Ever Visit Another State For A Day? Congress May Stop That State From Assessing Income Tax On You

September 20, 2016

UPDATE: On September 21, the U.S. House passed H.R. 2315 by voice vote. It now goes to the Senate for consideration.

It looks like as early as Wednesday, the House of Representatives may consider H.R. 2315, the Mobile Workforce Income Tax Simplification Act of 2015. (Companion measure is S. 386.) Here's what it's about.

The bill limits states from imposing or collecting individual income tax on people who are in the state for less than 30 days. Most states technically require such payments when someone is in the state for even a day (see map below), and even that withholding to be set up in advance. Such practices disrupt interstate commerce and falsely suggest that business travelers earn their income in traveling states and not from the home office. We’ve increasingly heard horror stories of states trying to collect these sums.

Since all states provide a credit for taxes paid to another state, making people fill out 20 or 30 tax returns for a net national wash is lunacy. Most everyone, except some state tax administrators, supports this legislation. (State tax administrators instead urge states to voluntarily adopt a more convoluted model, which no state has.)

Growing state efforts to raid revenue from business travelers who are in the state for only a few days have created needless complexity and threaten to harm interstate commerce. The Constitution empowers Congress to limit the power of states to tax interstate commerce. Prohibiting states from requiring payment or withholding of income taxes from someone in the state for less than 30 days is a fair balance.

Lead sponsors of Mobile Workforce are Reps. Mike Bishop (R-MI) and Hank Johnson (D-GA) on the House side and Sen. Sherrod Brown (D-OH) and John Thune (R-SD) on the Senate side.

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