NCPA - National Center for Policy Analysis

State Income Tax Laws Vary Widely

December 16, 2013

States have widely different laws for residents who work in one state but live in another, says Elaine Povich, a staff writer for Stateline.

Each state has different standards for assessing income tax for citizens who work in multiple states.

  • Some states apply a "first day" rule -- if you've worked in a state for one day, you owe that state income tax.
  • Some require an individual to spend a certain amount of time in that state before an income tax is triggered (this ranges from 10 to 60 days).
  • Other states assess income tax based on the amount of income earned in that state, rather than the time spent.

Some states have tried to fix the situation by entering into reciprocal agreements with other states. Virginia and Maryland, for example, have an agreement such that Virginia residents can work in Maryland but do not have to pay a Maryland income tax. Others have developed model legislation that would deal with nonresident workers, but North Dakota is the only state to have implemented it so far.

Many corporations have begun to back federal legislation that would make state income tax rules conform. For workers who travel, the different income tax rules can make their lives complicated.

The Mobile Workforce State Income Tax Simplification Act sets a 30-day minimum for income tax liability: once a worker has worked in a state for 30 days, he is liable for income tax there, and the taxing laws apply. Earnings are subject to taxes in the state in which the work is performed, and those taxes are credited against taxes that would be due in the worker's state of residence (something that states already do).

  • New York says that it would lose $100 million annually from this legislation, while California would expect to lose $15 million a year.
  • The Federation of Tax Administrators opposes the federal law, saying that states are best suited to determine their own tax laws.

Source: Elaine S. Povich, "'Road Warrior' State Income Tax Laws Vary Widely," Stateline, December 12, 2013.


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