Federalism

New Hampshire's Supreme Court Lawsuit Seeking to Prevent Massachusetts from Taxing NH Residents Working Remotely for Massachusetts Firms

The case was filed directly in the Supreme Court under its "original jurisdiction" over cases filed by one state against another. It could have important implications for the future of federalism.

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When the Supreme Court rejected Texas' lawsuit seeking to overturn the election results in Pennsylvania and other swing states last month, many people probably thought we have heard the last of the Supreme Court's "original jurisdiction" over cases filed by one state against another, for a long time to come. But there is in fact another such case on the Court's docket: New Hampshire v. Massachusetts. Like Texas, New Hampshire filed its case directly in the Supreme Court, because the Constitution gives that court original jurisdiction over cases filed by one state against another. Unlike the "Texas Turkey," this case has some real merit, and also has important implications for the future of American federalism. If not for commentators' focus on more dramatic recent events, the case would have attracted a lot more attention than it has so far.

Boston Globe columnist Jeff Jacoby, has a helpful summary of how the case came about:

Freedom from income taxes is a New Hampshire delight: The Granite State is one of nine that don't tax ordinary income. Of course, that benefit doesn't apply to New Hampshire residents who commute to work across the Massachusetts border. Income earned inside Massachusetts by an out-of-state resident is subject to Massachusetts taxes.

What about a New Hampshire resident who used to commute to Massachusetts?

A no-brainer, surely. If you don't live in Massachusetts, and you no longer work in Massachusetts, then Massachusetts has no right to tax your earnings. What could be more self-evident?

Until last spring, that was the law…

Then came the pandemic. Massachusetts declared an emergency and ordered non-essential workplaces to close. Many of the 84,000 New Hampshire residents who had been commuting to jobs in the Bay State switched to working from home. Under the rule that had been in place for decades, Massachusetts could no longer tax their income.

So it invented a new rule.

In April, the Department of Revenue published an "emergency regulation" declaring that any income earned by a nonresident who used to work in Massachusetts but was now telecommuting from out of state "will continue to be treated as Massachusetts source income subject to personal income tax." For the first time ever, Massachusetts was claiming the authority to tax income earned by persons who neither lived nor worked in Massachusetts.

Not surprisingly, New Hampshire strenuously objected to its neighbor's unprecedented tax grab. When Massachusetts refused to reconsider, New Hampshire turned to the Supreme Court, which adjudicates lawsuits between states. The justices are expected to decide this month whether to take the case.

While the new Massachusetts regulation is supposed to be only an "emergency" measure, the state has repeatedly extended it. Moreover, instead of helping to combat the Covid pandemic, the Massachusetts regulation actually exacerbates it, by increasing the cost of working from home (which state authorities otherwise encourage because it reduces the risk of spreading the disease). The state could just as easily claim it is fighting the pandemic by imposing a tax on home food deliveries to New Hampshire residents who used to dine out at restaurants in Massachusetts (thereby enabling the state to regain some of its normal pre-pandemic restaurant tax revenue), or on the use of home Wi-Fi systems by New Hampshire workers who previously used networks in offices located in Massachusetts.

New Hampshire's  motion for leave to a file a complaint in the Supreme Court outlines two theories as to why the Massachusetts rule is unconstitutional: it violates the Dormant Commerce Clause (which prevents states from regulating and taxing economic activity beyond their borders), and the Due Process Clause of the Fourteenth Amendment, which has long been held to bar state taxation of people who neither live nor work within its borders. Both arguments build on one of the bedrock principles of American federalism: that state sovereignty is territorial in nature. States do not have the power to regulate and tax activity beyond their borders.

In its reply, Massachusetts relies heavily on the argument that the new tax rule is just an "emergency" measure limited to preserving the pre-crisis taxation status quo, and thus does not unduly burden interstate commerce, violate the Due Process Clause, or invade New Hampshire's sovereign interests. This argument strike me as problematic, since there is no special emergency exception to the Dormant Commerce Clause, the territoral aspets of the Due Process Clause, or the general ban on states' ability to regulate and tax beyond their borders. Moreover, as already noted, the Massachusetts' new tax rule actually exacerbates the spread of Covid at the margin, by making it more costly for New Hampshire residents employed by Massachusetts firms to work at home.

Ultimately, most of Massachusetts' arguments rely on the notion that the NH workers in question have close connections to the Massachusetts economy and benefit from interacting with it . Therefore the state claims it has a right to keep taxing them as before. For example, Massachusetts points out that it "supports major urban centers that offer employment opportunities and wages on a scale not generally available elsewhere."

Much the same reasoning would justify allowing Massachusetts to tax the income of any employees of Massachusetts businesses, regardless whether those workers have every physically worked in the state or not—indeed, regardless of whether they had even set foot there at any time in their lives. And the logic is not limited to direct employees. After all, independent contractors hired by Massachusetts firms, but doing their work in other states, also sometimes benefit from "employment opportunities" affected by Massachusetts' state policies.

The same points apply to Massachusetts' claim that "non-resident employees also enjoy greater job security as a result of the public services provided by Massachusetts that support and promote the businesses in which those non-residents are employed, including Massachusetts's legal system." Again, this applies to any out-of-state employees of Massachusetts firms, regardless of where they do their work, and regardless of whether there is an emergency going on or not.

