The Long Arm of The Commonwealth

By Ian Aikens | July 21, 2021

Is there such a thing as a “temporary tax”? Having come from the late great State of California several years ago, I never experienced such a phenomenon myself, but perhaps Granite State workers who work for Massachusetts companies will experience it themselves come September 14, 2021.

This tale of government overreach began on April 21 of last year when the Massachusetts legislature passed “The Proposed Rule,” which allowed work performed in New Hampshire to be taxable to the State of Massachusetts.  Things went from bad to worse in October of 2020 when the Massachusetts Department of Revenue extended the ruling indefinitely as the lockdown and emergency orders dragged on and on. To make things look kosher, there was a public hearing on the issue, but it was held five months after the rule went into effect.

The plot thickened when the State of New Hampshire filed a lawsuit with the US Supreme Court on October 20, 2020 suing the State of Massachusetts for violating the US Constitution, specifically the Commerce Clause and Due Process Clause. The Commerce Clause is supposed to restrict individual states’ powers of regulation, and the Due Process Clause prohibits the government from depriving life, liberty, or property unless authorized by law.

Aside from the moral and constitutional issues involved, we’re talking about a lot of money here. Massachusetts charges a 5% state income tax, and the number of employees affected by this issue ranges from 80,000 to 110,000 New Hampshire residents who work for companies based in Massachusetts.

Here’s the issue. Prior to the lockdowns, New Hampshire residents who commuted to Massachusetts for their jobs did not have to pay Massachusetts state income tax for the days they worked from home. Thus, if employees commuted to Boston 4 days/week and worked at home on Fridays, they would only pay Massachusetts income tax on 80% of their wages that week.  But when the lockdowns were decreed, most New Hampshire residents were commuting into Massachusetts 0% of the time. The ruling, which went into effect March 10, 2020 meant they would still pay Massachusetts state income tax on 80% of their wages as if they were still commuting, as it used the period of January 1, 2020-February 29, 2020 as a tax basis.

Switching away from a user fee standard was clearly an outrage. If New Hampshire residents were no longer using Massachusetts roads, police, and other infrastructure services while they remained in New Hampshire (which did provide those services or at least the availability of them), why should they have to pay for them? A residence-based taxation model where taxes are paid where public services are consumed is a fairer way to collect taxes. What justification did the bureaucrats provide for changing the rule midstream? If it was a reasonable rule before the lockdown—which it was—by what right did they change it?

Government bureaucrats never lack for excuses when it comes to overreaching into people’s lives—and especially their pocketbooks. They don’t miss a beat.  Acting Solicitor General Elizabeth Prelogar, who advised the US Supreme Court not to take the case because she sided with tax-hungry Massachusetts, did concede that police and fire protection for the New Hampshire residents who work at home would be provided by New Hampshire, not Massachusetts. However, she noted, “Yet that resident’s work also may continue to depend on and benefit from services provided by Massachusetts. For example, Massachusetts and its municipalities may provide similar protections to the infrastructure and staff critical to the work of the New Hampshire resident who is temporarily working at home—such as computer servers that enable and store the employee’s work product, courts that enforce contracts, and financial institutions and transactions necessary to the work.”

This is quite a stretch. Computer servers? They are often stored in a different state, especially to protect the company’s data if there is some type of natural disaster. Yes, the courts are there to support businesses, but aren’t they in existence to support all of society? Wouldn’t they be there even if the New Hampshire employee didn’t work for the Massachusetts firm? Besides, the courts charge all manner of fees for their services to the users, so why should an employee in another state also have to pay? As for financial institutions, aren’t these supposed to be private institutions supported by fees paid by their customers?

The obvious truth to the matter is that Taxachusetts earned its shameful name because of its model of extreme tax extraction to support a bloated bureaucracy. Instead of cutting back and laying off unneeded employees—just like private, voluntary businesses were forced to do during the lockdowns—the state arbitrarily changed the rules so it would have enough revenue to continue to pay its army of bureaucrats. An army of workers, I might add, that suffered no economic losses during the lockdowns and continued to get the same pay for doing less work. “Nice work if you can get it.”

