Working from house may damage New York’s coffers

Working from home during the pandemic could result in a big blow to New York’s budget if the US Supreme Court rules in favor of a smoldering tax dispute between New Hampshire and Massachusetts.

It concerns a lawsuit filed by New Hampshire this week to prevent Massachusetts from taxing its residents who have worked remotely for Massachusetts-based companies due to the COVID-19 pandemic.

A favorable decision for New Hampshire could set a precedent and affect states that levy income tax on non-state workers who work in state-owned companies and commute across state lines, a Moody’s report said Thursday.

And while Massachusetts would hit about 4% of its tax revenue, New York could take an even bigger loss if a decision were generally applied to other states.

New York State’s reliance on non-domestic income tax receipts accounts for 15% of personal income tax and 7% of state operating income for the fiscal year ended 2018 – not an insignificant percentage given the urgent tax needs of the state worsened by the pandemic and the resulting economic recession.

Overall, New York raised $ 7 billion in tax revenue this year from non-resident taxpayers in other states.

“Losing any part of this revenue would exacerbate the state’s challenges as it faces large budget gaps due to the coronavirus effects and a fiscal imbalance in its Medicaid program,” Moody’s said.

Of course, working from home has already cost the state a lot in the past 10 months. Reduced commuting means fewer people pay sales tax to fill up their cars or pay train fares. Local sales tax and local transport revenue have decreased as a result.

New York is seeking billions of dollars in federal aid to sustain its revenue after the pandemic closed stores and restricted public gatherings, deeply freezing the state’s economy.

According to Moody’s, commuters in the states of Connecticut and New Jersey would be the main beneficiaries if the court ruled in favor of non-resident workers.

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