As New Hampshire points out in its filing, remote employees who never come to the state seeking to tax them do not use state public services or burden its infrastructure. This undercuts the main standard traditional rationales for taxing out-of-state residents. They are also not eligible for Massachusetts welfare state programs, and the state has every right to continue excluding non-residents from them. I would add that attempting to tax such workers is a blatant example of "taxation without representation," since remote workers obviously do not have the right to vote in Massachusetts state elections.

If Massachusetts prevails on the merits, it could potentially have dire implication for the growing number of people who work as remote employees for firms located in another state. The latter state could tax their income even if they never set foot there. This would also make it much harder for people to "vote with their feet" for states with lower taxes, better public policies, and other advantages. If they try to do so, their former home state could try to keep right on taxing them if they are still employed by the same firm. For reasons noted above, under Massachusetts' logic, it might even do so if they work as independent contractors rather than direct employees.

Massachusetts also argues, at length, that New Hampshire lacks "standing" to file this case because the taxes in question only burden individual New Hampshire residents, not the state itself. To my mind, New Hampshire's response on this point is compelling. It argues that Massachusetts' extraterritorial taxation of its residents necessarily invades New Hampshire's exclusive sovereignty to tax activity within its borders, and reduces the pool of income available for NH itself to tax.

However, the issue of state government standing is a murky one, on which existing precedent is far from a model of clarity. The Supreme Court recently dismissed two important cases filed by state government on standing grounds: the "Texas Turkey" and Trump v. New York (the case where various blue state and local governments challenged Trump's ultimately abortive effort to exclude undocumented immigrants from apportionment counts determining the allocation of representatives between states).

To my mind, New Hampshire v. Massachusetts is easily distinguishable from these two cases because the harm to New Hampshire is much clearer and more direct than in Texas v. Pennsylvania (where there was no real harm to the plaintiff state at all, other than dissatisfaction about the defeat of their preferred candidate in the election) and much more certain than in Trump v. New York (where the Supreme Court denied standing because it was unclear whether the Trump Administration would actually manage to get the data needed to exclude any significant number of undocumented immigrants from the apportionment counts).

However, a majority of justices could potentially decide the standing issue against New Hampshire nonetheless. Standing doctrine is a morass of contradictions generally, and state government standing is arguably an even bigger cesspool than the rest. I wish the Supreme Court would just drain this swamp by abolishing the doctrine of standing entirely. But that isn't going to happen anytime soon.

While New Hampshire v. Massachusetts hasn't attracted much public attention, it has already generated a number of notable amicus briefs supporting New Hampshire. Four states (three "blue" and one "red")—New Jersey, Connecticut, Hawaii, and Iowa, have filed an excellent brief supporting New Hampshire's position on the merits. Not coincidentally, all four have many residents who work remotely for out-of-state firms.

A coalition of ten red states led by Ohio have filed an amicus brief arguing that the Supreme Court cannot refuse to hear "original jurisdiction" state vs. state cases, but must consider them on the merits. The Ohio brief builds on an argument previously defended by Justices Clarence Thomas and Samuel Alito in Nebraska v. Colorado and (a few days after the brief was filed) Texas v. Pennsylvania. I think the Thomas-Alito position has a lot of merit. But seven of nine Supreme Court justices recently rejected it in the Texas case, and I highly doubt they are going to reconsider the issue so soon.

Another brief supporting New Hampshire was filed by prominent tax law scholar Edward Zelinsky. As he describes in his brief, Prof. Zelinsky is a professor at Cardozo Law School in New York City, and also "a Connecticut resident who works from home on a majority of his work days, doing legal re-search and writing." He has, in a previous case, "challenged New York's taxation of his Cardozo salary paid to him for his remote work days in Connecticut."

Assuming it does not adopt the Thomas-Alito position on original jurisdiction, the Supreme Court has many options in this case. It could simply refuse leave to file a complaint, as was done in both Nebraska and Texas, perhaps coupled with a brief statement indicating that New Hampshire lacks standing (if they in fact conclude that is the case). Alternatively, the Court grant leave to file, and issue a more detailed opinion on standing and on the merits (if it concludes NH does in fact have standing). The justices could also grant leave to file and schedule the case for a full oral argument, thereby giving it the level of consideration a case of this magnitude normally deserves.

I hope—and very tentatively expect—that they will choose the latter option. The "Live Free or Die State" deserves to win this important case. At the very least, it is no Texas Turkey that can be lightly dismissed.

We could learn what the Supreme Court intends to do with the case, as early as next Monday. Stay tuned!

 

 

 

 

NEXT: Contra Alan Dershowitz on Late Impeachments

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  1. Having individual NH taxpayers sue Massachusetts over this would only make the jurisdictional issue more vexing, since even though the case directly concerns interstate commerce, the 11th Amendment would appear to prevent any federal court from laying a finger on the case. Would that mean it can only be brought in state court? Of which state? What if the NH and MA supreme courts reach opposite conclusions? Does whichever one ruled first become entitled to “full faith and credit” and thus prevail? Or do we wind up with cases where NH won’t extradite the taxpayer, but he had better not set foot in MA?