Although ultimately the US Supreme Court declined to hear the case, we haven’t heard the last of this issue. The lawsuit was watched nationally because other states also apply the “convenience of the employer” (COTE) rule, which says that if the employee is working at home for his convenience, not the company’s, then the income is taxable to the employer’s location. The states of Arkansas, Delaware, Nebraska, New York, and Pennsylvania use the COTE rule, and Connecticut uses it too but only if the taxpayer resident’s state applies a similar rule. With many state governments operating on oversized budgets and the impending economic troubles ahead, you can bet that they are going to be very creative to change their rules too like Massachusetts to extract as much income as possible from employees working remotely in another state.

What is most interesting about this bruhaha between New Hampshire and Massachusetts is the reaction of several of our Congressional representatives. They have all been outraged by Massachusetts’ sudden change of the rules to sustain its bureaucracy. US Senator Jeanne Shaheen called the Massachusetts tax an “abuse of Granite State workers.” US Senator Maggie Hassan proclaimed her opposition by saying, “I’ve long said that attempts by other states to unfairly tax New Hampshire residents are unconstitutional.” US Rep Annie Kuster called the tax grab “outrageous and an unfair tax burden on our state’s workers.” US Rep Chris Pappas also complained about workers “being forced to pay an unfair income tax.”

Unfortunately, this deathbed conversion to supporting lower taxes seems at odds with their voting records. Senator Sheehan sponsored S.411, which increased the federal tax on all tobacco products. When she was governor, Maggie Hassan signed SB367, which increased New Hampshire state gas and diesel taxes by 4.2 cents per gallon. When it came to amending the state constitution with an income tax ban, Annie Kuster’s vote was a definitive NO because “we shouldn’t tie the hands of future generations.” (Actually yes, we should tie the hands of politicians from increasing taxes.) To his credit, Rep Pappas has been particularly aggressive in the fight against Massachusetts taxing New Hampshire workers, but he has repeatedly called for the repeal of the 2017 Tax Cuts and Jobs Act, which even the New York Times admitted lowered taxes for most Americans.

Sadly, I suspect that our congressional representatives are more concerned about getting in trouble with their constituents back home and getting voted out of office than any principled opposition to higher overall tax extractions. Furthermore, if the shoe were on the other foot and they were senators and congressional representatives for Massachusetts, I’ll bet they’d take a completely different stance on the issue.

In the end, since Massachusetts Governor Baker gave notice that the latest COVID-19 state of emergency ended on June 15, 2021, the tax rule remains in effect for an additional 90 days. We will have to wait and see what the bureaucrats cook up when the telecommuting tax ends on September 14, 2021 and they can no longer collect the tax on days when New Hampshire residents still work from home. Those who supported the rule change always said that it was meant to be temporary and strictly in response to the pandemic as an emergency measure only. While more residents will be back to working in the office in Massachusetts, clearly more telecommuting is here to stay.

What will Massachusetts bureaucrats do to fill the black (tax) hole? I don’t believe they will tighten their belts as it’s not in their DNA, but I hope that I’m wrong. Maybe someone can invent a vaccine to inoculate taxpayers against politicians and bureaucrats.


Berube, Selene. (2021, March 24). New Hampshire v. Massachusetts: Massachusetts Extraterritorial Taxation of New Hampshire Residents. Retrieved from New Hampshire v. Massachusetts: Massachusetts Extraterritorial Taxation of New Hampshire Residents – The Justice Journal (

Bookman, Todd. (2021, May 26). Justice Department Sides with Massachusetts in Cross-Border Tax Fight With N.H. Retrieved from Justice Department Sides with Massachusetts in Cross-Border Tax Fight With N.H. | New Hampshire Public Radio (

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