01092021 NH Welcome Sign

A sign welcomes visitors to New Hampshire from Massachusetts on U.S. Route 3 North.

By Arthur Vidro

Folks who live in New Hampshire but work in Massachusetts are required to pay an income tax to Massachusetts. There’s no dispute about that.

But a dispute has arisen because many of those New Hampshire-dwelling workers who used to travel to Massachusetts to work are now working from home. Spurred by the pandemic and by office closures, by folks wanting to work from home or being asked to work from home, many former commuters are now doing their jobs for Massachusetts companies without crossing any state lines.

Should they still be paying an income tax to a state in which they no longer set foot? That’s the dispute. Massachusetts says yes. New Hampshire says no.

Back in October, New Hampshire asked the Supreme Court to block Massachusetts from collecting this tax from workers who no longer travel into Massachusetts.

Massachusetts collects this tax from more than 80,000 New Hampshirites, so it’s not just isolated cases here and there.

There’s no dispute as to folks who continue to commute into Massachusetts to perform their jobs. They are subject to the tax laws of Massachusetts. The dispute is only for those folks who no longer commute physically.

The Massachusetts tax on New Hampshire residents is not the only case where an entity levies an income tax on non-residents who work within its borders. So other states are eagerly watching to see how this dispute plays out.

I had my first taste of a commuter tax back in 1990. Although I did not live in New York City, I worked there for a number of months proofreading an annual almanac. We proofreaders started in the springtime, and the office staff shipped out the final pages as soon as the results of the World Series were in. By then I was the sole remaining proofreader, retained because I was the only one there who knew how to read and write a baseball box score. I was hoping the Series would go seven games, but it was a four-game sweep, thus shortening my potential length of employment by half a week.

Anyway, for 1990, I paid my federal income tax, plus my New York State income tax (that’s where I lived). Plus I had to file with the State a New York City non-resident income tax form to send them a piece of the pie. I grossed $5,466 on that almanac assignment. My tax to the city tallied $16.03; that payment was made to the State along with the State income tax I owed upon filing in March 1991; the State distributed the city’s portion accordingly.

It’s a lot of work to have a city tax – or a State tax – apply to non-residents. But it also provides lots of jobs for tax preparers, tax lawyers, and government workers.

Just picture if Claremont had its own city income tax, and folks from Newport or Charlestown who worked in Claremont had to pay an income tax for the privilege. Such a law would require several people to administrate.

One can argue that a large influx of commuters into an area increases greatly the area’s need for certain services that have to be paid for, such as sanitation and water. On the other hand, this tax is not popular with the commuters who pay them.

Usually, commuters are taxed for a smaller percentage of their income than are resident workers.

Washington, D.C. is chock full of workers commuting from Virginia, Maryland, and Delaware. If any location was ripe for a commuter income tax, that would be it. But the U.S. Congress back in 1973 passed legislation that barred D.C. from enacting such a tax. Yes, some of those who voted for the prohibition were themselves commuting to work in D.C.

Just as the federal government has limited Washington, D.C.’s options, so has New York State limited New York City’s options. In about 1999, the New York City commuter tax disappeared, per orders from New York State.

The situation with Massachusetts and New Hampshire stems from occurrences that could not have been reasonably foreseen by lawmakers: the pandemic, plus the growing ability to work via computer from home.

The case also involves a pandemic-related emergency order issued by Massachusetts, so it’s more complicated than it first appears.

At some point this year, this case will be back in the headlines. It’s a perfect case for the Supreme Court. When two states disagree on how state law or an emergency order affects their residents, the Supreme Court is the logical arbiter.

Paperwork has been filed. The court will read the paperwork, then decide whether to take the case. I predict they’ll take it.

What will be the outcome?

We’ll have to wait and see.

Arthur Vidro’s latest short story, “Which Casino?” appears in the November 2020 issue of Mystery Weekly Magazine.

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