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Hm, I have not heard about this, but let's haul out Dobbin again. Suppose I am a career TSgt and am paid enough only to feed my family gruel, and have the choice of living on base in roach-infested quarters, or off base in a rat-infested apartment. In order to make ends meet, I buy an Amway distributorship and say goodbye to the rats and roaches. My residence is surely elsewhere, because the Air Force transfers me every two years.

Is the statement that my AF income is not taxed by the state, but the Amway income is, and as if it were on top of the military income (possibly pushing me into a higher bracket)?

Frankly, this sounds very reasonable to me. The Amway income is earned in the state and will be taxed no matter where the official residence is. As to counting or not counting the military income, this seems to me to be like counting Social Security for various purposes. Just because it is not taxed, does not mean it was not earned.

This is quite apart from the issue of whether the military are paid enough.
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