Posted on 01/18/2021 4:13:11 AM PST by Kaslin
Freedom from income taxes is among New Hampshire's delights: The Granite State is one of just nine that don't tax ordinary income. Of course, that benefit doesn't apply to New Hampshire residents who commute to work across the Massachusetts border. Income earned inside Massachusetts by an out-of-state resident is subject to Massachusetts taxes.
What about a New Hampshire resident who used to commute to Massachusetts?
A no-brainer, surely. If you don't live in Massachusetts, and you no longer work in Massachusetts, then Massachusetts has no right to tax your earnings. What could be more self-evident?
Until last spring, that was the law. The Massachusetts Department of Revenue itself said so: "Compensation for services rendered by a non-resident wholly outside Massachusetts, even though payment may be made from an office or place of business in Massachusetts," the department affirmed in a 1984 ruling, "is not subject to the individual income tax." And if a New Hampshire resident employed by a Massachusetts company worked in Massachusetts ony part of the time? In that case, "only that portion of his salary attributable to his work in Massachusetts will be taxed."
Then came the pandemic. Massachusetts declared a state of emergency and ordered non-essential workplaces to close. Many of the 84,000 New Hampshire residents who had been commuting to jobs in the Bay State switched to working from home instead. Under the straightforward rule that had been in place for decades, Massachusetts could no longer tax their income.
So it created a new rule.
In April, the Department of Revenue published an "emergency regulation" declaring that any income earned by a nonresident who used to work in Massachusetts but was now telecommuting from out of state "will continue to be treated as Massachusetts source income subject to personal income tax." For the first time ever, Massachusetts was claiming the authority to tax income earned by persons who neither lived nor worked in Massachusetts.
Not surprisingly, New Hampshire strenuously objected to its neighbor's unprecedented tax grab. When Massachusetts refused to reconsider, New Hampshire commenced a lawsuit in the Supreme Court, which has original jurisdiction over "controversies between two or more States." The justices are expected to decide this month whether to take the case.
Massachusetts, needless to say, wants the Supreme Court to give New Hampshire the brush-off. A brief filed by Attorney General Maura Healey disparages New Hampshire's complaint as lacking "seriousness and dignity," and insists that Massachusetts "is not injuring New Hampshire itself" by withholding millions of dollars in taxes from the paychecks of New Hampshire residents. If any of those residents object to being taxed by Massachusetts, Healey's brief suggests, they can always file for an abatement. If that doesn't work, they can always appeal to the Appellate Tax Board. Why should the Supreme Court concern itself with what amounts, at most, to the personal tax gripes of New Hampshire telecommuters?
But Massachusetts has indeed injured New Hampshire itself. It has launched what amounts to an attack on a fundamental aspect of New Hampshire's sovereign identity — its principled refusal to tax the income of New Hampshire residents earned in New Hampshire. It was one thing for Massachusetts to withhold taxes from New Hampshire residents for income earned within the borders of Massachusetts. With its new tax rule, however, Massachusetts is reaching over the border to extract taxes, thereby undermining a core New Hampshire policy.
"Through its unprecedented action," the New Hampshire brief argues, "Massachusetts has unilaterally imposed an income tax within New Hampshire that New Hampshire, in its sovereign discretion, has deliberately chosen not to impose."
New Hampshire isn't fighting alone. Fourteen other states have filed briefs urging the Supreme Court to take up its complaint. They urge the justices to reassert and reinvigorate a basic principle of the Constitution's federal system: that the power of states to tax nonresidents' income does not extend past their own borders.
To be fair, Massachusetts isn't the first state to violate the principle. A handful of states, including New York and Pennsylvania, have for years been taxing nonresidents for income they earn working at home. Resentment by other states has been heating up for years. Now the pandemic, by transforming tens of millions of employees into work-from-home telecommuters overnight, may have pushed the issue past the boiling point.
States with no income tax, like New Hampshire, aren't the only ones affected when their work-from-home residents are taxed by another state. So are states that do tax income, because they commonly provide a credit to residents for taxes paid to other states. That protects their own citizens from double taxation — but it also means the loss of billions of dollars that would otherwise be available to fund public services. In one of the briefs supporting New Hampshire's litigation, New Jersey, Connecticut, Hawaii, and Iowa call this "the Hobson's Choice to which they are put: doubly tax residents' income or suffer fiscal consequences."
