Tax My Ride: Taxing Commuters in Our National Economy

Abstract

Located on the scenic St. Croix River, Hudson, Wisconsin is just a half-hour drive from the major metropolitan area of Minneapolis and St. Paul - "the Twin Cities" of Minnesota. Hudson is, therefore, a popular "bedroom" community for Twin Cities' workers. Those commuters, the Wisconsin residents who work in Minnesota, face taxation by two sovereign states: They are taxed by the state of Wisconsin on the basis of their residency in Wisconsin, and they face taxation by Minnesota on the income that was "sourced" or earned, in Minnesota. It is well-settled that both states are entitled to tax at least some portion of our Wisconsin commuters' incomes. What is less settled is the constitutional limit of the "double" taxation that can occur when two states claim to be the source of income, a situation that is happening with increasing frequency in our increasingly mobile, and telecommuting, population. If, for example, a Wisconsin resident worked for a Minnesota employer, but occasionally worked from home, both Wisconsin and Minnesota could claim to be the source of the income. If both states claim to be the source of the income, the commuter will be taxed twice on that portion of her income, a result that doubtless seems markedly unfair to our commuter. The question this article explores is becoming increasingly pressing. Demographic and work place trends, along with increasingly aggressive state revenue collection practices, combine to predict that the question of fair apportionment of individual taxation will only grow in importance.The article begins with a comparison of state taxation of individual and business income. Part II proceeds to explore the relevant constitutional norms: the dormant Commerce Clause and the Privileges and Immunities Clauses of both Article IV and the 14th Amendment. Part III synthesizes these Constitutional norms and their application to commuters. Part IV concludes with a discussion of the growing importance of this question and the avenues for possible resolution.