For remote workers, taxation without representationMar 10, 2021
This opinion piece was first published in The Sun.
When Massachusetts Gov. Charlie Baker declared a state of emergency on March 10, 2020, many New Hampshire residents who were commuting to the Bay State began working from home instead.
Ordinarily, Massachusetts could not continue withholding taxes from these workers’ paychecks while they were not working in the Bay State. But under a new Baker administration rule, out-of-state remote workers were required to continue paying income tax to Massachusetts — a state where they do not live, cannot vote, and no longer work.
Remote-working Granite Staters were understandably outraged. As was New Hampshire Gov. Chris Sununu. Accordingly, New Hampshire Attorney General Gordon MacDonald filed an original jurisdiction case with the U.S. Supreme Court to protect Granite Staters from Massachusetts’ unconstitutional money-grab. Fourteen other states, along with several public interest groups including The Buckeye Institute, have urged the high court to hear this consequential case.
New Hampshire v. Massachusetts should matter to anyone who works from home or employs remote workers. Teleworking has skyrocketed during the pandemic, with approximately half of Americans now working from home, according to a recent study by the Brookings Institution.
Software giant Salesforce.com, the largest private employer in San Francisco, recently announced that most of its employees would continue to work remotely after the pandemic, and that the company would shrink its physical office space, as a leading indicator that American work and commuting patterns are changing for the long term.
This shift to remote work started well before the pandemic and benefits employers and employees alike. It enables employers to attract top-notch talent from outside of their immediate geographic area. It gives employees the flexibility to locate their households in more affordable or otherwise preferable areas. And it saves everyone money.
A Global Workplace Analytics study found that those who work remotely half the time can save nearly $11,000 per year for their employers and between $2,500 and $4,000 per year for themselves.
The remote-work revolution can also help bridge the growing urban-rural economic divide. People who work from home are almost twice as likely to earn a six-figure salary compared to the general population, and small towns and rural areas stand to profit substantially if more high-income earners relocate there while telecommuting to work for employers in larger metropolitan areas.
Some government officials have lauded the shift to telework, and even encouraged it. As Gov. Baker himself said, “Now as we look to the weeks and months ahead, we’re urging businesses to continue to promote remote-work and work from home as much as possible.”
The governor, it seems, wants to have his cake and eat it too — advising Granite Staters to stay home at the same time he taxes them as though they didn’t.
If being taxed without representation weren’t enough, Massachusetts — home to John Hancock and the Boston Tea Party — wants to levy taxes for unused services, too.
Being taxed where you work makes sense only because the taxing jurisdiction generally incurs commuters’ wear-and-tear burden on its roads, utilities, community services, and infrastructure.
But absent the commuter presence and burden to pay for the same, there is no good reason — short of greed — to tax telecommuters’ wages while they have no say or vote on the tax or the election of its assessors.
If Massachusetts prevails in New Hampshire v. Massachusetts, other states and jurisdictions will quickly adopt a similar soak-the-teleworker tax policy. In Ohio, for example, cities are already taxing the income of remote workers who used to work there, but are now working elsewhere.
Income taxes should be paid by people who live or, at the very least, actually perform work there.
Working from home is here to stay. Employers and employees have both learned to adapt and adjust their budgets to meet the demands of that new normal. Governments should, too.
Unconstitutional taxes levied upon the income of those who have no vote is neither just nor sustainable given our new post-pandemic realities—and Massachusetts (of all places) should know better.
Andrew Cline is president of the Josiah Bartlett Center for Public Policy in Concord. Robert Alt is president and CEO of The Buckeye Institute in Columbus, Ohio.