The Supreme Court is considering new limits on how states can assess income tax on money residents earn across state lines.
Several justices appeared skeptical Wednesday of a Maryland official who argued the state’s tax on out-of-state earnings passes constitutional muster.
Other states are carefully watching the case, which could mean the loss of hundreds of millions of dollars in revenue if the court narrows the scope of tax collection.
Maryland currently allows residents to deduct income taxes paid to other states from their Maryland state tax, but it does not apply the deduction to a local “piggy back” tax collected for counties and some city governments.
A Maryland couple says that scheme unfairly imposes a double tax burden on them. Maryland’s highest court ruled the tax is unconstitutional.
(AP)
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Most Maryland residents are unaffected, since the norm the Capital Region (Maryland, DC and Virginia) is you pay tax totally based on residence and not on place of employment. This is so the DC city government can’t tax the large number of commuters working for the federal government.
In most of the country, you pay income tax based on where you work, not where you live (i.e. a commuter tax).