To protest unfair taxation on the east coast in 1773, citizens in Boston banded together and dumped tea into the Boston Harbor—an event, I should add, that helped sparked activism that eventually led to the American Revolution.
Unfortunately for telecommuters who work between New York and a neighboring state, to protest the system of unfair double-taxation might mean dumping laptops and iPhones into Hudson Bay, which would be an enormous waste of time and expensive equipment.
So what to do? After all, both of these situations required some form of protest against a system of taxation that was clearly unjust.
While there might not be an action that appropriately and reasonably harkens back to the tea party in pre-Revolutionary America, there is, nonetheless direct action needed to halt the “telecommuter tax” that taxes remote workers twice—once for the work they do in their out-of-state home and again for their work within the state of New York.
To explain this unfair system of extraterritorial taxation, it’s best to put it in a hypothetical context. Let’s say that you work as an editor for a publisher in New York City, but you live in nearby New Jersey. Your employer values flexible work, thus you only have to commute to the city one day each week to have a round of meetings. For those four days that you’re working from home, you are subject to taxes in New York state as well as in New Jersey, thus telecommuting means you’re forced to pay taxes twice simply for living in a nearby area that happens to be in a different state.
“Well, isn’t that in direct opposition to the United States Constitution?” you ask.
Why yes. Yes, it is.
Edward A. Zelinsky, Professor of Law at the Benjamin N. Cardozo School of Law at Yeshiva University, wrote about this issue today in an opinion piece for the Oxford University Press blog entitled, “Swine Flu, Telecommuting and New York’s Extraterritorial Taxation of Nonresident’s Incomes” that focused on the need for this taxation to be overturned, especially in the wake of the swine flu scare that got several companies thinking about telecommuting, if only for emergency planning purposes.
Zelinsky puts this tax issue in the personal context and discusses how he was affected by New York’s telecommuter tax, saying he’s “something of a poster boy for the irrationality of New York’s extraterritorial taxation of nonresident telecommuters” due to the fact that he teaches in Manhattan but does a great deal of work at his home in New Haven, Connecticut.
You can almost see the bitterness leaping off the page as you read Zelinsky’s words. He discusses his personal experiences during his challenge with New York’s double-taxation. He states that, “Virtually all independent legal commentators concluded that this challenge should have prevailed since the Due Process and Commerce Clauses of the U.S. Constitution prevent the state from taxing activity that occurs outside their respective borders.” These seem like solid federal mandates supporting his decision, do they not?
Despite his rational, well-supported argument that invoked federal guidelines to address this one state that sees fit to tax telecommuters , his challenge of the tax failed. In fact, he notes that “New York’s Court of Appeals, that state’s highest court, specifically approved New York’s tax-based discouragement on nonresidents telecommuting from their out-of-state homes.”
This makes very little sense, especially given the congestion and pollution problems that New York, most notably in its largest city, wishes to combat. What this is, at least in the minds of some telecommuters who are the victims of this unjust double-tax, is a direct assault on their non-traditional working schedules that flagrantly violates all of the grand visions the state itself claims to have about reducing traffic and supporting clean air initiatives.
If you pop on over to a great non-profit website, Telcoa.org, you will see a rather detailed summary via description and solid links discussing how this injustice can be corrected by the Telecommuter Fairness Act of 2007, which is still sitting around, awaiting approval. I encourage you to take a moment to sign the petition and take action via the other means they suggest as well.
If petitions don’t work, if valid legal claims against this double-taxation don’t work, what would be the most appropriate course of action?
1 comments:
The Telecommuter Tax Fairness Act is necessary to facilitate telework, not just in the New York area, but nationwide.
Although New York has been the most aggressive in threatening nonresident telecommuters with double taxation, other states, including Delaware and Pennsylvania, have maintained a similar tax policy on their books.
Further, because the U.S. Supreme Court refused to review Professor Zelinsky’s claims under the U.S. Constitution - as well as the constitutional challenges raised by a telecommuter from Tennessee - other states are free to adopt a policy like New York’s. Given the significant budgetary shortfalls facing many states now, the Supreme Court’s implicit authorization to states to collect revenue from non-voting nonresidents has particular appeal.
The penalty for interstate telecommuting also has national implications because New York targets telecommuters who live – and work – far beyond Connecticut and New Jersey. In addition to Tennessee, New York has reached into Maine, Florida, Virginia, Mississippi and Arizona, for example, to tax telecommuters there.
As Professor Zelinsky discusses, telework is a crucial tool for managing the current swine flu outbreak. It is also an essential strategy for weathering the recession.
Individuals trying to save money on commuting and child care need to telecommute. Older Americans who can no longer manage the physical strain of daily commuting but suddenly find they must continue working due to lost pensions need to telecommute. Unemployed individuals who cannot find work locally, cannot sell their homes to relocate and need to expand the geographic scope of their job searches need to telecommute.
Businesses trying to reduce real estate and energy costs so they can avoid layoffs need to implement telework.
Rural communities, which need an influx of new jobs – and which will want to put to good use the broadband the federal government has agreed to fund - need telework.
Given the public health, business continuity, environmental and economic benefits of telework, the country cannot afford to penalize Americans who do Web-based work across state lines. The Telecommuter Tax Fairness Act is the right remedy, and it is critical to tell our Senators and House Representatives this measure must become law.
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