Can a local government impose its income tax on remote workers who live and work outside the jurisdiction? NTUF’s Taxpayer Defense Center today filed an amicus brief with the Ohio Supreme Court arguing against Cincinnati’s income tax applying to individuals who live and work outside Cincinnati but work for an employer located in Cincinnati.
Schaad v. Alder involves Ohio law HB 197, passed during the COVID-19 emergency, when many Ohio workers stopped commuting into central cities every weekday, threatening income tax revenue to these cities. The law “deemed” the employees as still working at the office even though they as individuals no longer had any physical presence in Cincinnati.
Our brief argues that taxing non-residents based on their employer’s location violates due process, and taxability based on former presence should eventually expire—even during an emergency. The government justifies local income taxes on commuters as paying for government services enjoyed by those commuters, but if the employee is no longer coming into the jurisdiction, then the taxes they are paying are unjustified. Otherwise, Ohio cities are trying to demolish a key component of the American system: the ability to vote with one’s feet from high tax places to low tax places.
We hope the Ohio Supreme Court will hold that the Ohio General Assembly cannot authorize extraterritorial municipal taxation.