    The issue is much older than Covid-19, and the prevailing rule up to now appears to be that yes, the income is considered earned in the state where the employer is located and thus both states can tax it. But if the employee has never even visited there it may be a novel fact pattern. The decision is likely to matter, though: many employees who did not trust employees to work from home before Covid will likely continue doing so now that they’ve tried it for a year.

    1. On original jurisdiction: The constitution does not distinguish interstate disputes. The constitution gives original jurisdiction in any case “where the State is a party.”

      If original jurisdiction is suddenly mandatory … wouldn’t that involve reworking, well, everything? If I sue the state, that case must be accepted by the Supreme Court? I suppose the 11th amendment could bar it, but that isn’t really how the 11th amendment has been interpreted, has it? If I sue a state official in his official capacity … is the state a party?

      I dont quite understand how this is suppose to work without opening the floodgate to thousands of cases that must be accepted by the Supreme Court, unless the court makes a distinction. And I dont know how they would justify that.

      1. The argument isn’t for all all original jurisdiction cases but just those that are between states. It doesn’t really matter that the constitution doesn’t differentiate because those cases are obvious and it’s a procedural matter anyway. The SC could just choose to always hear lawsuits between states; the argument is that they should.

    2. Just thinking out loud, but wouldn’t Ex Parte Young allow a suit to enjoin state officials from collecting taxes?

      1. Would there be mandatory jurisdiction in that case under the proposed theory?

      2. What about 28 U.S.C. § 1341?

        1. Good point. However, that statute provides:

          “The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.”

          The issue would be whether each state has a “plain, speedy and efficient remedy” in its own courts.

          1. “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States”

            New Hampshire has no sales tax on tires, Taxachusetts has a 6.25%, and Taxachusetts tried to require NH tire shops to collect it from customers with Mass plates on the vehicle.

            In both cases, what power does the Commonwealth have over an individual who is not physically IN the Commonwealth? Is the fact you aren’t not an “immunity”?

            So how would it be relevant that Taxachusetts has a “plain, speedy, and efficient remedy” in its courts if it lacks jurisdiction over the taxpayer?

            For that matter, what is to prevent Charlie Parker from decreeing that *every* NH taxpayer owes MA income tax because the jobs in NH wouldn’t be there but for their proximity to Boston? After all, the airport in Manchester, NH (MHT) is officially known as the Manchester-Boston Regional Airport.

            1. Well, for one thing, because Charlie Baker might object.

            2. Hell, back in the 1600 southern New Hampshire was part of Massachusetts. That should make them all subject to MA state tax

            3. “In both cases, what power does the Commonwealth have over an individual who is not physically IN the Commonwealth?”

              If a business solicits business from customers who ARE “IN the Commonwealth” they shouldn’t oughtta be complaining that the state wants to long-arm them. If they really object to acting as taxing agents for MA, they could decline to work on cars registered in MA.

    3. On the procedural and 11th amendment issues, start with International Shoe.

    4. If the Supreme Court refuses to hear the case then Massachusetts DOR assesses taxes and asks the IRS to take the amount from the New Hampshire residents’ federal tax refunds. Plus interest, penalties, fees, and random amounts they collect on the grounds that “we don’t care, we don’t have to”. (Mass DOR is the combination of evil and incompetent you expect from a government agency; the IRS is a wise and benevolent angel in comparison.) You probably have to do a legal dance in Massachusetts starting with exactly the right form of administrative protest and continuing to jump through hoops with precise timing when you don’t get a response. But by the time they take your money it’s likely to be too late to protest. And when state courts refuse your appeal on procedural grounds the U.S. Supreme Court will not review that decision.

      So I really hope this case is heard.

    5. At least for this case, it is highly probable that the employees did set foot in MA before the March (or April lockdowns). So clearly MA has a well defined tax interest in fiscal 2020. If the employee is use the equipment of a MA employer or the VPN provided by the MA employer, MA also has a bona fide claim of jurisdiction.
      It is hard to imagine how a dispute does not ned up in federal court.

  2. I’m sure Delaware will be watching this closely. After all, their taxes pay for the fabulous infrastructure enabling corporate registration from anywhere.

    1. The advantages of incorporating in Delaware have diminished, and a lot of interstate corporations choose to incorporate in South Dakota now.

  3. “For reasons noted above, under Massachusetts’ logic, it might even do so if they work as independent contractors rather than direct employees.”

    I did a lot of work as an independent contractor, and several states have tax laws alleging the right to my money because some branch of a client was in their grasp. I was able to just not take a contract for any clients in one of those states, because there were always alternative clients available. I suspect these workers are more constrained, but I would suggest to them to form a corporation and switch to a business to business model rather than working for wages.

  4. With the shift to remote working at home for many workers, especially higher-paid white collar workers, such disputes are going to become more common, as the loser states try to claw back revenue from winners.

    I live in a medium sized New Jersey town (it calls itself a City, but that is just bragging, IMO). There is a train station that services the surrounding two or three towns. Most of the workers were heading into Manhattan. Before COVID, the parking spots around it were packed If you got there after 9:15 am in a weekday, you could only park 1/2 a mile away or more.

