“Lame Duck” session of Congress should pass Multi-State Worker Tax Fairness Act

There is a reason that Congress’s post-election meetings are called “lame duck” sessions. They often aren’t pretty. Senators and representatives not returning to Congress (because they retired or were defeated for re-election) may not have strong incentives to legislate responsibly. Senators and representatives who will be part of the new Congress starting in January may feel that the lame duck session is an imposition on them since they will be returning to Washington in the new year.

Nevertheless, it is sometimes possible for “lame duck” convocations of Congress to be productive. Some observers, for example, thought that the legislative session following the 2010 election was constructive. Among other accomplishments, that session of Congress abolished Don’t Ask-Don’t Tell and extended President Bush’s tax cuts – though, of course, opponents of those decisions would have preferred that Congress hadn’t legislated on these matters.

Can the “lame duck” congressional session following the 2014 election be productive? In the hope that it can be, I suggest that the 113th Congress enact in its final days the Multi-State Worker Tax Fairness Act, previously known as the Telecommuter Tax Fairness Act.

The Multi-State Tax Worker Tax Fairness Act has been introduced in the House by Representatives Himes, DeLauro, and Esty as H.R. 4085. In the Senate, the Act has been introduced as S. 2347 by Senators Blumenthal and Murphy.

The Act is aimed at the pernicious tax practice by which New York (and other states) impose income taxes on nonresident telecommuters for days such telecommuters work at their out-of-state homes and never set foot in the Empire State. New York’s extraterritorial taxation results in double taxation of nonresident telecommuters as New York taxes the income earned on these days while the state in which the telecommuter lives and works legitimately taxes this day also since the home state is providing public services to the telecommuter on the day she works at home.

Telecommuting is growing because, in a modern economy, it can entail significant benefits. Telecommuting extends job opportunities to individuals for whom traditional commuting is difficult, for example, the disabled, parents of small children, persons who live far from major employment centers. Telecommuting is also good for the environment, reducing the carbon footprints of employees who spend some of their work days at home and need not physically commute to work on those days.

Our concerns about Ebola reinforce the benefits of telecommuting. In an earlier time, a firm combating contamination simply had to shut its operations. Today, modern technology – the internet, email, cell phones, social media – can instead permit individuals to work and communicate with each other from their homes.

The benefits of interstate telecommuting explain why a diverse coalition supports the Multi-State Tax Worker Fairness Act to avoid double state income taxation of telecommuters on their days they work at home. Among the groups supporting the Act are the American Legion, the Christopher and Dana Reeve Foundation, the National Taxpayers Union, The Small Business & Entrepreneurship Council, the Association for Commuter Transsportion, The Military Spouse JD Network, and the Telework Coalition.

It is, in short, anomalous for New York to double tax the income of nonresident telecommuters on the days such telecommuters work at their out-of-state homes and never enter the Empire State. New York engages in this double taxation throughout the country. In one instructive case, New York taxed Mr. Manohar Kakar of Gilbert, Arizona on the income he earned working at home in the Grand Canyon State. New York engages in such double taxation despite the long-term costs to New York of chasing from its borders firms which embrace interstate telecommuting. Thus, the Multi-State Worker Tax Fairness Act would be good, not just for telecommuting, but for New York itself by encouraging firms which rely on out-of-state telecommuters to stay in the Empire State.

The upcoming “lame duck” session of Congress might fit the dominant pattern of post-election convocations of the House and Senate which accomplish little. But maybe not. If members of the 113th Congress choose to spend their final days in office productively, a productive place to start would be the Multi-State Worker Tax Fairness Act. Passing the Act would be good for the country by making state income tax systems safe for interstate telecommuting.