Support the Multi-State Worker Tax Fairness Act

As our nation works to strengthen our economy and to meet the significant transportation and energy challenges we face, we must encourage the use of a crucial tool: Telework.

Telework can reduce the cost of traffic congestion. According to the Texas A&M Transportation Institute, in 2011, traffic congestion cost the United States $121 billion in wasted time and fuel, not including the effect of longer delivery times, missed meetings and other negative consequences of congestion. By taking cars off the road, telework can cut such waste. Spared the drive, telecommuters can get to work faster. When highways hum, drivers can get to work faster and goods can reach customers sooner. Without the stress of daily gridlock, both telecommuters and office-based employees can work more efficiently and effectively. In addition, telecommuters can put the money they save on fuel back into the economy.

Telework can reduce the cost of transportation infrastructure. By decreasing the number of daily drivers and transit riders, telework reduces the wear and tear on the nation’s existing roads and rails. It also reduces the need for additional construction. As a result, telework optimizes federal dollars spent on repairing and maintaining existing infrastructure and mitigates future costs.

Telework can assure business continuity. Powerful storms, pandemics, terrorist threats and major transit disruptions can slow or halt business operations. However, when employees are equipped and trained to telecommute, organizations facing such emergencies can continue functioning with no loss in productivity.

Telework can boost employment. By reducing recruitment, overhead and other business costs, telework makes it less expensive for companies to hire new staff. At the same time, it enables Americans who have lost their jobs to expand the region where they look for work. Further, according to the National Broadband Plan, increasing telework opportunities could enable 17.5 million non-workers, including retirees, homemakers and disabled Americans, to enter the workforce. These new teleworkers could produce significant revenue and disability savings for the federal government.

The Telecommuter Tax prevents businesses and individuals from adopting telework. Notwithstanding the critical benefits of telework, a harsh tax penalty thwarts its growth: the Telecommuter Tax. The tax derives from a state policy commonly referred to as the “convenience of the employer” rule. In a state applying this rule, nonresidents who work for in-state employers and choose to telecommute part-time must pay taxes to the state on 100% of their salary – not just the wages they earn when they work in the state, but also the wages they earn at home, in a different state. Because telecommuters’ home states can also tax the income earned at home, workers are threatened with double taxation on that income.

The convenience rule is a strong deterrent to telework. Some workers are forced to reject telework because the rule creates too much confusion about where they owe taxes. Other workers are forced to reject telework because they cannot afford an extra state tax bill. The convenience rule also makes telework unaffordable for businesses: The administrative costs of figuring out where they must withhold for interstate telecommuters can be unmanageable.

The Multi-State Worker Tax Fairness Act would abolish the Telecommuter Tax. The legislation (H.R. 4085; S. 2347) provides that no state may tax income that nonresidents earn when they are physically present in a different state. It would eliminate the risk that workers will be double taxed for using the Internet to access an out-of-state job.

The National Broadband Plan called upon Congress to consider telework tax relief legislation, asserting that the “double taxation issue … is preventing telework from becoming more widespread.” The Telework Coalition, the Association for Commuter Transportation, the National Taxpayers Union, the Small Business & Entrepreneurship Council, the Christopher & Dana Reeve Foundation and the American Legion are among the diverse group of stakeholders that have endorsed telecommuter tax relief legislation.

The Multi-State Worker Tax Fairness Act will strengthen our economy, transportation system, emergency preparedness and energy security. Please help make this essential measure law.