Agglomeration and State Personal Income Taxes: Time to Apportion (With Critical Commentary on New Hampshire’s Complaint Against Massachusetts)

Fordham Urban Law Journal, Forthcoming

17 Pages Posted: 31 Mar 2021 Last revised: 15 Apr 2021

See all articles by Darien Shanske

Darien Shanske

University of California, Davis - School of Law

Date Written: March 31, 2021


The Supreme Court is currently considering whether it will accept original jurisdiction over New Hampshire v. Massachusetts. At issue is the State of New Hampshire’s (and its amici’s) claim that Massachusetts’s insistence on applying its income tax to residents of New Hampshire, who once commuted to work in Massachusetts but now work for the same businesses remotely in New Hampshire because of the COVID-19 pandemic, violates the Due Process Clause and dormant Commerce Clause. The claim is simple and seductive: if these New Hampshire residents barely leave their own homes, much less their state, how can it accord with due process for Massachusetts to tax them?

In this short colloquium essay, I make the following points about the merits of this case. (I think the case should be dismissed on procedural grounds, but believe the merits are important and will eventually be reached on a similar fact pattern.)

1. The plaintiffs are essentially arguing for physical presence as a predicate for individual income taxation. To the extent that the argument is that physical presence is currently required by the Due Process Clause or the dormant Commerce Clause, I argue that contention is wrong.

2. I also argue that a physical presence rule should not be created. This is a case where common sense intuitions about work and the creation of value can lead one astray. Here, what intuition misses is the importance of agglomeration economics. The residents of New Hampshire massed on the border with Massachusetts (and paying higher housing prices to do so) are not preparing for an invasion. Rather, they are rationally choosing to live in the Greater Boston area because of the professional and cultural amenities that the area offers and for which the state of Massachusetts can reasonably ask them to contribute.

3. The plaintiffs make a similar argument about apportionment, namely that the Massachusetts’s regulations fail fair apportionment. Again, as based on current law, this argument is incorrect (and should remain so). Apportionment is judged by a reasonableness standard and here what Massachusetts is doing satisfies that standard. It has long been acceptable for states that are the source of an employee’s income because that is where the employee works to consider itself the source of all of that income. All Massachusetts has done is argue that the usual source rule should apply during this temporary disruption. Similarly, all New York’s convenience of the employer rule argues is that the usual source rule of thumb should not be disturbed unless the employer is the driving force behind the employee working elsewhere.

4. There is a difference between what the Constitution permits and what would be best as a matter of policy. If, as seems likely, there will be more remote work in the future, then the traditional all-or-nothing rule of thumb as to the source of individual income should be reconsidered. In particular, I argue, it is appropriate for states to shift to apportioning the income of individuals just like they currently do for the income of businesses.

Suggested Citation

Shanske, Darien, Agglomeration and State Personal Income Taxes: Time to Apportion (With Critical Commentary on New Hampshire’s Complaint Against Massachusetts) (March 31, 2021). Fordham Urban Law Journal, Forthcoming, Available at SSRN: or

Darien Shanske (Contact Author)

University of California, Davis - School of Law ( email )

400 Mrak Hall Dr
Davis, CA CA 95616-5201

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