Thursday, June 20, 2024
Hawai'i Free Press

Current Articles | Archives

Thursday, June 3, 2021
​Taxes: How Hawaii Can Gouge Teleworkers
By News Release @ 5:52 AM :: 2533 Views :: Small Business, Taxes

Taxing teleworking income from different states

from UH News, June 2, 2021

The COVID-19 pandemic has accelerated the growth of teleworking in the U.S. The result leaves states grappling with the issue of how best to tax the incomes of employees who live in one state but work remotely for employers located in another state. A new University of Hawaiʻi Economic Research Organization (UHERO) brief explores current policies on taxing teleworking income across the U.S. and provides two possible solutions to the growing issues states are facing.

Situation in Hawaiʻi and U.S.

In Hawaiʻi, residents are taxed on income from all sources (some may be taxed by other jurisdictions as well). Non-residents are taxed on income from Hawaiʻi sources only, and the calculation of Hawaiʻi-sourced income is based on the number of days an employee is physically present in Hawaiʻi. To avoid double-taxation, 41 states and the District of Columbia allow income taxes paid to another state to be credited against income tax liabilities in their home state.

Growing dispute due to COVID-19

A dispute between two states has made its way to the U.S. Supreme Court. New Hampshire petitioned the nation’s highest court to rule whether it is constitutional for Massachusetts to continue to impose its income tax on New Hampshire residents who used to commute to work in Massachusetts, but now (because of the pandemic), work entirely from home in New Hampshire for Massachusetts companies. Hawaiʻi and three other states expressed their support of New Hampshire.

Possible solutions

UHERO noted that the current practice of taxing workers based on their physical presence at work is considered by many to be outmoded. To better fit the new world of teleworking, the first solution UHERO provides is for stakeholder states to get together and forge an agreement on a formula to apportion income not strictly based on physical presence. A key concern with adopting the apportionment approach is that it will lead to not only increased employee and employer tax compliance costs (timesheet reporting, internal audits, etc.), it will also create demand for new and expensive systems of revenue administration. UHERO, however, said these issues are not insurmountable.

The second approach UHERO provides is to tax individuals based on where the person lives rather than on where the income is received. According to UHERO, taxation of income on the basis of residence eases the compliance burden of taxpayers and can be particularly important in border states. This residence principle is already practiced in 17 states, where they make reciprocal agreements with other states to not tax non-resident earned income.

UHERO notes that the apportionment approach works best when all stakeholder states participate in the arrangement. However, getting all the states to participate would be difficult, and data shows that Hawaiʻi will lose substantial income tax revenues (in excess of $100 million in tax year 2018) if the state joined the arrangement.

UHERO is housed in UH Mānoa’s College of Social Sciences.

Read the entire brief on UHERO’s website.


TEXT "follow HawaiiFreePress" to 40404

Register to Vote


Aloha Pregnancy Care Center


Antonio Gramsci Reading List

A Place for Women in Waipio

Ballotpedia Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii


Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii ConCon Info

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federation of Republican Women

Hawaii History Blog

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii Military History

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Together


Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

July 4 in Hawaii

Land and Power in Hawaii

Lessons in Firearm Education

Lingle Years

Managed Care Matters -- Hawaii

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

National Parents Org Hawaii

NFIB Hawaii News

NRA-ILA Hawaii


OHA Lies

Opt Out Today

Patients Rights Council Hawaii

Practical Policy Institute of Hawaii

Pritchett Cartoons

Pro-GMO Hawaii

Rental by Owner Awareness Assn

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

School Choice in Hawaii

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii