White House backs Massachusetts push to tax remote workers in New Hampshire
The Biden administration has intervened to ask the U.S. Supreme Court to decline to take up New Hampshire’s lawsuit against Massachusetts.
For the better part of a year, New Hampshire and Massachusetts have been locked in a legal battle over Massachusetts’ decision to levy an income tax on New Hampshire residents who work remotely for Massachusetts companies.
Now, New Hampshire’s legal challenge to stop the remote work tax has attracted a new opponent: the Biden administration.
The Biden Justice Department recently filed an amicus curiae brief with the U.S. Supreme Court urging the Court to decline to hear New Hampshire’s lawsuit against Massachusetts. The brief argues that “[t]his is not an appropriate case for the exercise of this Court’s original jurisdiction.”
“Try as they might, overreach by Washington politicians and efforts by the Biden administration will not deter NH from fighting against Massachusetts’ unconstitutional attempt to tax our citizens,” tweeted Gov. Chris Sununu in response to the amicus brief. “We remain confident that the Supreme Court will hear our case and that we will win.”
New Hampshire is one of only nine states that do not have a state income tax. And the only state in the nation with no income tax or sales tax.
New Hampshire argues Massachusetts’ policy “unilaterally impose[s] the precise tax on New Hampshire residents that New Hampshire itself has consistently rejected.” This threatens New Hampshire’s state sovereignty and counters the Granite State’s competitive tax code, which has historically attracted workers and business investment from the Bay State.
But in the view of the Biden administration, the concern that “the Massachusetts tax rule will create incentives for individuals to behave in ways that might ultimately harm New Hampshire” is not “sufficiently direct or serious” to justify action from the Supreme Court.
Massachusetts implemented the remote work tax in 2020, as many of the more than 100,000 New Hampshire workers who had previously commuted to Massachusetts chose to work from home due to the COVID-19 pandemic.
When Massachusetts refused to budge and roll back the policy, New Hampshire decided to seek relief from the U.S. Supreme Court. New Hampshire is alleging Massachusetts’ tax violated two clauses of the U.S. Constitution: the Commerce Clause, by burdening interstate commerce, and the Fourteenth Amendment’s Due Process Clause, by unlawfully confiscating income to which Massachusetts has no right.
The remote work tax is set to expire 90 days after the date when Gov. Charlie Baker ends Massachusetts’ pandemic State of Emergency. Baker says he plans to do so June 15. Granite Staters subject to the Massachusetts tax will need to pay it on all income earned between March 10, 2020, and the expiration of the policy.
New Hampshire argues that not only does the remote work tax undermine the state’s unique and attractive economic conditions, but it is also an issue of national importance, because other states may take the U.S. Supreme Court’s silence on the matter as permission to implement their own taxes across state lines.
“It’s unclear. It’s punitive. It’s also one of these things that’s just so counterintuitive,” said Peter Kimpton, a New Hampshire resident who has been affected by the policy.
“I’m calling it a fiduciary panic on Beacon Hill. I believe everybody is scrambling, recognizing there’s going to be a massive tax revenue shortfall. And so they are looking at how they can offset some of this shortfall,” headded.
The taxation of residents of New Hampshire with no physical presence in Massachusetts sets a troubling precedent.
“The non-resident telecommuter is an easy target because who’s going to speak up for us? Who is my defender on Beacon Hill? It feels like I’m being punished for keeping my job,” said Kimpton.
By commuting to Massachusetts, New Hampshire workers sacrifice their income-tax free earnings. But as long as they’re working in their home state, that burden should remain on the other side of the border.