    I drove by there the other day in the middle of the day. There were maybe 10 cars there, and you could find a spot only 50 feet from the train.

    So there has been a major shift of workers from NYC to NJ. Want to bet that NY will try to tax them?

      1. Nope. However, I am sure Summit, and many other NJ towns, are in a similar situation.

        1. Summit is one I’ve thought of because it has (or at least, had) sky-high housing prices by virtue of being on the NE corridor. If that is no longer a huge selling point, being able to command 3x the cost of houses in a town like Kinnelon, only 20 miles away, might not hold.

  5. If the “Massachusetts” company is incorporated outside of Massachusetts and their servers are outside of Massachusetts, then what right does Massachusetts have to levy a tax on the workers??

    1. The theory seems to be that their principal place of business is in MA, and that is where they receive both their direction as employees and their paychecks.

      1. No, the theory is that the “remote” work is “remote from” the Massachusetts office where they would be physically working had Massachusetts not ordered them not to.

      2. My theory is corruption needs money to throw at voters, and this just won’t due to have the vitcims fleeing, so cover arguments must be raised.

    2. The workers physically traveled to MA to work during the fiscal year.

  6. What is the legal definition of an “emergency”? Can every state now declare an emergency for tax purposes?

    1. Sure. “We want your cash” is always an emergency.

    2. It shows the extent to which power-mad Governors have exploited these “emergency” powers…

    3. It’s in the Massachusetts Civil Defense Act, Chapter 639 of the Acts of 1950 as amended (not codified in the General Laws). The list of triggers of an “emergency” starts with a formal declaration of war and ends with lack of rain. The law is general enough to allow anything to trigger an emergency. (And the Supreme Judicial Court has specifically found COVID-19 to be a legitimate reason.) When an emergency is declared the governor can rule by decree. The Act grants the governor all powers which it is in the power of the legislature to grant. The Supreme Judicial Court has declined to read a nondelegation doctrine into the state constitution. But the governor can’t create new felonies, I think; violation of an order of the governor is only punishable as a misdemeanor.

      1. I think I answered the wrong question. An “emergency” in the context of a Massachusetts regulation is whatever the agency says is an emergency. An emergency regulation is exempt from notice and comment rules and goes into effect immediately. Judicial review is available to decide if the “emergency” situation really called for immediate action. If it was an action under the governor’s emergency powers what I said above applies.

  7. Where is the work being done? I worked for 15 years living in NY for a Memphis based company…I’ll pay TN state taxes!

    1. There’s a GM plant in Detroit, which has a corner sticking out into Hamtramck, an odd city completely inside Detroit, like Vaticin City in Italy.

      Anyway, Detroit, like all large, bloated, corrupt cities, has an income tax, and Hamtramck does not.

      90% of the workers work in that corner.

    2. For a dozen years, I was paid by a IL corporation and lived in MA and in CA. I never paid taxes to IL, but only to the state in which I resided.

  8. Some of the arguments made would seem to apply to international taxation of foreigners with US income as well as to interstate taxation. It will be interesting to see whether the Court relies on any of them.

    1. Massachusetts actually does worse.

      I don’t know the exact details, but have heard of MA residents who went to Europe and upon return, being taxed by MA for all of their FOREIGN earnings.

      1. No surprise.
        My states of residence always taxed my foreign earnings as filed on my federal tax form.

  9. So it’s the “Live Free or Die” state versus the “open you wallet wider, clinger” state.

    1. I mean “open your wallet widah, clingah.”

      1. Yes and no. I’m more sympathetic to NH than I am to MA but here’s the argument on the other side: living in NH and working for a MA company allows one to benefit from infrastructure paid for by MA taxpayers that helps create these jobs in the first place. There’s a reason a majority of NH’s population lives within 40 miles of the MA border. And at some point it’s not unfair to expect the people benefiting from that infrastructure to help pay for it.

        1. Then, as the post seems to intimate, these NH workers should get a vote in Massachusetts elections.

          1. There are lots of people who pay taxes without having a vote. Minors. Convicted felons. Non citizens who are here on green cards. Non citizens who buy American investments. Tourists who pay sales taxes. Do they all get votes too?

            1. I’m adapting Somin’s analysis. If he’s wrong then so am I.

              It would hardly be the first time Somin was wrong.

            2. I’m adapting Somin’s analysis. If he’s wrong so am I.

              Wouldn’t be the first time he was wrong.

          2. No unless they claim their legal residence is in MA (and supply that address).

        2. This seems to make a temporal error, among others. Just because they *once* benefited from MA infrastructure doesn’t mean they continue to do so, nor does *former* benefit justify paying future taxes (otherwise you would always owe taxes in every state you’ve ever lived). It’s hardly clear what taxpayer funded infrastructure those employees are benefiting from now. Servers are paid for by a company, not the state, as is most (if not all) internet infrastructure. And those employees pay for their use of the internet with an utility provider. If they’re not commuting into MA, they’re not currently using *any* MA infrastructure. Nor is it even clear what state-funded infrastructure the MA company is truly benefiting from now, especially with regard to those employees.

