The governor of New Hampshire said New Yorkers were pouring into the state due to high taxes and fear for their safety amid the Covid-19 crisis.
New Hampshire Governor Chris Sununu told CNBC. “People come from all over the country, especially in the Northeast. You’re in New York, you have a mayor who doesn’t know what he’s doing. You have years of terrible policy out of Albany. People have choices and 2020 is driving them towards those decisions, it’s like they put a big sign on the Brooklyn Bridge that says ‘last person out, turn off the lights.’ “
Real estate in New Hampshire is selling quickly, Sununu said, adding that he regularly receives calls from companies wanting to go to “Free live or die”; status.
One problem some new residents of his state may have is that they are continuing to work for out-of-state employers, as many companies are allowing people to work from home to stop spread of coronavirus.
Republican governors say New York, Massachusetts and other high-tax states are “pickpocketing” New Hampshire’s by taxing foreign employees who no longer come to their states to work.
Sununu said his state attorney general is reviewing Massachusetts’ decision to continue taxing employees who worked from home in New Hampshire during the pandemic. He said high tax states like New York do not have the right to tax people who do not live or work in their states.
“When it comes to New York, Massachusetts, California trying to pick up the people in New Hampshire, we are going against them,” Sununu said. “They are on the hunt for our citizens and we will go to war.”
In March, Massachusetts established a regulation that would tax out-of-state workers who used to work to Massachusetts. This rule was recently renewed, possibly later this year. The state says the regulations are meant to help companies avoid having to overhaul their payroll system.
Sununu says it is unfair to residents of his state and it could be illegal. Before Covid, more than 80,000 New Hampshire residents moved to Massachusetts – many to Boston.
Taxpayers can usually get a credit in their state tax on taxes paid to another jurisdiction. But New Hampshire doesn’t have a large-scale income tax, so its residents can’t apply the Massachusetts tax credit. The top income tax rate in Massachusetts is 5.05%.
“You don’t start taxing people across borders,” Sununu said. “You are not creating new rules and gimmicks.”
The first likely interstate war is over how to treat former workers during a pandemic. Each state has different rules about how they typically treat out-of-state workers. But the most belligerent states, like New York and California, have said they will continue to enforce their out-of-state tax policies – even if those former employees are no longer in the office.
With many states with limited revenue, some workers may be taxed twice by the state in which they worked and the state in which they have been living and working since the pandemic.
It is not clear whether New Hampshire’s efforts will end in court. The state has a long history of strongly defending its residents from other tax claims, which have not always been successful. It has resisted other states’ attempts with sales taxes to require businesses outside their borders to collect and pay sales tax on their behalf. New Hampshire eventually had to comply with a 2018 Supreme Court decision in the South Dakota v. Wayfair v. South Dakota, even though the state legislature required any state or local tax authorities to give advance notice. to the New Hampshire Attorney General.
The situation raises a bigger question about how states will tax workers in the new era of telework, tax experts say.
“In the case of New Hampshire, you have taxpayers whose residency and workplace are currently in New Hampshire and they don’t set foot in Massachusetts,” said Jared Walczak, Foundation vice president of state projects. Tax said. “Massachusetts is arguing that since their office space is still there, they can tax them.”
For New York, the cost of any change or federal law can be very expensive. It collects almost a fifth of tax revenue from employees. Governor Andrew Cuomo said that the efforts of Congress – including Senator John Thune’s proposal – to limit the states’ ability to tax out-of-state workers “could be very costly” on Thanh New York City.
However, Walczak said New York’s concerted efforts to tax people who don’t live in New York and don’t work there could backfire in the long run, prompting companies to move their offices. states with lower taxes or no taxes.
“If a much larger share of a company’s workforce is far away, its office location becomes less and less important,” he said. “So if you’re a small Manhattan company, and now 80% of your workforce is working remotely and your employees are being taxed twice, maybe there’s a real argument. robust for moving to New Jersey or another state where your employees are only taxed once. “