House Of Representatives Passes Mobile Workforce State Income Tax Simplification Act

By Global Tax Weekly

If dealing with one tax administration isn’t bad enough, try the United States, where of course tax doesn’t stop at federal level because there are 50 states also waiting to ensnare unwitting taxpayers. Large companies operating across national and sub-national boundaries are largely able to cope with corporate tax compliance issues by employing teams of tax experts to figure out what the firm’s tax obligations are and the best ways to fulfill them. However, for individual mobile workers, this issue can be very daunting and can even stretch the mental resources of companies that employ them. As the National Association of Manufacturers recently observed, the “increasingly mobile workforce is subject to an ever-changing hodgepodge of state tax laws, creating a compliance and fiscal nightmare for both companies and their employees on temporary assignments to other states.”

And if this problem currently taxes the resources of a company, just imagine how self-employed individuals must feel: overwhelmed and living in perpetual fear of audits and fines, I should imagine – which is hardly going to encourage inter-state commerce and innovation.

So, the approval by the House of Representatives of the Mobile Workforce State Income Tax Simplification Act, which should hopefully substantially reduce these problems is certainly good news for mobile workers. However, these are by no means new proposals. They have actually been floating around Congress for a number of years, but without passing both chambers.

Following House approval of the latest version of the bill, it was received in the Senate on September 22. But history suggests the chances of its final passage are low. And also, the timing of the referral isn’t the greatest, with the Senate set to adjourn for the election recess on October 7. Doubtless mobile workers have learned to be patient by now.

Strict enforcement by US states of tax residence rules has been characterized by some as a blatant revenue grab from mobile workers. But others have wondered if states are doing themselves more harm than good by doggedly sticking to the letter of the law. It would certainly be interesting to learn how much it costs states to enforce these laws, and whether that cost is outweighed by the additional revenues they collect. I suspect that there’s not a lot in it. What’s more, as mentioned, the economic impact might also be negative.

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