          It is also unproven that the choice of MA as a location was driven by anything MA chose to fund with taxpayer money – they’re assuming the conclusion here. The choice of MA could well be an historical accident completely unrelated to the business needs of the company. It’s not like Silicon Valley ended up in California because California did anything special to attract the tech industry – it’s an historical accident caused by individual actions (starting with a Stanford administrator after WW2).

          The rightness of NH’s position is easily demonstrated. Imagine an MA-based company hired someone today located in NH, who worked remotely for 100% of their hours. MA could not tax that worker’s income. Why does someone who previously commuted into MA, but today works 100% of their hours from home in NH, differently situated than that hypothetical new hire?

          1. No AWS or Azure servers are in Massachusetts. Not sure about Google or Oracle.

            So it depends on who the company you work for gets it’s cloud services from

        3. Why do NH residents paying MA taxes have to pay OUT OF STATE tuition rates to send their kids to MA state universities while illegal aliens get in-state rates?

          1. “Why do NH residents paying MA taxes have to pay OUT OF STATE tuition rates to send their kids to MA state universities while illegal aliens get in-state rates?”

            Because the illegal aliens you’re complaining about live in MA and pay in-state tuition rates based on where they actually live, which is in-state. Federal anti-discrimination law prevents the states from treating people differently based on race, religion, sex or national origin.

        4. ” There’s a reason a majority of NH’s population lives within 40 miles of the MA border.”

          Yes, they all moved up there 30-50 years ago — they all fled Massachusetts.

          First it was those in their ’50s who would be retiring in 10 years and they were willing to commute for a few years. A lot of teachers did this. Then in the 1990’s it was all the young people who could afford to buy in NH rather than rent in the MA towns were they had grown up.

          Not having a sales tax led to shopping malls being built as close to the MA border as possible — as in a few hundred feet from it in some cases. Those brought people to work in them. And you gotta pay taxes on money earned in NH if you still live in MA…

          It’s like saying that there are a lot of Cubans in Miami….

        5. What infrastructure are they benefiting from by remote work in NH?
          Not the roads – they aren’t driving.
          Not the buildings – they aren’t present.
          Not the utilities – they aren’t using water, sewer, or electricity.
          Not the ‘services’ of police, fire, etc, either – none of those service them in NH.

          Are you claiming that the business benefits, and they benefit from the business, therefore they owe the state income taxes?

          1. Where does the income come from. If the business they work for provides services in NH, and the employee only does work basedin NH, then NH has a point. On the other hand, for all other cases, MA has a point in that the worker’s work creates income at the place where the business is able to turn it into billings,and eventually, into revenue, which is at headquarters, not in the field.

            1. I work for a company that does business in all 50 states.
              I work in a different state than the location of the HQ.
              I travel to other states occasionally for work – but not the HQ state.
              I do remote work in several other states that I do not visit – but not the HQ state.

              How many and which states do I owe income taxes to, and why?

              Your bizarre “creates income” and “turns into billings” ‘logic’ lacks coherence or clarity, and you really need to work on it – it’s just “you didn’t build that” writ large-government-style.

        6. Companies have offices all over. Shall satellite office workers be taxed by the home office state because their infrastructure makes it possible?

          Of course, this all skips discussion that bloated governments grow up around financial success, then declare themselves the cause of it, rather than a parasiticsl infection.

  10. Suppose NH were to institute an income tax, or MA were to try this on a state which already has an income tax. Would that prevent MA from taxing an employee who is already being taxed?

    1. States with income taxes (at least MA & ME) allow you to deduct what you paid to another state from what is due that state.

      In other words, if your own state’s income tax is higher than the state in which you worked, you only have to pay the difference between the two. You do have to file in both states, though.

    2. “Suppose NH were to institute an income tax, or MA were to try this on a state which already has an income tax. Would that prevent MA from taxing an employee who is already being taxed?”

      Pretty much everybody being taxed by Massachusetts is also being taxed by the United States. The fact that there are multiple taxes levied on the same income doesn’t render either one invalid, unless they combine to exceed a 100% tax rate.

  11. You can bet your ass that under a Democratic administration, they will find a way to allow remote workers to be taxed. NH residents who formerly worked in MA will have to quit and find new jobs with companies not resident in MA.

    Will MA try to tax workers in India, Czech Republic, China, etc., who work for MA companies, or are managed by people in MA?

    1. They really don’t want to go down that road, because the first thing every company will do, is incorporate in Texas. California and New York got there way back when telework was rare and got to tax teleworkers that lived in their states but worked for companies in other states. The precedent has already been set and now they get to choke on it.

    2. What MA doesn’t realize is that the Boston rental market is imploding.

      All these companies have to do is move to NH and then MA doesn’t get their corporate taxes either.

      1. “All these companies have to do is move to NH and then MA doesn’t get their corporate taxes either.”

        If the companies could get everything they needed in NH. The thing is, not everybody wants to live in a low-tax. low-service place. Young people planning families like to live in places that have good schools and parks for their kids, and good libraries for the kids and themselves.

        Meanwhile, businesses like to be located in places that have good transportation infrastructure, to bring raw materials in and finished products out.

        1. Nothing wrong with NH schools that I remember. (Admittedly I was pretty young at the time, but while my parents have disparaged the available public education other places I grew up, I’ve never heard a word against NH’s).

