Legislature could take power over one tax out of Murphy’s hands
A couple of years ago, as he was looking for ways to balance the state budget, then-Gov. Chris Christie almost scrapped a decades-old reciprocal tax agreement between New Jersey and Pennsylvania.
Christie had estimated ending the agreement would generate an additional $180 million for the state fund, but ultimately decided to keep the economic deal in place. It had been hammered out more than 40 years ago, when state income tax rates were quite similar in Jersey and Pennsylvania.
It allows commuters from both states pay income taxes where they reside, instead of where they work.
Now, a plan is working its way through Trenton to require the entire Legislature to cancel the agreement if a similar move is contemplated in the future. It would no longer be the sole authority of the governor — any governor.
Christina Renna, the vice president of the Chamber of Commerce of Southern New Jersey, strongly supports this effort.
She said the reciprocal agreement has been beneficial for companies in the South Jersey region “as it relates to incentives to move their business here, attracting people from across the river to work here.
She said this is so because “if you’re a Pennsylvania employee you’re still going to pay Pennsylvania’s flat income tax rate. You’re not going to pay New Jersey’s high income tax rate.”
She said this provides an incentive for talent to come across the Delaware River into New Jersey “and of course with that comes all the additional income, when you get your lunch here in New Jersey, when you put your child in daycare here in New Jersey, if you get your dry cleaning here in New Jersey.”
“And then for corporations, they use it as an attraction and retention tool themselves, when they’re looking especially at the millennial workforce, for example, that want to live in Philadelphia," Renna said.
She said when companies try to get in-demand employees to come work for them, it certainly helps if those people will be paying Pennsylvania’s lower income tax, not the higher, graduated one in the Garden state.
Renna said the agreement is also beneficial for lower-income workers who travel to jobs in Pennsylvania every day.
“They’re likely paying under Pennsylvania’s 3.07 flat income tax rate, so it would be a tax hike on the working poor," she said.
She stressed if the agreement is scrapped, “you would have current companies that have Pennsylvania employees looking to open branches across the river, in order to retain those employees who would suddenly be looking at paying much higher taxes.”
The bill to require legislative approval on a change being sponsored by State Sen. Fred Madden (D-Gloucester) and Assemblyman Lou Greenwald (D-Camden).
You can contact reporter David Matthau at David.Matthau@townsquaremedia.com.
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