Dear Senator Lieberman:
On behalf of the Small Business & Entrepreneurship Council (SBE Council), thank you for your leadership in sponsoring the Telecommuter Tax Fairness Act (S.1811). Given the growing importance of telecommuting and a more mobile workforce, this would redress a serious tax problem for entrepreneurs, small businesses and workers.
According to the latest estimates from the U.S. Census Bureau released in early 2010, the number of self-employed who worked exclusively from home increased 25 percent between 1999 and 2005. Of course, it's not just entrepreneurs working from home, but employees as well. Those in the total U.S. workforce that worked at home exclusively rose by 21 percent, and those working some of the time from home increased by 20 percent over the same period. The ability to work from home has been greatly enhanced in the subsequent years given innovations in technology.
There are tremendous benefits derived from working at home, including for the environment, in terms of balancing home and work lives, and helping to save time and money for workers, as well as for employers. Overall, telecommuting enables businesses and workers to operate more flexibly.
Employers can draw from a larger geographic area in terms of hiring workers with skills that match their needs, and where such workers may not be readily available in their communities or region of the country. In addition, job relocation by one family member may not necessarily mean the severing of employment for their spouse, family member or significant other if telework in an option.
Unfortunately, some states have extended the reach of their state income taxes to the out-of-state, telecommuting employees of in-state firms, even if those employees only come into the state for work occasionally. In fact, a telecommuter's entire income can be vulnerable to being taxed by a different state from where one lives if telecommuting was for the person's convenience, and not due to a job requirement.
This is grossly unfair, can mean higher taxes imposed on entrepreneurs and workers; can increase tax compliance costs for small businesses and individuals; can rob states that credit taxpayers for taxes paid elsewhere of legitimate tax revenues; and can put taxpayers at risk of having to pay taxes twice on the same income in states offering no credits for income taxes paid to other states.
The Telecommuter Tax Fairness Act would eliminate such tax unfairness for telecommuters and small businesses by prohibiting a state from imposing an income tax on a nonresident individual for any period when not physically in the state, or from deeming the nonresident individual to be present because the individual works at home for convenience or because the individual's work at home fails any convenience of the employer test.
SBE Council strongly supports the Telecommuter Tax Fairness Act. It's sound pro-worker, pro-entrepreneur tax policy.
If you have any questions, or if we can be of assistance, please call SBE Council at 703-242-5840. Thank you again for your leadership and support of small business.
Karen Kerrigan, President & CEO