During normal times, roughly 15 percent of all New Hampshire commuters headed south to Massachusetts for work.
And even though the COVID-19 pandemic means that many of those interstate commuters remain north of the border teleworking from home, Gov. Charlie Baker’s administration thinks they should still pay Massachusetts state income tax.
His counterpart in New Hampshire is not happy about it.
During a nationally televised interview Monday morning, Gov. Chris Sununu spoke out against the effort, accusing Massachusetts of trying to “pick the pockets of the people of New Hampshire.”
“They’re coming after our citizens,” Sununu said on CNBC. “And we’re going to put up a fight for it.”
Of course, before the pandemic, it was New Hampshire’s citizens that were coming across the border after Massachusetts jobs. According to the most recent data, more than 97,000 New Hampshire residents commuted to Massachusetts before the pandemic hit — even if it meant leaving their income tax-less refuge to pay the Bay State’s 5 percent levy.
New Hampshire residents who worked for Massachusetts employers were previously — and still — allowed to deduct work-from-home days from their taxable income. However, the Baker administration issued an emergency regulation this spring saying that Granite Staters who began telecommuting due to coronavirus shutdown orders, medical guidance, or employee policies would still be subject to the income tax on days that would have otherwise been at a Massachusetts workplace.
Last month, the Department of Revenue announced the rule would be extended until either the end of the year or 90 days after Baker declares the state of emergency over (whichever comes first). According to a DOR spokesperson, the temporary rule is intended to minimize “sudden disruption” for employers and employees during the pandemic. Similar policies have also been adopted in Rhode Island and Vermont.
Still, the Massachusetts rule has been met with bipartisan opposition in New Hampshire, which has the second-highest percentage in the country of workers who commute out of state (behind only Rhode Island).
In a letter Wednesday, two Democratic state senators wrote that it was “completely unfair to charge New Hampshire workers the Massachusetts income tax while they are not working in Massachusetts” and urged the DOR to withdraw the rule. Sununu, a Republican, also announced that the state’s Department of Justice would investigate “whether any state is engaging in improper taxation of our citizens,” though he did not specifically mention Massachusetts.
The New Hampshire governor was less subtle on Monday.
“They’re going to try to pull every dollar, but we’re going to stand up for our citizens and do the right thing,” he said on CNBC, suggesting that states like New York and Massachusetts — which have taken a financial hit from the pandemic — are “worried about revenues.”
Sununu said he called Baker last week to inform the fellow Republican governor about the state DOJ’s plan to investigate the rule.
“It seemed to be this emergency rule that was passed in March that kind of flew under the radar for a little bit,” Sununu said Monday. “Now there’s this idea they’re going to extend it because I think people realize that working remotely is possible. You can have all that connectivity in a place like New Hampshire, but not have to be in the dire straits of a New York City or Boston or Seattle or San Francisco.”
As The Boston Globe reported last week, tax experts say the rule could face legal challenges, especially as companies move to make telework a permanent feature for more employees in light of the pandemic.
The DOR is planning to hold a virtual public hearing to discuss the policy on Aug. 27.
But for Sununu, his mind is already made up. While he acknowledged that New Hampshire “absolutely” derives a benefit by virtue of its location bordering Massachusetts, the governor suggested the Baker administration figure out a different way to make up any lost revenue.
“You don’t come and start taxing people across the border,” he said. “You don’t start creating new rules and new gimmicks because you haven’t created a successful model like New Hampshire has, right? So of course we’re going to defend our citizens and defend our businesses, and that’s why they’re flooding over here.”
During the CNBC interview, Sununu repeatedly said the New Hampshire population was “booming” due to the pandemic. Recent studies have found that young migrants to New Hampshire have begun offsetting the elderly state’s declining birth rate, even before the pandemic.
“My job isn’t to worry about how Massachusetts taxes,” he said. “They’ve created a structure where they’ve become dependent on taxes, dependent on abusing citizens and businesses, dependent on a system that puts government first, not the individual.”
Sununu also repeated the claim that businesses were flocking to New Hampshire from other higher-tax Northeast states, though his office has declined to provide specific examples. He cited the state’s lack of income tax and sales tax, as well as “great schools” and “safety” — alluding to perceived urban concerns about “riots or COVID or whatever it might be” — as the reasons driving those decisions.
“It’s like they put a big sign on the Brooklyn Bridge that said, ‘Last one out turn out the lights,'” Sununu said, though he did not say how many new residents New Hampshire had gained.