Now COVID threatens Americans with double-taxation

Time running out for Congress to respond

WND News ServicesBy WND News Services
Published March 28, 2021 at 4:49pm

Aviation Boatswain’s Mate 3rd Class Carla Rivera participates in a flight-deck fire drill March 8, 2021, aboard the amphibious assault ship USS Tripoli in San Diego. (U.S. Navy photo by Mass Communication Specialist 1st Class Peter Burghart)

By Andrew Wilford
Real Clear Markets

The case against protecting remote workers from pandemic-related tax changes was never a strong one. With the passage of the American Rescue Plan (ARP) Act, it’s gotten even weaker.

Since early on in the pandemic, I’ve been warning (over and over and over and over) about the need for Congress to address how states handle the tax treatment of remote-working Americans. The number of Americans potentially subject to higher tax bills or even double taxation because they’re now working from home and no longer crossing state lines can be measured in the millions. Unfortunately, with the earliest state tax deadlines less than a month away, time is running out for Congress to act.

As a result of the pandemic, many Americans switched to remote work for long periods of time in 2020. Many employees that normally cross state lines to an office (as is common in large multi-state metro areas) but instead worked from home last year may find that the state in which their office is located still expects them to pay taxes as if nothing had changed. This also opens up the possibility of double taxation, as both the resident’s home state and their prior work location’s state could allege that the work was done in that state.

States pursuing these tax bills counter that they simply lack the room in their budgets to provide relief from these assessments. Never mind that it was often the states making this argument that promulgated special rules ensuring that workers following pandemic guidelines and working from home couldn’t escape their tax webs.

One of the most egregious examples of states’ revenue sickness came when New York, consistently one of the most aggressive states when it comes to subjecting nonresidents to its high tax rates, even required medical workers who volunteered to travel to New York City when the city was a COVID hotspot to pay New York income taxes for the time they worked there. When asked why the state was choosing this approach, Governor Andrew Cuomo responded that the state was not “in a position to offer any subsidies right now.”

Well, now they are. Even as the fiscal situation of many states improved dramatically over the course of last year, Congress still decided to go ahead with huge amounts of funding for state and local governments. States that begged for federal aid when they were anticipating overall revenue decreases of 8 percent or more instead saw an average revenue decrease of just 0.4 percent.

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