Taxation and radio

As states grow more and more desperate for tax money (laying off employees seems out of the question as an option), States are going to get more and more aggressive at trying to collect taxes.  Rush is warning others in radio that he’s the test case and others should be concerned about how aggressively New York keeps coming after him.  Let’s step it up a notch.

Let’s say California really wants to squeeze radio for taxes.   Radio station “X” is in California.  Three hours a day, Rush is on the air there.   National Advertisers send a check to Clear Channel in Texas, a state with no income tax.  Clear Channel sends a check to Rush living in Florida, a state with no income tax.  No cash ever flows through Station “X”s bank account in California. For having radio station “X” in California, The Governator is getting no income he can tax.   The value of the station license is plummeting, so even the property tax revenue on the station goes away.  What is a Governator to do?

What he would like to do is what New York is trying to do with Rush (without success so far).   When a pro sports team visits New York, the state of the home team will try to tax 1 day’s worth of earnings of the visiting team because did “work in our state” for a day- but they can only get away with that because the sports person physically was present in their state.  In my above scenario, Rush (or whomever) never physically went to the state.

Let’s say that the Obama Administration, which is developing a reputation already for steam rolling legal precedents if they interfere with the objectives, does something that enables states to tax out-of-state programming sources, so all 50 states could tax Rush on some portion of his income.

This post should really be in Unintended Consquences Blog.  Assume the above happens.  Rush goes to work for Sirius/XM (Or maybe Clear Channel merges with Sirius/XM – make up your own scenario – or substitute “The Internet” instead of Sirius/XM).   Now Rush is still heard in Califonia coming from a satellite out in Space.  The radio stations in California are bulldozed and donated to a nature preserve and the license turned in to the FCC.  Rush is just 1 of 200 channels now on Satellite radio.  He’s still doing the show from Florida.  If things escalate, maybe he does the show from International Waters (there is short wave radio precedent for this), or moves to a Friendly Country like Belize or Bermuda. 

Maybe the Governator can tax the $6/month that Sirius/XM gets from its California subscribers, but you still can’t touch the ad revenue to Sirius or the income going to Rush.  

What’s your next move, Governator?