TheAgitator.com
Goodbye, D.C.
Thursday, March 11th, 2004Reader Matt Gaffney is fed up, and is moving his two businesses out of Washington, D.C.
He wites:
I’ve had it with DC. I operate two small businesses out of my home, and the DC government’s constant taxation, regulation, and meddling is driving me nuts. I’m moving to Pennsylvania this year.I write, edit, and sell crossword puzzles under these two businesses to newspapers, magazines, and websites. I do this from my Adams-Morgan apartment. The business is all done via computer and US mail (very small volume — just people sending checks). It’s so unobtrusive that people who I’ve lived next door to for 5 1/2 years here don’t even know I work from home.
I received a piece of mail from the DC government today informing me that I need to pay them $250 for one of my businesses for something called a “Business Corporation Report”. This involves me filling out a one-page report and sending them a $250 check. This is separate from a $200 payment I had to send them last year for something called a “Master Business License,” which also involved me sending them a check and filling out a one-page form. This is separate for an acronym called CHOP, which “allows” me to operate a small business out of my home, and for which I had to fill out a one-page form and send them a check for $50.
This is all in addition to the 9% DC state tax I pay and 5.75% sales tax. Plus there’s an 11% DC restaurant tax.
I attempted to call bullshit: called the relevant agency and asked what I got for my $250. The bureaucrat on the other end of th line politely told me: “Well, you don’t *get* anything, but if you don’t pay, you’ll be charged penalties and interest.”
I asked her how this “Business Corporation Report” differed from the “Master Business License,” for which I also received no service, and how each differed from the CHOP fee, which also provided no service.
“Those all have nothing to do with each other,” she told me.
A couple of years ago, I had to go down to some building on North Capitol St. in person (wasting a morning’s time) to file forms for some useless license in person because the DC government had lost the forms TWICE (and one of those times they cashed the check I had sent, but lost the forms!). There were two black women in their early 20s or so in line in front of me who, as I overheard it, were attempting to start a hair-braiding business. The bureaucrat behind the counter asked them some questions and it was clear this was going to be a low-budget operation, but the women were told they needed to pay $85 for some kind of license. The two looked at each other, looked sort of embarrassed, and told the bureaucrat, “OK, well we’ll come back later.” How much you want to be they never started the business because of that fee?
For me, these fees are an annoyance. But how many poor, mostly black entrepreneurs in DC have their businesses killed in cradle by this kind of crap? The DC government is so dysfunctional that it’s almost as if it’d rather have these two women be wards of the state that productive, striving entrepreneurs.
Well, I’ve had enough of it. I’m off to buy a house in Pennsylvania. Top state tax rate: 2.8%! I already wrote my city council member a long e-mail explaining that DC will get this $250 from me, but it won’t get the thousands of dollars in taxes I pay them each year. In my case, they’ve killed the goose. Hope they enjoy this $250 egg, ’cause it’s the last I’m laying.
Of course, it took an Institute for Justice lawsuit to liberate D.C. hairbraiders from having to obtain expensive, time-consuming cosmetology licenses — an antiquated law that dates back to the 1930s.
I’m also self-employed and living in D.C. The most annoying thing is that if your gross income is more than $12,000, you can’t simply report your income as personal (as you can with the federal Schedule C), but you must file a separate “unincorporated franchise” return, which nails you at a higher rate than the individual return.
Of course I am sympathetic, BUT I have some questions for Matt ( also keep in mind if I come off rude I’m trying not to, but this seems too common-sense to me):
1. How did D.C. know to charge you all these fees? Did you voluntarily go to some government agency and seek licensing? WHY?
You have stated yourself that you have low volume mail, you run your business off the computer and no one would notice you even run a business out of your home.
If I were you, I would have never obtained any licensing and D.C. would have never known about the business. Is someone (when no one even knows about your business) going to turn you in? Since you do not sell any products, dont keep any inventory, or have customers come into your “office” what substantiates your home as a place of business that would be regulated? How the hell is someone going to regulate business you do on your computer? You could be using a laptop in Timbuktu for all they know.
I do not live in D.C. However, I do run businesses out of my home off my computer. Do I have my home registered as a business? Hell No. No one needs to know what I do in my home. Its not open to the public. My business exists in cyberspace. I receive my payments at a P.O. Box and my company is registered in Wilmington DE ( I do pay a $99 per year RA fee and $60State corp tax).
It just seems to me all this could have been easily avoided.
Graham, great point, and I support what you are doing, but you do understand you are breaking the law.
How sad is it that our government at all levels makes hard working citizens become criminals?
Current PA resident here.
Unfortunately, our income tax just got hiked to 3.something%. And it’s likely to go higher thanks to an ongoing RINO infestation.
There’s also a 6% sales tax (7% in Philadelphia) here. So even though the state income tax is low, the sales tax actually makes us a state with a slightly higher than national average tax burden.
And depending where you move, there may be a local tax of .5% or 1% (plus property taxes of course).
Sorry to burst your bubble, but PA isn’t exactly a low tax utopia. True, it’s a significat step up from DC, but if low taxes is what you’re looking for, you may want to try Delaware.
PA does have incredibly lax gun laws though, so it’s not all bad new.
One other minor point, the highest tax rate is also the lowest tax rate. PA has a flat state income tax.
Was the PA sales tax just recently raised? I could have sworn it was 5% when I was student there in the late 90s.
- Josh, late 90s? Temptus fugit…
Another PA resident.