          And most business in the US isn’t manufacturing – so raw material and finished product shipping isn’t exactly a priority. (And indeed, NH at least used to have paper mills – so there’s certainly some manufacturing infrastructure available there). Historically manufacturing is one of the more broadly distributed types of business – lots of towns and cities grew up around a mill or factory. The kinds of businesses that substantially prefer to do business in cities aren’t manufacturing.

          And when we talk about NH residents commuting to MA, let’s be honest, we’re talking about Boston and its surrounding suburbs. And the people commuting aren’t working in factories.

          1. Are you done picking nits with things I didn’t say?

  12. The leftist controlled blue states historically benefited from being the first to be developed, so there were a lot of jobs there and people had to put up with their ridiculous taxes and other nonsense because of the jobs. Well, that’s over now, and will likely remain over for quite some time, so there’s no longer any reason to pay 9%-13% to these places when there are very nice places not that far away that are much cheaper.

    For example, NYC will levy about 13% after state and local taxes are counted in. But you can live in Pennsylvania and only pay 3%. Even if you end up needing to come to the office once every two weeks, it’s not very far.

    Places like California and Hawaii are somewhat insulated because it has a beautiful climate, but why would anyone pick New York or New Jersey if they didn’t have to?

    1. Does it occur to you to wonder why it is that blue states were the first to be developed? It wasn’t an accident.

      1. In a lot of cases, what places developed are historical accidents. Silicon Valleys location in California is an historical accident that the state government had nothing to do with. It would be especially hard to demonstrate that specific individual government policy drives these sorts of outcomes.

        However, these places weren’t always regulatory hellholes. Rather, it’s vastly more likely their current political landscape is the result of certain developmental forces (and historical accidents) than that current politics was somehow determinative of those developmental forces in the past. (Causal arrows only go forward in time, after all). They weren’t always ‘blue states’.

        Now, there is broad evidence that institutions matter at a higher level of generality – broader things like rule of law and private property. See Acemoglu and Robinson’s book Why Nations Fail. Or just compare Nogales, Arizona to Nogales, Mexico, which are literally two halves of the same city, split by an international border. But getting down to the level of specific state policies is impossible – both New York and Texas recognize similar private property (to reasonably similar degrees) and provide for rule of law, and have a long history of substantially doing so.

        The historical dimension is also important. Making bad law in the last year, 10 years, or possibly even 50 years, isn’t enough to undo 150 years of reasonably good law before that. And goodness here isn’t an absolute measure, but a relative measure compared to the rest of the country and the world. The corrosive effects of relatively bad law take significant time to manifest.)

        1. James Michael Curley largely destroyed Boston — it was in sad shape in the 1960s-1970’s — and the economic boom is only a product of the last 30 years.

        2. Silicon Valley grew up around Stanford. Just as the MA Rt 128 tech center grew up around MIT and Harvard. Simple cause and effect of faculty starting or providing leadership in tech companies

          1. But *why Stanford* and not Harvard or Princeton or the University of Chicago or any of a number of equally good schools? That’s historical accident.

            One provost specifically decided to encourage entrepreneurship, and that decision had outsized consequences. That’s historical accident. Any of a large number of similar institutions could have done it. One man caused Stanford to be the one to do it.

        3. ” Silicon Valleys location in California is an historical accident that the state government had nothing to do with. It would be especially hard to demonstrate that specific individual government policy drives these sorts of outcomes.”

          Silicon Valley is near Stanford University. Stanford University attracted smart people to its engineering and business schools and they proceeded to create engineering businesses that flourished.

          1. It’s more than that. There was a particular provost after WW2 who specifically encouraged Stanford graduates to start companies (like Hewlett and Packard). That’s an historical accident. It could have been any reasonably good college. It didn’t have to be Stanford.

            Nor did it have anything to do with government policy.

            1. Next you’re going to try and tell us the tech boom in Redmond wasn’t because of wise choices by the Redmond city council.

              1. The tech boom in Redmond comes because two businesses chose to relocate to Redmond. NOA and Microsoft both started somewhere else.

                Redmond is across the lake from the University of Washington. Meanwhile, Intel has a heavy concentration in Oregon because they found a good supply of technically-trained workers there, because of the original presence of Tektronix, which itself launched a number of other tech businesses in the area.

      2. Boston had a natural harbor ideal for sail — and was far bigger than NYC. Then came the steam tug and the inherent efficiency of NYC’s rivers. Hartford was (and is) a major N/S and E/W junction.

        It was geology.

        1. Boston was never far bigger than NYC.

            1. Boston wasn’t founded yet.

              1. Plymouth colony was.

      3. Ocean and river locations good for shipping. They become financially well to do, being bottlenecks for the rest of the nation’s land mass, originally farming but noe manufacturing as well.

        And financial hubs due to same. Their business is the nation as a whole, and they are the center of it for historical reasons.

        Being successful, government bloat and corruption grows around it, then pretends, to justify its corruption and bloat, to be the cause of the financial success.

        But it is just a parasitr. Evidence: empires collapse as new centers of empire form on the outskirts, less (self-)burdened. Thus empires march across the surface of the Earth over centuries.

