As New York struggled with tens of thousands of coronavirus cases, medical professionals from across the United States headed to New York City to help. Their work was crucial to New York’s efforts to contain the pandemic and undoubtedly helped save lives. And in May, New York Governor Andrew Cuomo announced their reward: tax bills from the state of New York.
That’s right. Tax bills. Doctors and nurses who voluntarily crossed state lines to come help – in some cases, sacrificing vacation time to do so – are now being informed that they will owe New York’s substantial income tax on any money they made while they were there. And while individuals can generally receive a tax credit from their home state for tax paid to another state, thus avoiding double taxation of that income, many will be paying a much higher tax rate than normal on money they earned during their time in New York. This situation is even more perverse for residents of states like South Dakota that don’t have an income tax against which a credit can be claimed. These individuals will simply have to absorb the entirety of the unexpected expense.
These medical professionals are not alone. They are confronting a challenge that many Americans who regularly travel for work face – a challenge that has been highlighted by the coronavirus pandemic. And that is navigating the complexities of paying income tax when you spend time working in different states throughout the year.
Generally your income is taxed by the state in which your income is earned, your home state. But some states – like New York – aggressively tax individuals whom they deem to have earned income in their state, even if the “income” earned is simply what the individual makes for attending a one-day conference in the state. Other states allow individuals to work for a longer period – as long as 60 days in some instances – before they require a nonresident to file an income tax return in their state. If you work as a traveling nurse, a salesman, or a corporate trainer – all jobs that might regularly take you to multiple states in a year – tax time can be absolutely bewildering as you try to navigate the different rules of the different states in which you’ve worked over the past year.
The tax situation facing mobile workers has long called out for a solution. And for the past four Congresses, I’ve championed legislation – the Mobile Workforce State Income Tax Simplification Act – that would help bring certainty to workers, states, and employers by establishing a 30-day threshold that would apply to nonresident employees working in all 50 states. Spend 30 days or fewer in another state during the year, and your income would still be taxed in the state where your work “home base” is located. Spend more than 30 days in any given state, and you would be subject to income tax in your home state as well as in the state in which you’re temporarily working. Establishing this uniform standard would make it a lot easier for employees to figure out when they might incur additional state income taxes as a result of work-related travel.
The pandemic has highlighted the need for this legislation – as well as the need for additional pandemic-specific measures to fully protect health care workers and remote workers from negative tax effects. I recently introduced a revised version of my bill in the Senate – the Remote and Mobile Worker Relief Act. This legislation contains all the provisions of my Mobile Workforce legislation, but it also adds a special 90-day provision governing health care workers who voluntarily traveled to other states to work during the pandemic. This should ensure that no health care workers face higher tax bills as a result of their willingness to help out in pandemic-stricken areas.
My revised bill also addresses the potential problems facing remote workers as a result of the pandemic. Many workers who generally work in another state from their place of residence – for example, New Jersey residents who work in New York City – worked from home during the pandemic because of stay-at-home orders and similar measures. Now, normally these workers would be taxed on the resulting income by the state in which they normally work. But their unexpected remote work has opened up the possibility of having that income taxed by their state of residence as well – which would create an unexpectedly complicated tax filing situation and possibly a higher tax bill for these workers.
My legislation would simply continue the status quo that existed at the start of the pandemic. So, for example, if you are generally taxed in the state of North Carolina because your job is there, but you live in South Carolina, your tax situation would not change simply because you worked from home during the pandemic.
My Mobile Workforce bill has received strong bipartisan support in previous Congresses, and the U.S. House of Representatives has even passed a version of my legislation several times. The only reason my bill has not advanced in the Senate is because of opposition from a handful of states who aggressively tax those temporarily working inside their borders. I hope that with the additional urgency created by the pandemic, we will be able to pass the Remote and Mobile Worker Relief Act this year, either alone or as part of a larger coronavirus relief package.
Americans have faced a very difficult few months as a result of the COVID-19 pandemic. Congress should intervene to ensure that new tax burdens are not among the pandemic’s effects. I intend to do everything I can in Congress to ensure that Americans who worked from home to help flatten the curve don’t face a complicated tax situation as a result – and that health care workers who risked their lives to work in COVID-stricken areas are not rewarded with massive tax bills from the states whose residents they helped save.
** Note to editors: A similar version of this op-ed first appeared in the Wall Street Journal.