Yes, our state tax just got rased to just over 3% flat this year.
Sales tax is 6% everywhere, minimum, and is 7% in Allegheny County (Pittsburgh area), and Philadelphia County.
Local taxes, for the most part are going to be AT LEAST 1%, but much more if you live in Pittsburgh or probably Philly.
School taxes are pretty high. I think mine are about $3500/year on a house valued at about $130,000.
Traffic citations are high (I’m a police officer), so don’t get stopped in PA.
Our governor will be increasing taxes throughout his term, so figure all of these numbers to be the lowest their going to be for a long time, soon to be higher.
PA is no tax haven, trust me.
Chris
PA is great. I was born and raised there and plan to retire there. I can’t make enough money there in computers, so I am suffering through living in VA, which is as close to PA as I could find and still have access to DC.
Traffic fines are high, but the state is nice enough to notify you of that as soon as you cross the border. There is a very detailed sign listing out the fines for speeding. I usually dig in my pocket, see how much money I have and set my cruise control accordingly.
And the cops in PA are invariably nice, respectful and relatively lenient. Their whole attitude is different. They really do try to enforce the spirit of the law rather than “get you for anything” like the DC and surrounding area cops.
Although, there is some sort of unwritten rule that if their hat falls off, someone gets a ticket. I’ve never quite figured it out, but there is a causal relationship in there somewhere.
Moving to PA want help. Most states (including DC) are the same.
I love the Fla. No income tax and sunny days. But the best is NH. No income tax. No sales tax.
And with the Free State Project taking off in the next few years, it will be our last hope for real liberty in our lifetimes.
Interesting events. PA has its upsides.
NH rocks.
NJ does not, but we have good striper fishing….
D.C. is the worst, worse than any state(12.9%)!
Pennsylvanis is an improvement, about 15th(9.1%)…
I’m in Texas, which has about the 5th lowest tax burden (8.3%)…
But it doesn’t get much better than New Hampshire, which is #2 (6.6%)!
Perhaps your friend should think it over, Radley, he stands to gain twice as much, and the individualist culture (along with the FSP) suggest things will only get better in NH.
As a NH resident, I know a little about the tax situation. It is a constant source of pain and frustration. I guess it depends on what you want to do. If you want to run a business, then NH has a business-friendly tax environment. However, if you just want to live here, you’re in for a big surprise if you think you’re saving anything on taxes. You may not pay income tax, but if you want to own a house anywhere near jobs, and don’t want to commute over an hour each way, prepare to shell out more than $200,000 for a modest house. Tack on property tax rates of almost $30/1000, and your mortgage can get pretty high. For example, here in Portsmouth, you can have a house valued at $225,000 (good luck finding a house here for that), and your property taxes are about $3500-4000/yr (maybe a little more). To compare, my parents live in a small town up north in the boonies, and their taxes are close to $3000/yr, with nowhere near the same services.
The cost of living here in NH is outrageous, and sprawl is on the rise. Because of the Claremont decision re: school funding, we have to resolve the issue of property tax. But they’ll never go down from current levels, and they are already through the roof. If you’re lucky enough to live in a property-rich area or have a mall close by, some of the burden is off you. But then your house is valued more, so you end up paying anyway.
Can I have dibs on the corner apartment?
You must have been paying like 820 or something.
Well, Matt, should pony up his fair share, of course.
Thank heavens he isn’t attempting to move his business off-shore. (Recalling Stanley Tools and “my” Sen. Grassley.)
As a native NHerite, but a current CT resident, I don’t think that NH residents who have not lived outside of NH really understand how good they have it. A lot of my friends live in Westchester County, NY. A typical house is from 400-800K. My friends from Mamaroneck, NY who had an average home were paying about 14K/year in property taxes. This is in addition to NY’s sky high income and sales taxes. Oh yeah, and the county sales tax too.
I did an undergrad thesis on property taxes where I concluded that property taxes were the way to go. Too bad I can’t remember why anymore…
And for those who don’t know, the (atrocious) Claremont decision was where the NH state supreme court read into the constitution that equal public education was mandated, and thus should be funded out of revenues collected and distributed by the state. It was as bad a decision (in terms of legislating from the bench) as the MA gay marriage decision.
DC is 51st out of 51, the least-friendly state in which to start a small business:
And, at the opposite end of the scale, the 10 least friendly:
51. District of Columbia
50. Hawaii
49. Minnesota
48. Maine
47. Rhode Island
46. California
45. New York
44. Vermont
43. New Mexico
42. Oregon
http://www.bcentral.com/articles/harper/141.asp
MP-
Just curious-where in NH are you from? Most parts of NH are still (relatively) reasonable, but in my area (Seacoast), they are now building condos that are going for $350,000-$400,000-in Dover, not even Portsmouth. All new housing is in the same range. A lot of people I work with have moved to Maine, despite the income tax, because property taxes are so much lower. It ends up being a wash for them to live in ME vs. NH.
Frank,
You got a typo there - “stripper” has two “p”s.
DC has seveal disadvantages. With an inability to tax commuters from neighboring states and with a small tax base, it is forced to be creative with taxes to its citizens and businesses (and other methods like parking tickets). DC is also saddled with many costs that are usually picked up by the state, such as medicare, medicaide, mental health services, etc.
What DC needs is the ability to vote in Congress; as it is right now, we are subjected to the whims of the 535 who serve. They are the ones who have set us up to fail.
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