Submitted by Nicole Belson Goluboff, Jun 7, 2007 10:39

Mayor Bloomberg's congestion pricing plan is an admirably ambitious approach to tackling the city's poor air quality and the adverse economic effects of traffic - one Governor Spitzer is wise to consider seriously. Absent a change to the state's tax system, however, the plan could actually drive state nonresidents with New York employers to abandon our state altogether, significantly eroding our tax and economic base.

Under a rule known as the "convenience of the employer" rule, New York State may tax a state nonresident who sometimes telecommutes to his New York employer both on the income he earns in New York and on the income he earns when he works from home. Since the employee's home state can also tax the income the employee earns at home, the telecommuter may be taxed twice on the same income. The double tax threat encourages nonresidents to idle on clogged roads, rather than use the Internet, to get to their New York jobs.

A congestion pricing plan in a state that clings to the convenience rule will put such nonresidents in an untenable position: Under the plan, they will be penalized for driving into Manhattan, and, under the convenience rule, they will be penalized for sometimes skipping the drive and telecommuting instead. If they are punished for driving here often and punished for driving here less, they may easily conclude they should not come here at all. The state will then lose the capacity to tax any part of their salaries, and it will lose the revenue they would have generated for the state and its businesses on their office-bound days.

If we want the Empire State to be eco-friendly, an attractive place for people to work and an attractive place for tech-savvy businesses to launch and continue operations, we must make it easier for workers to commute here sometimes via the Web. We must get rid of the convenience of the employer rule.

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