INTRO 

The political climate of America is far from restful, and the Constitution has become subject to more partisan scrutiny over the past three years. In New England, however, the battle continues. Both New Hampshire and Massachusetts issued stay-at-home orders during their states of emergency due to the COVID-19 pandemic, but with many restrictions now lifted, whether or not employees work in person is up to businesses and workers.

New Hampshire filed a case to the Supreme Court, New Hampshire v. Massachusetts, to “rectify Massachusetts’ unconstitutional extraterritorial misconduct” for collecting income taxes from remote New Hampshire workers who worked in Massachusetts before the pandemic. According to New Hampshire Governor Chris Sununu, the commonwealth of Massachusetts has launched an attack on New Hampshire’s identity, known as “the New Hampshire Advantage”, which Gov. Sununu highlights, and it as a sovereign entity. 

BACKGROUND FACTS

As of the publishing date of this article, Massachusetts taxes workers for employers within state boundaries. However, when Massachusetts Gov. Baker ordered all non-essential workers to refrain from commuting to their offices in March, New Hampshire residents who work in Massachusetts were required to continue their work from their New Hampshire homes. As a result, these workers no longer reaped the benefits of Massachusetts municipal services and protections like water and local law enforcement. 

On April 21, 2020 the Massachusetts legislature passed “The Proposed Rule,” known as the “Tax Rule”, allowing work in New Hampshire to be taxable; the goal of the order is to return the way of life to pre-pandemic times as if those who regularly work in Massachusetts are physically there. This impedes on the right of New Hampshirites to not be taxed on their income received from working within state borders. 

FACTS OF THE CASE

Collecting income taxes from the over 80,000 New Hampshire residents that work in Massachusetts is considered extraterritorial taxation, which is unconstitutional.  According to the case Allied-Signal, Inc. v. Director, Div. of Taxation (1992), states are not given the jurisdiction to tax services or value earned outside of that state’s borders. As cross-border workers are forced to remain at home by the state of emergency orders, they are incapable of working within the jurisdiction to which they previously paid taxes. As returning to offices could pose potential health risks, the Tax Rule penalizes cross-border workers for adhering to guidelines.  

The Tax Rule, Massachusetts’ rule about source income of non-residents for the duration of the pandemic, was extended twice as a result of the state of emergency extensions, and Gov. Sununu believes these extensions are sufficient pieces of evidence that indicate that Massachusetts will let the Tax Rule exist past the end of the pandemic. There are constitutional taxation boundaries that states must follow. New Hampshire is unique in that it chose, in its sovereignty, to have no income nor sales tax which distinguishes it from the rest of New England. The entire case is based on the fact that Massachusetts made teleworking taxable, as if non-residents are physically working within state borders, and re-defined apportionment to not encompass non-residents staying home amidst the pandemic. 

ANALYSIS & CONSTITUTIONAL APPLICATION

This case, because it involves two sovereign states, should be heard in the Supreme Court. The case can not be resolved by each state’s respective Supreme Court, and by U.S. Code 28, the Supreme Court of the United States has original jurisdiction over any controversy between two or more states. It is not the first time that one state brings suit against another in court. 

The Attorneys and Solicitors General provided counts of the causes of action. This section of the lawsuit highlights precedence and cites where precedence is relevant. First, the commerce clause and the case Oklahoma Tax Comm’n v. Jefferson Lines, Inc  establish that states cannot regulate commerce between them, that is Congress’s job. In addition, the “Dormant Commerce Clause” does not allow states to take advantage of one another in the absence of congressional rule.

The second count cites the Due Process Clause: “seizure of property by the State under pretext of taxation when there is no jurisdiction or power to tax is simple confiscation and a denial of due process of law” (Miller Bros. Co v. Maryland, 1954). The state respectfully asks for the court to consider ruling against Massachusetts’ negligence, reversing the orders Massachusetts has in place, and paying for grievances brought upon by the filing of this lawsuit.

There is an economic component to consider as well; should cross border taxation be permitted, there will most likely be a wave of businesses headquartered in Massachusetts that lose workers. In turn, the amount of business and income tax revenue for the state would decrease and could force the state senate to increase tax rates to make up the loss. New Hampshire could also lose residents to Massachusetts; the opportunity cost of living in a state where their income taxes don’t pay for services they receive might be greater than living in a state without sales tax, great education, and exceptional quality of life. 

The lack of income tax has not stopped New Hampshire from being one of the top 10 states for education and quality of life. Life, services, and liberties that come from the “New Hampshire advantage” are beyond that of other states whose taxes and regulations restrict citizens’ lives. Massachusetts, while a densely populated state, should not be relying on New Hampshire workers’ income tax revenues to fund its public services. New Hampshire workers usually can apportion their days on their tax forms and receive some of their income back so that the state taxes only its fair share (Okla. Tax Comm’n v. Jefferson Lines, 1995). The Tax Rule is incompatible with the unique and sovereign choice to not implement an income tax, according to N.H. Attorney General MacDonald. New Hampshire provides exceptional public services based on a much smaller tax revenue base in comparison to its neighboring states.

Americans, not just New Hampshirites and Massachusettsens, should care about the tax rule. If the Supreme Court rules in favor of extrajudicial taxation, then the decision opens a legal loophole for it to happen everywhere. According to the Amicus Curiae submitted on behalf of New Hampshire by New Jersey, five other states have a similar rule and New Jersey believes that Massachusetts will fail to get rid of it post-pandemic. By allowing one state to tax outside its borders would allow states to spend tax revenue on people separate from those who paid the taxes, which is the job of Congress, not states. In other words, the Tax Rule, according to New Jersey, could cause victim states to sacrifice billions of dollars in revenue. It is a direct violation of The Commerce Clause by overriding Congress’ duty to regulate commerce between the states. If this is allowed, then the integrity of the US Constitution is destroyed. 

CONCLUSIONS

Ending “Taxation without Representation” was a primary cause of the American Revolution, and is the current mantra of the District of Columbia while it fights for statehood and two senators. Once taxation is allowed without investing in the representation of tax-payers, the 231 years of American tradition has crumbled. This could be a landmark case regardless of how the court decides. Should the Supreme Court form an opinion that favors New Hampshire, the Constitution remains the supreme law of the land. If the Court rules in favor of Massachusetts then the fourteenth amendment and Article I are practically irrelevant and states can be recognized as sovereign entities in charge of their own commerce. This jeopardizes the Union that Americans fought to keep together in 1861.

As Americans sacrifice money and freedom for security, they will find that they will have neither. Congress should step in as support for the plaintiff since its powers as the regulator of commerce were compromised. As a sovereign branch of the federal government the Congress must provide checks and balances to the others, however, it is there to create bills to eventually pass as laws and regulate fiscal laws, and Massachusetts has assumed the job of the Congress and New Hampshire seeks to keep this in check.