        1. Don’t forget that trains can’t climb hills like trucks can — where a highway can have a 6% grade, even a 1% is a real problem for trains, requiring far more locomotives than level track.

          So geography affected the railroads too — and all east/west traffic has to cross two mountain ranges — the Appalachians in the east and the Rockies in the west.

          1. Once you get past the Rockies, you also have to get through the Cascades and the Coast ranges, if your goal was an ocean port on the Pacific.

    2. I grew up on Long Island. It’s quite nice from the start of spring to mid-autumn, and most winters aren’t that snowy. The shorelines of Jersey and CT are similarly pleasant, and a mere train ride from Broadway. It doesn’t get as nasty hot in the summer as it does in the Southeast and Southwest, and when it gets above 90 F the shore is not far away. Hell, my family once owned a small slice of a beach. We didn’t always get skatable ice in the winter, but I played hockey on a cove that extended from a lake near my house, when I was a kid. I claim to be the worst pond hockey goalie to ever play on skates. ( Kids who played in their boots don’t count.) Remote work makes winter less of a problem. Instarcart and other services mean I don’t have to go to the store if I don’t want to, so I plan ahead based on the weather report and stay home. We are even allowed delivery of alcohol, nowadays. Now, WI, where spring is the last two weeks of May and I’ve been stuck in ice-storm-spawned traffic jams in early October, may take a hit. Still, some like to snowmobile, cross-country ski and icefish. De gustibus…

  13. “he state could just as easily claim it is fighting the pandemic by imposing a tax on home food deliveries to New Hampshire residents who used to dine out at restaurants in Massachusetts (thereby enabling the state to regain some of its normal pre-pandemic restaurant tax revenue), or on the use of home Wi-Fi systems by New Hampshire workers who previously used networks in offices located in Massachusetts.”

    Don’t give the Mass DOR any ideas…

    Back when Michael Dukakis was Governor, they literally sent Mass State Troopers up to the parking lots of the NH State Liquor Stores to spy on MA residents buying booze (NH has lower taxes). MA then used the plate numbers to bill the MA residents for the MA tax on the booze.

    NH wound up literally having to arrest the Mass State Troopers for trespassing.

    1. NH has no income tax nor sales tax. Makes you wonder how they can pay the bills.

      1. They do tax dividends and interest, and property taxes are pretty high. My guess is some of the money from that goes to the state. Anyone know about licensing fees?

        1. Also from WIkipedia: “New Hampshire is an alcoholic beverage control state, and through the State Liquor Commission it takes in $100 million from the sale and distribution of liquor.”

      2. According to Tax Foundation.org New Hampshire is the state most heavily reliant on property taxes.

      3. Massachusetts spends an average of $675,939 per mile of state controlled highway, the national average is $160,997 and NH spends far less.

        MA mandates police officers to supervise all highway construction jobs, the other 49 states don’t. The largess starts there and continues…

        NH is more frugal.

      4. High property taxes.

  14. “Massachusetts also argues, at length, that New Hampshire lacks “standing” to file this case because the taxes in question only burden individual New Hampshire residents

    And Taxachusetts is being hypocritical. In _Georgia v. Tennessee Copper Co., 206 U.S. 230, 237 (1907)_, cited by SCOTUS to give Massachusetts standing in _Mass v. EPA_, stated:

    “”The case has been argued largely as if it were one between two private parties; but it is not. The very elements that would be relied upon in a suit between fellow-citizens as a ground for equitable relief are wanting here. The State owns very little of the territory alleged to be affected, and the damage to it capable of estimate in money, possibly, at least, is small. This is a suit by a State for an injury to it in its capacity of quasi-sovereign. In that capacity the State has an interest independent of and behind the titles of its citizens, in all the earth and air within its domain. It has the last word as to whether its mountains shall be stripped of their forests and its inhabitants shall breathe pure air.” [emphasis added]

    New Hampshire has a police power to protect its citizens from harm and if MA is going to argue that this police power includes the ability to sue the EPA over CO2 (on behalf of its citizens) then how can it then not agree that NH has a similar right?

    1. “if MA is going to argue that this police power includes the ability to sue the EPA over CO2 (on behalf of its citizens) then how can it then not agree that NH has a similar right?”

      I’m pretty sure the Massachusetts state government agrees that NH could file a similar lawsuit, to the extent that NH citizens are harmed by carbon dioxide pollution.

  15. _New Hampshire v. Maine, 426 U.S. 363 (1977)_ was an original jurisdiction case — NH was fighting for the right of their lobstermen to set traps in the river that ran between the two states.

  16. Interesting to view this through the lens of how we treat different types of workers. If you are a NH resident employed in MA and a white collar worker you likely have the option to work remotely. If you live in NH but commute to a manufacturing or retail job in MA you don’t have the option and you are stuck paying MA taxes.

  17. Supreme Court, because the Constitution gives that court original jurisdiction over cases filed by one state against another.

    There’s a federal statute that says that. The constitution says that the Supreme Court shall have original jurisdiction in an case where a state is a party. Note the singular form in the constitutional text.

    Now, the 11th amendment bars federal court jurisdiction over suits by citizens of state A against state B. But that bar would not apply to a suit by citizens of state A against state A.