According to the National Taxpayers Union, at least 2.1 million Americans who previously crossed state lines for work are now working from home because of COVID-19 restrictions. When the pandemic ends, remote work is expected to remain far more common than it used to be. The unfairness of what Massachusetts began doing last spring, and of what a few other states have been doing for much longer, will grow more galling. Only the Supreme Court has the power to shut down such overreaching. And now, thanks to New Hampshire, it has the opportunity.
If I recall correct Kentucky used to do the same with workers from Tennessee, because TN does not have a income tax either.
“Freedom from income taxes is among New Hampshire’s delights:”
Not for long, wait till the Rats get into office. IMO
Instead of suing Massachusetts, wouldn't New Hampshire be better off simply giving Massachusetts-based companies an incentive to establish a legal presence in New Hampshire so those employees don't have to be paid by a Massachusetts entity? That would eliminate this problem entirely.
On the other hand, people working remote will get a refund on their Kansas City income tax. Go figure.
no standing
1. If a person living in New Hampshire works in Massachusetts, that person is taxed as a MA worker. The law is clear on that. If a person living in NH works for a MA company but never sets foot in MA might be a different story. But how is the MA government supposed to distinguish between the NH-MA commuter and the NH resident working at home if the company is domiciled in MA and the payrolls are processed in MA?
2. It seems to me that the easiest case for NH to make is that these people began working from home in NH after the MA government ordered the businesses in MA to close. It seems that MA has a very weak legal argument here on this basis alone.
“The power to tax is the power to destroy”
Downside of no income tax in NH is that property taxes are very high, BTW.
NH does, and a lot of them have. Completely changed the character of the lower half of the state, and of course they brought their flatlander politics with them, so NH is no longer a solid red state. Could have retired to NH; very glad I didn't.
I was wondering where this whole issue stood.
I know people affected by this and it would be a good thing for them to get their illegally stolen money back from Mass.
Some companies located in MA did create NH branches and assigned their NH work-from-home employees to them. Hurrah for them!
Unfortunately, quite a few companies in MA are run by communists who actively arrange things to maximize the MA taxes paid by NH residents. Even when upper management is somewhat sane, there are often enough crazy leftists infesting the HR department to screw things up on their own.
Many New York City commuters have dealt with this for years. If you live in New Jersey or Connecticut and work in New York, you have to file tax returns in both jurisdictions -- where you work and where you live. You owe your taxes in the place where you work, and your home state adjusts your tax liability accordingly.
For example ...
Suppose I earn $100,000 and I live in New Jersey and work in New York. Suppose New York has a state tax rate of 6% and New Jersey is 4% at this income level. Leaving all deductions, etc. aside ... I file my New York tax return that says I owe them $6,000. I file my New Jersey tax return that says I owe them $4,000 -- but I get a credit for the $6,000 I paid to New York and therefore I owe $0.
If it was the other way around and I lived in New York and work in New Jersey, I'd still pay $6,000 in taxes but $4,000 would be paid in New Jersey (4% of $100,000) and I would owe $2,000 to New York (6% of $100,000 minus the $4,000 I paid to New Jersey).
The important thing to note here is that this works because income tax returns are filed in both states. That's the mechanism for reporting the income in both jurisdictions and paying it accordingly without being "double taxed." If only one state has an income tax, then the whole dynamic is different.
Taxing wages is a form of slavery.
If I exchange 40 hours per week for a payment from my employer, why should government get a share?
We should own 100% of our labor, government should be funded using other taxes, not taxes on wages.
Taxing wages is a form of slavery.
If I exchange 40 hours per week for a payment from my employer, why should government get a share?
We should own 100% of our labor, government should be funded using other taxes, not taxes on wages.
And their state motto is Live Free or Die.
Commie Left is taking them all to the bank.
build a wall
Fort Campbell is the home of the 101st airborne Screaming Eagles
It used to be that the head quarters of the 101st Airborne division was on the TN side (Clarksville, TN, Montgomery county to be exact.
Every few months they confirm the “office of origin” for my wife’s company.
She is assigned to Hartford, CT, but works in MA. Although that is good for taxes, her insurance comes out of CT. This means that our Docs are almost all in CT. I live on the border, so its not a bad thing—in fact in most cases the docs are closer in CT.
Its just weird how all of this stuff works out. It takes a little bit of time to get used to it.
But getting taxed in MA, and having to pay property taxes in NH would be a nightmare. For while NH doesn’t have an income tax, their property taxes will make your hairs curl.
I understand your point. And I agree.
But can you imagine if they did not withhold taxes? Can you imagine the outrage of people if they had to sit down once a year and write a check for their tax liability?
Holy crap, the government would collapse in about ten minutes.
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