The Biden administration is siding with Massachusetts in a thorny court battle with neighboring Massachusetts over taxing remote out-of-state workers during the pandemic.
In October, New Hampshire filed a lawsuit against Massachusetts in the U.S. Supreme Court over its cross-border income tax collection policies that made out of state residents working remotely during the pandemic subject to the state’s 5% personal income tax.
The justices had asked the U.S. Justice Department in January for its opinion on whether the high court has jurisdiction over the case, given that it is an interstate dispute.
In a brief filed Tuesday, acting Solicitor General Elizabeth B. Prelogar urged the court not to take up the case, arguing that the court jurisdiction over such disputes “should be used sparingly.”
“The court has recently declined similar invitations and opportunities,” Prelogar wrote in the 28-page brief. “The issues New Hampshire seeks to present can adequately be raised and litigated by New Hampshire residents who are subject to the Massachusetts income tax.”
Massachusetts enacted the emergency rule in response to the coronavirus outbreak, requiring out-of-state residents who were working for Massachusetts employers before the pandemic remain subject to the income tax, even if they were working from home. New Hampshire doesn’t have an income tax.
The lawsuit contends that Massachusetts has no constitutional authority to collect an income tax on employees who physically worked in the state prior to the pandemic.
“It undermines New Hampshire’s sovereign duty to protect the economic and commercial interests of its citizens,” the 36-page complaint reads.
An estimated 100,000 New Hampshire residents cross the state line into Massachusetts for work – roughly 15% of all commuters, according to the lawsuit.
Massachusetts has argued in legal briefs that the tax policy “passes legal muster” and urged the high court to toss out New Hampshire’s complaint.
New Hampshire Gov. Chris Sununu has accused Massachusetts revenue officials of trying to “pick the pockets” of New Hampshire residents.
On Wednesday, Sununu shrugged off the solicitor’s legal brief and predicted New Hampshire would prevail in the case.
“Try as they might, overreach by Washington politicians and efforts by the Biden administration will not deter NH from fighting against Massachusetts’ unconstitutional attempt to tax our citizens,” the Republican posted on Twitter. “We remain confident that the Supreme Court will hear our case and that we will win.”
Members of the New Hampshire’s all-Democrat congressional delegation also ripped the solicitor’s position in the case.
U.S. Rep. Maggie Hassan called it the “wrong position” by the Biden administration and said Massachusetts’ move to tax remote out-of-state workers is “unconstitutional.”
“The Supreme Court must hear this case and reverse this bad-faith effort,” she said in a statement. “We need strict and clear limitations set upon states that attempt to wrongly tax Granite Staters, and I will continue to push to ensure exactly that.”
This article was originally posted on Biden administration sides with Mass. in tax fight with NH