Paul L. Caron

Thursday, October 7, 2021

Shanske: Agglomeration And State Personal Income Taxes

Darien Shanske (UC-Davis; Google Scholar), Agglomeration and State Personal Income Taxes: Time to Apportion (With Critical Commentary on New Hampshire's Complaint Against Massachusetts), 48 Fordham Urb. L.J. 948 (2021): 

Sometimes easy cases make bad law — or at least might make bad law. The Supreme Court is currently considering granting certiorari in New Hampshire v. Massachusetts. At issue is the State of New Hampshire’s (and its amici’s) claim that Massachusetts’s insistence on applying its income tax to residents of New Hampshire, who once commuted to work for businesses in Massachusetts but now remotely work for those businesses in New Hampshire because of the COVID19 pandemic, violates the Due Process Clause and dormant Commerce Clause. The claim is simple and seductive: if these New Hampshire residents barely leave their own homes, much less their state, how can it accord with due process for Massachusetts to tax them?

This simple analysis, however, should be rejected because it would be applying an old economy heuristic (you earn where you physically are) to a new economy problem (work can happen in many places). If the Supreme Court agrees to hear this case (and I think it should not), and if it were to hold in favor of New Hampshire (and I argue in this Essay that it should not), it would deal a severe and almost comically mistimed blow to the modern urban economy by undermining the ability of central urban areas to impose income taxes on an increasingly mobile workforce.

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