The Supreme Court’s unwillingness to intervene in a fight among states over taxing income from remote work may spark a jurisdictional revenue war. In August, the Court refused to take up a lawsuit by New Hampshire against Massachusetts’ practice of levying income taxes on Granite State residents employed by Bay State companies but working from home during the Covid lockdowns. Now New Jersey officials, who filed an amicus brief in the case because the state’s telecommuting residents are similarly taxed by New York, have proposed a law that would let the state tax telecommuters, including possibly tens of thousands of Empire State residents now working from home but employed by Garden State companies. The in-your-face legislation also provides incentives for Jersey residents to challenge New York’s law in tax court—one of the only venues left to residents after the Supreme Court decision. Given that several hundred thousand New Yorkers once commuted to other states to work and may now be staying home to telecommute, Albany risks losing revenues.
Beginning in March 2020, Covid restrictions brought a sharp rise in telecommuting, or working remotely from home. Studies have suggested that, during the pandemic’s initial phases, up to 36 percent of all private-sector employees, or about 43 million people, worked at home at least one day a week, and 15 percent, or about 18 million, telecommuted full-time. Census data before the pandemic found that as many as 6 million workers regularly cross state lines to go to their jobs. So it’s likely that several million current telecommuters have jobs with firms in another state. In New Hampshire, about 15 percent of residents with jobs—some 84,000 workers—commuted to Massachusetts pre-pandemic.
Author(s): Steven Malanga
Publication Date: 26 Sept 2022
Publication Site: City Journal