Volume 96, Online
By Josh Meyerson [PDF]

 The befuddling interplay of state income taxation schemes has been eloquently characterized by legal scholarship as “a mess.” State taxes involve fifty jurisdictions applying distinct rules and differing tax rates. To add more complexity to this tangled web, many states also permit cities, counties, and municipalities to levy separate income taxes. With multiple governmental entities sinking their teeth into the same bundle of earnings, individual taxpayers are often left feeling as though they are paying too much in taxes. 

Though the presence of state and local taxation is nothing new, what has become more pervasive since the onset of the COVID-19 pandemic is the situation in which a taxpayer lives in one state but their workplace is in another state. When a taxpayer is employed outside the state of residence, they may owe income tax to multiple states and political subdivisions, in addition to taxes owed to the federal government. 

Though the Due Process Clause of the U.S. Constitution does not necessarily forbid multiple taxation of personal income, aspects of the Commerce Clause require many states to combat duplicative taxation by providing credits for the amount of tax paid to other states. This practice essentially allows for apportionment of the taxes owed between the relevant states and localities, where an individual pays income tax first to the state where they earned the income (State A), and then, if the taxpayer’s state of residence (State B) has a higher tax rate, they pay State B only the excess of State B’s tax rate over that of State A. Taxes owed to cities, counties, or municipalities in an interstate situation tend to operate similarly. 

In Zilka v. Tax Review Board (Zilka II), the Commonwealth Court of Pennsylvania dealt with a complex, but likely commonplace, set of circumstances in which a taxpayer was a resident of Philadelphia but worked in Wilmington. Though the taxpayer in the case—who owed income tax to four different taxing jurisdictions—had a tax bill greater than that of all her Philadelphia neighbors who worked in-state and greater than that of all her Wilmington coworkers who lived in Delaware, the court concluded that the tax scheme violated no constitutional principles.

This Note begins by describing the facts and procedural history of Zilka II in Section II. Then, Section III examines the legal history of the dormant Commerce Clause and its intersection with state and local taxation. Section IV details the Commonwealth Court of Pennsylvania’s decision and reasoning in the case. 

Part V.A provides a critical analysis of the court’s opinion, arguing that the court failed to sufficiently engage with the Commerce Clause issues presented in the case and misapplied the relevant Supreme Court precedent. Part V.B then argues that, even if the tax scheme at issue is constitutional, it has a number of defects from a tax policy perspective. Overall, this Note asserts that, despite the Supreme Court’s silence on state income taxes and the fact that the ideal solution of uniformity is likely off the table, the Zilka II court failed to consider the constitutional and policy issues in the context of remote work.