Commentary

In missed opportunity, SCOTUS declines to rule on WFH tax case

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In a disappointing decision, the Supreme Court of the United States (SCOTUS) rejected to hear the case of New Hampshire v. Massachusetts in what could have been a momentous ruling for those who work from home.

The decision came Monday with no collective comment from the justices. Justices Samuel Alito and Clarence Thomas said they would have moved forward with the suit, while the Biden administration recommended the high court stay out of it.

The issue raised in the case is over income taxes paid for remote work. The suit comes from 123,000 Granite Staters who worked in Massachusetts pre-pandemic yet were still faced with the same income tax expenses even after they pivoted to work-from-home.

In other words, they were no longer physically in the state of Massachusetts, yet still had to pay higher income tax to the jurisdiction in which their offices were located.

Of course, New Hampshire has no income tax, which adds a layer of irony to the situation. These citizens performed work physically in New Hampshire, yet still had to pay a 5% income tax to the state of Massachusetts.

The state implemented this “temporary” rule roughly a month after directing non-essential employees to work from home due to COVID-19. On October 16, Massachusetts extended the rule until the end of the year or 90 days after the end of the state of emergency, whichever came first.

Making her case for why the justices should throw out the suit, the U.S. Solicitor General called the Massachusetts tax rule “idiosyncratic” and “temporary.” In reality, though, it is anything but.

The case is as relevant as ever and would have set national standards for how states can tax those who telecommute, as the issue is not exclusive to New England.

Similar lawsuits have been raised in Ohio on the behalf of workers who commute to a different city for work, like Columbus or Cincinnati, and still had to pay higher income tax due to a bill, House Bill (HB) 197, passed in March 2020.

In another, more extreme case, Dr. Manal Morsy is seeking to declare the law unconstitutional in Morsy v. Dumas, as she lives in Pennsylvania but commutes to work in Cleveland. Ms. Morsy’s income was taxed by Cleveland during the pandemic, despite her not having stepped foot in the state of Ohio for over a year.

In its recently passed budget, Ohio actually added tax refunds for remote workers affected by the tax rule, thus backtracking and weakening HB 197.

At least for some workers, working from home is here to stay following the pandemic. According to a recent report by Willis Towers Watson, employers expect about 37% of workers to still be telecommuting at the end of 2021. That would make sense, given the flexibility and ease of remote work.

The issue of how this subset of workers is taxed is not going away anytime soon, and so it would have been an impactful and incredibly significant ruling had the high court taken the case. These unfair, impractical, and unjust tax policies boil down to modern taxation without representation, and they must be addressed sooner than later.

About Nick Linder

Nicholas Linder, of Cincinnati, is a communications Intern for Maine Policy Institute. He is going into his second year of studying finance and public policy analysis at The Ohio State University. On campus, he is involved with Students Consulting for Nonprofit Organizations and Business for Good.

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