Incredibly, this is perfectly legal, based on a 1920 Supreme Court ruling about oil lease revenues. Thirty-two states have source tax laws on their books, but they were seldom used before computers made it easy to track down annuitants. Various groups are circulating long lists of states said to have source taxes. Some of these lists are inaccurate, but a quick telephone survey establishes that at least half a dozen states tax nonresident pensioners. The source taxers tend to nail their victims singly as they find them.
Notices show up in new mailboxes daily.
California hires collection agencies, files liens, and adds a 55 percent penalty and daily interest to the bills it presents after the passage of time. Additionally, these people are subjected to multiple moves during the course of their careers, often living and working in several different states. Under the source taxing authority presently extant in these states, it is entirely possible that at the end of their careers, these people could have source taxes applied on their retired incomes by each of these states simultaneously and yet not reside in any of them. Thirty-four organizations, including the Air Force Association, have joined Hoffman's campaign. Strangely, the American Association for Retired Persons is not among them.