House panel OKs uniform tax rule for mobile workers
Washington — A House committee has approved a bill that would prevent states from collecting income taxes on non-residents unless they work in that state for more than 30 days a year.
State laws currently require many employees to file income tax returns in every state in which they travel for work, whether they were there for a day or half the year.
The legislation, drafted by freshman U.S. Rep. Mike Bishop, R-Rochester, aims to simplify the tax reporting and withholding requirements for employers and employees by creating a uniform interstate standard. A similar bill has been introduced in the Senate.
“Our economy and our workforce is increasingly more mobile in every way, shape and form. In the 21st century, our laws have got to keep up to date,” Bishop said at a Judiciary Committee markup hearing Wednesday.
“We cannot have a patchwork of laws across this country where certain states represent a burden to taxpayers and job providers.”
The committee voted 24-4 to send the bill to the floor of the Republican-controlled House. Opposition came from Detroit-area Rep. John Conyers, the panel’s ranking Democrat, and members from New York, who said some states would be disproportionately harmed.
Conyers said the legislation could result in some states losing millions in revenue, such as $100 million in New York alone.
The change would mean a net loss of less than a tenth of a percent of total state taxes, and an estimated net loss of $1.8 million in revenue for Michigan.
Conyers urged the adoption of a 14-day threshold that would be “fairer to the states and would still provide certainty to employers and employees alike.”
Democratic New York Reps. Jerry Nadler and Hakeem Jeffries suggested the 14-day threshold and wanted to exempt states that would lose $25 million or more in revenue. They defended states’ rights to tax economic activity within their boundaries.
“What makes the whole thing even more outrageous is New York regularly sends tens of billions dollars more to the federal government than we get back in return. We are subsidizing the quality of life of dozens of states across this country,” Jeffries said, noting that the impact on New York is greater because of its attraction as a major economic hub.
“The opportunity to work in New York City, New York State, even for a few weeks, is a privilege. It’s not a right.”
Bishop said New York would be the only state to fall into the category of states losing more than $25 million in revenue, but New York’s “aggressive auditing” of non-residents is an example why the bill is needed.
“This is not about New York,” Bishop said. “This is a nationwide issue.”
Committee member and Rep. Dave Trott, R-Birmingham, said in running his own business he had to hire specialized lawyers and staff to sort out various state withholding laws and paperwork.
“This bill will get rid of all that unnecessary busy work and ... help make businesses more efficient,” Trott said.
A Michigan-based manufacturer who testified before the committee earlier this month noted that employees are often unaware of their tax obligations when traveling out of their home state for work until their employer tells them of their reporting requirements.
Lawrence F. Leaman, vice president of taxes for Masco Corp. in Taylor, said the company had to issue 50 W-2 forms in one year for a single employee, whose job is installing cabinets.
The bill has 47 co-sponsors, including Michigan Republicans Candice Miller, Tim Walberg, Bill Huizenga and John Moolenaar.