    So, not withstanding the federal statute, the constitutional text should still give the US Supreme Court original jurisdiction in a suit against state A by citizens of state A.

    1. The 11th amendment is one of those laws that doesn’t mean what it says. (As construed by courts through the years.) You can’t sue your own state in federal court except in limited cases where Congress has eliminated sovereign immunity.

      1. “You can’t sue your own state in federal court except in limited cases where Congress has eliminated sovereign immunity.”

        But in those cases, the Supreme Court would have original jurisdiction.

  18. “A no-brainer, surely. If you don’t live in Massachusetts, and you no longer work in Massachusetts, then Massachusetts has no right to tax your earnings. What could be more self-evident?”

    Something that is actually self-evident could be more self-evident. If the paycheck comes from Massachusetts, then Massachusetts can tax it.
    the alternative would allow out-of-state workers to avoid income tax by the simple expedient of taking their checks home before cashing them.

    1. States could follow the precedent of sales tax and use tax, imposing a payroll tax with offsets for existing employment taxes.

    2. ““A no-brainer, surely. If you don’t live in Massachusetts, and you no longer work in Massachusetts, then Massachusetts has no right to tax your earnings. What could be more self-evident?””

      Not a no-brainer at all, nor is it in anyway self evident.

      The general rule for income taxes is that income is taxed where it is earned, not where the earner lives.

      If you live in state A but commute to work in state B, then unless state’s A and B have a reciprocal tax agreement, you owe income tax to state B, not State A.

      Philadelphia has a local income tax. If your employer sends you on a business trip to Philadelphia for a week, you will owe Philadelphia income taxes on your earnings for that week.

      Most of the big accounting firms are partnerships not corporations, because of the way partnership earnings are assigned to the partners, a good number of those partners have to file state income tax returns in all 50 states.

  19. “If the paycheck comes from Massachusetts, then Massachusetts can tax it.”
    Not clear at all.

    1. sorry, I forgot to account for subnormal intelligence.

  20. I can’t speak with any kind of authority regarding NH vs. MA (from a vantage point of several thousand miles away for most of my life), but I did live near a state border for a long time. WA has sales tax but no income tax, and OR has income tax but no sales tax. OR charges income tax on income earned in OR, but WA for a long time exempted Oregon residents from paying WA sales tax. I believe the border area merchants lobbied for this, because they couldn’t compete on price with merchants across the border if they had to levy sales tax. In the actual border areas, all you had to do to claim the exemption was show an OR driver license. In other parts of the state, the exemption was still law but merchants weren’t as familiar with it. There were some other differences in state laws that created some opportunity for arbitrage. For example, registering a vehicle in WA had a price tag based in part on the value of the vehicle, but registering a vehicle in OR had a flat fee. Lots of people who lived in WA would find a way to register their car in OR. WA tried to crack down on this by monitoring all the cars that crossed the river at rush hour, going to work in Oregon in the morning and coming home in the evening. Eventually, flat vehicle registration fees became the law in WA.

  21. “ making it more costly for New Hampshire residents employed by Massachusetts firms to work at home.”

    This doesn’t make sense. This policy is neutral with respect to where the employee works. They wouldn’t be taxed less if they work in MA.

    I have been a field employee for many years while working in Texas. The distinction between “field” and “remote” tends to be whether it’s for the benefit of the employee or the employer.

    MA could reasonably argue that a NH resident that convinces the MA employer to let them work from home remains a MA employee for tax purposes.

    But in this case the NH employee now works from home for the benefit of the employer and the state of MA. This would argue strongly for treating them like NH employees.

    A key fact would be whether the employers have registered as NH employers. My employers have always had to register with each of the states where they have field based employees.

    So, I would argue that this could go either way. It’s a MA role and the employee agreed to employment by a MA employer. Therefore they pay MA tax.

    This changes if the MA employer registers as a NH business and reclassified the roles as remote. But if they do that, they can’t start demanding the employees commute later in the year.

  22. If the US Supreme Court declines the case, New Hampshire should pick a random 50,000 names of Bostonians and charge each a head tax of $100,000. Whether this is legal can then be adjudicated in the New Hampshire courts.

    1. Assessing a tax and actually collecting it are radically different things.

  23. This dispute goes back decades. Massachusetts used to post state troopers in the parking lots of NH liquor stores and follow buyers back into the state to pull them over and fine them. The NH governor ordered the Mass police arrested: https://www.washingtonpost.com/archive/business/1978/08/25/the-great-liquor-war/a3147daa-b038-4d38-877c-bef38837bd65/

    Also take a look at the Pheasant Lane Mall in Nashua on google maps – you’ll see that the store that is now the JC Penny has an odd pentagonal shape. That’s because due to a surveying error in 1986 when the mall was built the store pierced the state border into Massachusetts by 6 feet, and the tax authorities said that as a result, the entire mall was obligated to charge Massachusetts state sales tax. Instead, the architects decided to lop off that corner of the building to ensure that the entire thing was solely in NH.

  24. That is a great step taken by supreme court to prevent that massive blunders. this will help us and by the way JustProTech is a company that updates its users with the technology and reviews. We are providing all the informations related to Tech. https://justprotech.com/

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