Rep. Mike Bishop (R-MI) wants to fix what he considers an outdated state income tax standard in the United States, introducing legislation on Thursday that would benefit a mobile workforce and simplify tax reporting for businesses and employees.
“You just don’t have the same world we used to live in, where you’d go to work nine to five,” Bishop told the Ripon Advance. “There’s travel over and beyond the company headquarters now. Travel is an important part of life for many in the business community.”
Bishop said state income tax policy hasn’t caught up to this reality. The bill Bishop introduced, known as the Mobile Workforce State Income Tax Simplification Act, aims to address that issue. The bill, which is the House version of a bill that passed the Senate in February, aims to simplify the tax code for workers employed in multiple states. It is a bipartisan, bicameral effort, cosponsored by Rep. Hank Johnson (D-GA).
The current system places an expensive burden on employees, employers and states in an effort to track down the tax revenue from workers on temporary assignments in other states. Currently, even one day of working in a state requires the filing of income taxes and the need for companies to track withholdings for that state.
“There are states that have a desire to poach these employees when they cross the state line and get their hunk of flesh,” Bishop said.
There are up to 41 state income tax reporting requirements imposed on employees and employers, many of which depend on length of travel and income. The demand for doing work beyond a worker’s state of residence continues to grow.
This is an extreme compliance burden on everyone involved, Bishop said. To that end, the Mobile Workforce Act would change that system so taxes are only paid in a worker’s state of citizenship and in any state in which they work for longer than 30 days.
Businesses have called for this legislation that will ease their compliance burdens and the compliance burdens of their employees and make interstate operations easier to manage. The reduced administrative costs in pursuing small amounts of tax revenue would also benefit states, Bishop said.
“This is an opportunity for us to streamline and get some of this unnecessary regulation and taxation out of their world so they can grow and prosper,” Bishop said.