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Ending tax deal with Pennsylvania meets resistance

New Jerseyans who work in Philadelphia may see an increase in their taxes next year.

New Jersey is poised to end a nearly 40-year-old reciprocal tax agreement with Pennsylvania that allows commuters to pay their home state’s income tax rate rather than that of the state where they work.The change, which could have a fairly sizeable tax impact on commuters from both states, is currently set to take place Jan. 1, after Gov. Chris Christie did away with the deal earlier this month.

And while estimates indicate it could bring as much as $180 million in additional revenue to the state, there has been pushback.

The change means commuters from both sides of the Delaware River would be sending income taxes to both Trenton and Harrisburg — and that’s not sitting well with some politicians.

Senate President Steve Sweeney (D-West Deptford) said that, according to census data, any New Jersey resident who commutes to work in Pennsylvania and makes less than $110,000 annually will end up paying more in income taxes.

On the whole, he estimates the decision will cost roughly $1,000 each year for more than 100,000 New Jersey commuters.

“This is nothing more than a tax increase on New Jersey residents,” Sweeney said. “It will be a blow to residents who are trying to make ends meet. It’s unfair and unacceptable. This is not the last word on this issue.

“We should not be balancing New Jersey’s books on the backs of middle-class taxpayers. I call on the governor to renegotiate a new agreement that does not harm New Jersey’s working families.”

Christie says the move is a result of the state Legislature’s inability to find $250 million in savings in public employee health care costs, something he had requested when he presented the current fiscal budget earlier this year.

In a recent statement, Christie spokesman Brian Murray blamed the Democratic-led Legislature for “intentionally putting a $250 million hole in the budget to benefit their public employee union bosses.”

“If the Senate president and the (Assembly) speaker don’t want this to go forward, then put the residents of South Jersey ahead of the union bosses,” Murray said. “It’s their choice and, once again, they are picking their union masters over the people of South Jersey.”

The state Department of the Treasury has previously estimated the move would bring in roughly $180 million in new tax revenue to the state from the more than 100,000 Pennsylvania residents who commute to New Jersey for work.

Over 120,000 New Jersey workers are estimated to make the trip into Pennsylvania.

Christie does appear to be willing to renegotiate the deal, telling reporters at a news conference last week that the Legislature has “got time” to help him make the changes to public employee health care costs that he desires.

But his willingness to reconsider hasn’t stopped Democrats in both states from criticizing his plan.

Jeffrey Sheridan, a spokesperson for Pennsylvania Gov. Tom Wolf, a Democrat, said Christie seems “committed to making Pennsylvania and our residents working in New Jersey suffer the consequences of his failure to enact a responsible budget.”

New Jersey’s Assembly majority leader, Lou Greenwald (D-Voorhees), says the decision is short-sighted.

“The governor’s decision to focus on turning a quick buck instead of finding sustainable solutions to our budget problems continues to hurt our state and our residents,” he said. “New Jersey’s already high cost of living already causes residents to flee our state; it makes no sense to needlessly raise taxes on working families.”

E-mail to: andrewg@njbiz.com

Andrew George

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