Consider the "severe ramifications" that Facebook would be facing if they are reporting income for a worker in California when the worker has decided to move to Montana.
Imagine paying an employee in a manner that you don't have to worry about them lying about where they are. Rather than judging how much to pay them based on where they live, you just pay them and not worry if you can screw them over or not.
No, it would not. There is nothing preventing Facebook from paying employees of certain levels the same salary range regardless of location. The only reason Zuckerberg even has to clarify that they will be checking to make sure employees are where they say they are is precisely because he announced that Facebook would be paying location-adjusted salaries. This creates the perverse incentive for employees to claim they are living in high CoL areas when they are not, which in turn has repercussions because it negatively impacts Facebook’s ability to fulfill its legal obligations to the governments of the countries in which it operates.
However, if Facebook simply detached compensation from location entirely, there would be no incentive for anyone to lie about where they were, which also makes it easier for Facebook to file correct information. This only “works” for the tech employees Facebook currently employs in high CoL areas of Facebook set universal compensation levels at or above current levels. Otherwise, those in the Bay Area would be negatively impacted when Facebook adjusted this new universal pay scale down.
The issue with doing this from Facebook’s perspective is that labor expenses would not be able to be cut, which seems one of the significant drivers of the policy. Fewer colocated employees in the bay would lead to much lower capital costs, but this way they save money in two ways.
The actually more significant issue with a universal pay scale (though if I were Facebook I would not care about this) is that it would likely create a massive exodus of tech employees from the bay to other areas of the United States as people sought the highest amount of bang for buck. The tech employees themselves would not likely suffer in this scenario, but the region—which has built up enormous social infrastructure assuming the tech industry’s semi-permanence—would be hit hard. A lot of service jobs would disappear, for instance.
Personally I don’t think the diffusion of talent across the continental US would be a bad thing, though. 31 counties in the US account for 33% of GDP and a sort of geographic would relieve a lot of social and political tension that has been building since the 1970s. We also leave a ton of GDP on the table due to geographic concentration of firms in the US (working on finding the NBER paper I read on this recently). Encouraging tech workers to spread out would then be a utilitarian social good. However, I’m not sure Facebook really cares about this given the stated policy, and this is sort of a third order concern from “how do we decrease capital and labor costs” anyway.
...to make it legal to pay someone on the value they bring, rather than where they live? Pretty sure there no obvious laws against that. ETA: as long as the value is high enough, at least.
Probably you meant "to not have to know where they live", but that wasn't what the GP's post was saying.
Yeah but you don't need to break the tax code ... I mean, you could live in those small, more affordable yet decent places north of LA like Ventura or Simi Valley and report you are in SF... Not to mention living in a cabin in the Adirondacks or Brighton, NY for that matter but report you are living in NYC...
The CA examples don't raise issues because CA doesn't have local income taxes. NYC does, so your NY examples don't work... Unless you are okay with paying NYC income taxes while not living it working in NYC.
How much due diligence are companies expected to do when it comes to these things so that if it happens anyway the employer can be considered off the hook?
Where are you going with this? It isn't really controversial at all that a business needs to pay state taxes associated with their employees resident in the state. We can speculate about some alternate tax regime that didn't have those complications but to speculate on how a business can skirt the existing requirements doesn't seem like a productive conversation
No legitimate business is going to play games trying to illegal avoid these basic state taxes. They may choose to not have employees in certain states due to particular laws though. California comes to mind...
We aren't talking about businesses not paying taxes. We are talking about employees lying about what state they are in. Which is the excuse Facebook is using to monitor employees' location via VPN and geotracking.
