I feel the existing policies won’t be in tune with the changing circumstances.
Working from home is different than commuting to work from a nearby state. A remote worker can be hundreds of miles away and have never even visited the state where his job is. The only significant group that has been working like this are employees at call centers and tech support lines. And most of these people have relatively low income jobs.
When remote working becomes a common practice for people like doctors, lawyers, engineers, and business executives, the stakes will rise. These people have significant incomes.
I feel some states will try to target these people. They have large incomes but they don’t vote in the state; they’re perfect for hitting with a high income tax rate. These states can protect local voters by creating exemptions that only apply to state residents.
Other states will go the opposite route. They’ll try to get these people to relocate to them by acting as a tax shelter and enacting laws that protect state residents from any out of state income tax claims.
I think we’ll see situations where Massachusetts, for example, imposes a high income tax rate with exemptions that protect Massachusetts residents while Tennessee, for example, enacts a law saying Tennessee residents aren’t required to pay any out of state income taxes. And we’ll see court battles when a guy who lives in Nashville and “works” in Boston gets told he has to pay taxes and refuses to do so.
I think eventually it will settle down and there will be a national policy over these taxes. But I predict some arguments ahead before we reach that point.