The Biden administration’s solicitor general has asked the U.S. Supreme Court not to give New Hampshire its day in court to challenge Massachusetts’ cross-border income tax policy. Should the justices agree, the result would be to protect the Bay State’s ability to collect income taxes from out-of-state workers at will.
Now Granite State politicians from both parties are pushing back.
In a filing Tuesday, acting Solicitor General Elizabeth B. Prelogar told the high court it should follow its precedent that its role in adjudicating questions of original jurisdiction should “be exercised only ‘sparingly.'”
(In the Judiciary Act of 1789, Congress made the Supreme Court’s “original jurisdiction” exclusive in suits between two or more states.)
The case began in August when NHJournal and other media outlets reported that more than 80,000 Granite Staters locked out of their Massachusetts jobs and working from home due to COVID-19 were still being hit with the Bay State’s income tax. The Massachusetts Department of Revenue made the arbitrary decision to treat the income earned out of state as though the workers were still on the Bay State’s side of the border.
Gov. Chris Sununu filed suit, requesting the Supreme Court step in and stop what he calls a violation of state sovereignty. Rather than take the case in January, the court asked the solicitor general for an opinion. That opinion, with the effect of bolstering Massachusetts’ tax scheme, was filed Wednesday.
In her filing, Prelogar notes, “New Hampshire seeks leave to file a bill of complaint under this Court’s original jurisdiction. New Hampshire alleges that more than 100,000 of its residents work in Massachusetts and are thus potentially subject to the rule. New Hampshire further alleges that the Massachusetts rule is facially unconstitutional on the ground that it violates the “dormant” or “negative” Commerce Clause and the Fourteenth Amendment’s Due Process Clause.”
The solicitor general’s response was not to challenge the Granite State’s claims but rather argues the Supreme Court has a strong precedent of avoiding “original jurisdiction” claims if possible, and New Hampshire’s complaints did not meet that standard.
Sununu tells NHJournal he’s not backing down.
“Try as they might, overreach by Washington politicians and efforts by the Biden administration will not deter New Hampshire from fighting against Massachusett’s unconstitutional attempt to tax our citizens,” Sununu said. “We remain confident that the Supreme Court of the United States will hear our case, that we will have our day in court to fight for Granite Staters, and that when we do so, we will win.”
Sununu has the support of New Hampshire Democrats as well, including his potential 2022 opponent Sen. Maggie Hassan.
“This is the wrong position by the Biden administration,” Hassan said in a statement. “I’ve long said that attempts by other states to unfairly tax New Hampshire residents are unconstitutional. The Supreme Court must hear this case and reverse this bad-faith effort. 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.”
State Sen. Lou D’Allesandro (D-Manchester) was one of the first members of his party to speak out against the Bay State tax policy. He told NHJournal he blames Massachusetts for not resolving the matter with its neighbors.
“In the past, Massachusetts did not impose its income tax on New Hampshire residents working on our side of the state line,” D’Allesandro said. “That policy worked well for both states. Taking advantage of this critical situation [to impose a tax] makes no sense to me. It’s not good for either state and in the long run will prove a detriment to both.”
Tax experts tell NHJournal the Massachusetts policy is likely unconstitutional.
“I think New Hampshire has a strong constitutional claim against the Massachusetts Department of Revenue’s effort to reach across its border, by exploiting the COVID crisis, to impose its income tax on New Hampshire residents who are required to work from their homes,” said George Isaacson, a nationally known tax attorney who appeared before the U.S. Supreme Court in the Wayfair interstate sales tax case.
“The relevant constitutional issues are admittedly complex (e.g., “nexus” and “sourcing”), and there is not clear controlling precedent. Therefore, employees, businesses, and state tax officials should welcome clarification by the Supreme Court,” Isaacson added.
Granite State Republicans traced the problem back to the White House.
“The pro-tax Biden Administration knows no bounds,” NHGOP chair Steve Stepanek told NHJournal. “For the United States Solicitor General to seriously suggest the Supreme Court shouldn’t hear this case is laughable, and it’s once again the Biden administration embarrassing itself at the expense of New Hampshire.”
At least 17 groups have filed amicus briefs on behalf of the Granite State’s case, including Americans for Prosperity.
“The Biden administration’s affinity for high taxes has led them to mistakenly support this unconstitutional move to force tax hikes on the back of Granite State workers,” said AFP-NH State Director Greg Moore. “With this regulation, any former Massachusetts commuter, no matter where they currently live, could be charged with the state’s high income taxes. We urge the Biden administration to reconsider Massachusetts’ cash grab that is counter to that state’s long-standing tax policy that income is charged where you work, not where you live.”
And Grover Norquist of Americans for Tax Reform has been even tougher on the Massachusetts tax plan, calling it the “‘East Germany’ model of taxation: There is no escape.
“They’re essentially admitting they’re a loser state — losing businesses and taxpayers to other, low-tax states with a better quality of life.”