The governor of New Hampshire said New Yorkers are entering the state because of high taxes and fears for their safety amid the Covid-19 crisis.
“We are booming,” New Hampshire Gov. Chris Sununu told CNBC. “People come from all over the country, especially in the Northeast Polder. You’re in New York, you have a mayor who does not know what he’s doing. You have years of terrible policies from Albany. People have choices and 2020 brings them to they decide. It’s like they put up a big sign on the Brooklyn Bridge that says ‘last out, turn out the lights’. “
New Hampshire’s real estate sells fast, Sununu said, adding that he often gets calls from companies looking for the state’s “Live Free or Die.”
One problem that some of the new residents of his state may face is that they continue to work for employers outside the state, as many companies allow people to work from home to prevent the spread of coronavirus.
The Republican governor said New York, Massachusetts and other high-tax states “pickpocketing” New Hampshire residents through taxes from officials who no longer commute to their states to work.
Sununu said his attorney general is reviewing a Massachusetts decision to continue taxing employees who once commuted to Massachusetts but worked in the home pandemic. He said high-tax states like New York have no right to tax-free people living or working in their state.
“When it comes to New York, Massachusetts, California, trying to get the pockets of people in New Hampshire, we will stand against them,” Sununu said. “They are coming to our citizens and we are going to have a fight.”
In March, Massachusetts introduced a rule that would estimate estimates of state workers who were accustomed to commuting to Massachusetts. The rule was recently extended, possibly until the end of the year. The state said the rule was intended to help companies avoid having to upgrade their payment systems.
Sununu said it is unfair to residents of his state and it may be illegal. Before Covid, more than 80,000 New Hampshire residents commuted to Massachusetts – many to Boston.
Taxpayers can often get credit on their state tax for taxes paid to another jurisdiction. But New Hampshire does not have a broad income tax, so its residents can not apply for credit from Massachusetts taxes. The top income tax rate in Massachusetts is 5.05%.
“You are not starting to tax people across the border,” Sununu said. “You do not create new rules and gimmicks.”
The fight is the first of many that is likely to erupt between states over how to deal with former commuters during the pandemic. Each state has different rules about how they typically treat workers outside of state. But the most aggressive states, such as New York and California, have said they will continue to enforce their tax policy for out-of-state states – even if those former commuters no longer make the trip to the office.
With so many states running out of income, some workers could eventually be doubly taxed by the state in which they once worked, and the state in which they have lived and worked since the pandemic.
It is unclear if the efforts in New Hampshire in court will end. The state has a long history of being able to defend its residents from other tax claims, not always with success. It fights efforts of other states with sales taxes to require companies outside their borders to collect and pay a sales tax namely. New Hampshire finally had to comply with the 2018 Supreme Court decision in South Dakota v. Wayfair, though the state legislature requires each state as a local tax administration to inform the Attorney General of New Hampshire first.
Tax experts say the situation raises a bigger question about how states will tax workers in a new era of remote work.
“In the case of New Hampshire, you have taxpayers whose place of residence and place of work is now in New Hampshire and they have no foothold in Massachusetts,” said Jared Walczak, vice president of state projects for the Tax Foundation. “Massachusetts claims that because their office space is still there, they can tax.”
For New York, the cost of any change or federal law could be costly. It collects nearly one-fifth of its tax revenue from commuters. Governor Andrew Cuomo has said that efforts by Congress – including a proposal by Senator John Thune – to limit state resources to allow taxpayers to tax “could be very costly” for New York City.
However, Walczak said that New York’s combined efforts to tax people who do not live in New York and have not been able to work there will pay off in the long run, causing companies to move their offices to states with lower taxes than no taxes.
“When a much larger percentage of a company’s workforce is remote, the location of their office is less and less important,” he said. “So if you’re a small business in Manhattan, and now 80% of your employees work, and your employees get double taxed, there can be a really strong argument for moving to New Jersey or another state, where your employees be taxed only once. “
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