Or maybe they can call it a Re-Clarification of a tax?
Governor Pawlenty recently signed New legislation regarding taxes on deferred compensation. Prior to this legislation the state taxed deferred compensation when it was paid. If you worked in
If you chose to move to a retirement community in another state you got an extra benefit. Under current law you’re responsible to pay taxes on this income when it is paid to you and to the state you currently reside when it’s paid. If you’d retired to any of the multitude of states with lower taxes than
This isn’t just a new law going forward though, this new law says that it’s retroactive. They’re saying that if you were promised some stock options in 1980 when you worked for
There are some practical problems relative to Pawlenty’s New Tax. First is that some corporations who made and keep these promises will be required by the State of
The second problem is for the retirees. Many made decisions 5, 10, or 20 years ago based on the tax laws in place when they earned their income and when they were made promises by their employers. Many of these may face financial problems having to pay higher taxes than they’d expected. They expected to pay a certain amount of tax based on the laws in place when they earned their money. Now some may find themselves loosing homes or having to make other lifestyle changes because of this.
It’s one thing for the Pawlenty to go back on his No New Taxes pledge and add a new tax for future earnings. That’s bad enough. But for him to add a new tax retroactive to past earnings is slimy.
Even though it seems to me like it would be unconstitutional to place a new tax on old earnings retroactively, I assume that Pawlenty’s folks researched that before passing this to avoid the embarrassment of facing a constitutional challenge. Things are getting smelly.