It goes without saying that many Americans are working from home for the first time due to the global pandemic. Such a change in the way companies and employers work has led to a sensitive public policy question: how should companies be taxed whose employees mostly work from home?
Ohio lawmakers tried to answer that question at the start of the pandemic. On March 27, 2020, Ohio Governor Mike DeWine signed into law mandating a misguided solution.
House Bill 197 allows cities to collect municipal income taxes from commuters whose employers have temporarily closed their downtown offices due to the pandemic.
The Buckeye Institute, a non-profit, open-market think tank based in Columbus, Ohio, has tried the First District Court of Appeals of Ohio in Schaad v. Alder appealed a case challenging the City of Cincinnati's application of local income tax on non-resident commuters who worked from home during the pandemic.
The lawsuit seeks to prove that the city's emergency-based tax policy is unconstitutional, which, in my opinion, is objectively the case.
As a result of the pandemic, the work of workers who worked from home is being treated as if it were done in higher-taxed communities, meaning people like Josh Schaad (who spent less time in Cincinnati doing work last year) are doing more had to pay municipal income taxes in 2020 than in 2019.
Mr. Schaad had previously worked remotely and has therefore received retrospective reimbursements for work that was not done in Cincinnati. H. B. 197 forbade such a sensible solution.
Schaad v. Alder is just one of five cases the Buckeye Institute has filed in protest of H.B. 197
Denison v. Kilgore is Schaad v. Strikingly similar to Alder in that Eric Denison worked off-site in Westerville, Ohio, but had taxed his work as work done in Columbus. Denison was also successfully compensated for work outside the city limits of Columbus in previous years, but as with Schaad, such a practice was encouraged by H.B. 197
Last April, Franklin County settled the case and Denison paid his taxes back. They also agreed to continue this practice so that he would no longer have to pay higher Columbus taxes in the future.
In a third case related to the bill, on May 26, the Buckeye Institute appealed the Buckeye v. Kilgore a. The case also raises the question of whether the work of workers who have to work from home is treated for tax purposes as if it had been carried out in another city.
In March, Buckeye filed a lawsuit against the cities of Oregon and Toledo, Curcio v. Hufford, invoking the Constitutional Due Process clause as the reason for H.B. 197 unconstitutional. Aside from the legal reasons for not applying the law, in practice the workers in question were not receiving any taxable benefits or services from the cities of Oregon and Toledo because they did not live there.
Why should a person pay tax to a community where they do not live and from which they do not receive additional benefits or services?
The fifth case prosecuted by Buckeye relating to H.B. 197 was Morsy v Dumas, filed last April in Cuyahoga County. Dr. Manal Morsy lives in Pennsylvania but works in Cleveland.
Morsy hadn't set out in Cleveland (or Ohio) since March 2020, but she had paid income tax to the city of Cleveland and her hometown of Blue Bell, Pennsylvania, more than 400 miles from Cleveland, for over a year.
Buckeye called such a tax policy a "modern form of taxation without representation".
“Commuters pay taxes without having a say in the city administration. It is a taxation without representation “is spot on. Because of this, Buckeye has filed cases across #Ohio. Read more about our cases: https://t.co/aIuPLoTiBe https://t.co/hKOJn1QDdV
– The Buckeye Institute (@TheBuckeyeInst) June 11, 2021
The problem of unfair tax policies during the pandemic is not unique to Ohio, however. An even more significant legal challenge against pandemic tax law is underway here in New England.
Buckeye filed an amicus brief against Massachusetts with the US Supreme Court in New Hampshire asking the court to protect Granite Staters from unconstitutional taxation by Massachusetts.
Referring again to the due process clause, litigation attorneys have pointed out that Massachusetts is wrongly taxing New Hampshire's many commuters, over 80,000 of them who have been working from home since mid-October 2020.
The Supreme Court has yet to decide whether or not to rule on the case, but such a ruling could set a unified precedent for working from home across the country.
Now that more people than ever are working from home (which will be permanent for some), it would be a good idea for the court to hear the New Hampshire case and create a tax precedent for the nation after the pandemic.
Regardless of the Supreme Court ruling, no one unrepresented should have to worry about additional taxes during the added stress, financial and psychological burden of the pandemic, and our government's response to it.