No double taxation for dual state residents

Posted on Posted in Taxes

Can a state or local government tax your income that was earned and already taxed in another state? That was the question before the U.S. Supreme Court over the past few years and an opinion was finally issued this week.

NO” says SCOTUS in a 5-4 decision. The surprise to me was that it was such a close decision with sharply divided opinions among the Justices. But in Comptroller vs. Wynne, the Supreme Court decided that Maryland’s tax was in violation of federal law because its county tax effectively “double-taxes”some income that was already taxed in another state.

This decision is important to people like me who maintain legal residency in more than one state. Dual residency could have been suddenly a lot more expensive if the decision had gone the other direction. I suspect that this decision will also impact local earned income taxes but the Court decision does not address the question of what options are left open to the states. Other media reports speculate that we will see a wave of new tax laws designed to replace the tax revenue that will potentially be lost be this Court decision.

For more information see: Bradley Joondeph, Opinion analysis: Maryland’s personal income tax violates the Commerce Clause, SCOTUSblog (May. 19, 2015, 10:20 AM), http://www.scotusblog.com/2015/05/opinion-analysis-marylands-personal-income-tax-violates-the-commerce-clause/

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