Months after Massachusetts made its unilateral assault on the paychecks of New Hampshire workers, Gov. Chris Sununu is fighting back, announcing Friday he’s taking the Bay State to the nation’s highest court.
“Within five minutes of learning of this rule change, I immediately directed the Department of Justice to file a lawsuit in the United States Supreme Court on Monday,” said Governor Chris Sununu. “The Commonwealth has launched a direct attack on the New Hampshire Advantage, attempting to pick the pockets of our citizens. We are going to fight this unconstitutional attempt to tax our citizens every step of the way, and we are going to win.”
At issue is the Massachusetts Gov. Charlie Baker’s decision to tax income earned by New Hampshire workers who formerly commuted across the state line but were forced to work from home by the COVID-19 pandemic.
His Department of Revenue (DOR) issued a rule that income earned “by a non-resident who, immediately prior to the Massachusetts COVID-19 state of emergency, was an employee engaged in performing such services in Massachusetts…will continue to be treated as Massachusetts source income subject to personal income tax.”
On Friday, the DOR published a rule declaring this cross-border taxation would continue until the end of the year.
This fight has been brewing for a while. When NHJournal first asked Sununu about Massachusetts’ commuter tax policy in early August, he dismissed the issue with a joke.
“All the more reason why New Hampshire doesn’t have an income tax, shouldn’t have an income tax, and all those businesses should move up here,” Sununu said. “I think technically they may be allowed to do it per their law, but every worker and business that comes to New Hampshire basically gets a six percent raise on day one.”
Sununu soon reversed course, calling on his Department of Justice to review options and telling NHJournal he had confronted Gov. Baker privately over the issue. But no legal action was initiated until Friday.
Sources close to the governor’s office told NHJournal there were concerns about taking Massachusetts to court because the laws governing cross-border taxation are fluid. There were concerns a fight over the commuter tax, which could impact some 80,000 or so Granite Staters who cross the Massachusetts state line, could lead to a court ruling that hurts New Hampshire’s broader efforts to hold off efforts to collect out-of-state sales tax and generally defend its “New Hampshire Advantage” of no broad-based sales or income taxes.
That changed Friday.
“Despite the DOJ’s determination that the proposed rule raised various legal concerns, and the overwhelming opposition expressed at the proposed rule’s public hearing, Massachusetts has made the decision to approve the rule and continue to confiscate income from Granite Staters during a global pandemic,” according to a statement from the governor’s office. “Therefore, the State of New Hampshire will be taking this to the United States Supreme Court.”
Many in Massachusetts are dismissive of Sununu’s efforts.
Amy Pitter, president and CEO of the Massachusetts Society of CPAs and a former Massachusetts Commissioner of Revenue, maintains that there isn’t anything the state of New Hampshire can do to prevent Massachusetts’ reach across its border, arguing that about half of the states in a similar position are making the same decision.
“I don’t even know what that would look like,” Pitter said regarding a theoretical challenge by the Granite State. “I don’t know what their [the state of New Hampshire] beef would be.”
In New Hampshire, Sununu’s actions have bipartisan — or rather, tri-partisan — support.
Democratic gubernatorial candidate state Sen. Dan Feltes said in a statement Friday, “It is completely unfair to charge New Hampshire workers the Massachusetts income tax while they are not working in Massachusetts. These workers are acting in everyone’s best interest when it comes to public health and safety and should not be penalized for their actions.”
Feltes then added: “This is a failure of leadership by Chris Sununu, with his ongoing inability to work with surrounding governors.”
And Richard Manzo, Vice-Chair and Communications Director for the Libertarian Party of New Hampshire, told NHJournal:
“The Libertarian Party of New Hampshire commends and thanks Governor Chris Sununu for his bold action in defense of the New Hampshire Advantage.
“Granite Staters have been resolute in resisting the urge to implement income and sales taxes. Because of our resolve, New Hampshire remains a shining city on a hill for other states’ economies and governments to look up to. Massachusetts remains a cautionary tale, as evidenced by their residents’ willingness to travel north to New Hampshire to shop retail or to live just across the border to avoid their oppressive tax system. This is to no one’s detriment but the people of Massachusetts; the Party would urge their leaders to not drag us down with them,” Manzo said.
Sununu is expected to take his challenge to the Supreme Court on Monday
A spokesperson for the Massachusetts DOR says the administration does not comment on pending lawsuits.