Hundreds of thousands of New Jerseyans that would typically commute into New York City and pay taxes in that state have telecommuted from New Jersey for months because of the COVID-19 pandemic, but still do not pay taxes in the Garden State.
Several lawmakers are hoping to change that, and a bill that a Senate panel approved Thursday would have the State Treasury look at how those dollars could be captured during the pandemic, which by some estimates can drag on well into 2021.
“If New York were prevented from taxing New Jersey residents who no longer go to work across the Hudson, we could generate hundreds of millions – perhaps billions – of tax dollars for New Jersey, all while lowering the income tax bills of former commuters substantially,” one of the bill’s sponsors, Senator Steven Oroho, R-24th District, said in a Thursday statement.
New Jerseyans crossing states lines into New York to pay taxes are on the hook for their income tax in that state. In New Jersey, they pay tax credits for the taxes they pay to New York.
Those credits amounted to $3.4 billion in 2016, according to the State Treasury.
Under Senate Bill 3064, the state treasurer would have six months to provide the state Legislature with a report on how many tax credits were given to New Jerseyans between 2011 and 2020 for taxes they paid in New York.
That report would also have to include what steps had, and can be taken to recapture those dollars, and any case law or other legal obstacles to pursuing those avenues.
The treasury would also have to look at how other states may have tackled similar issues, and potential savings for workers if they were to pay taxes in New Jersey.
“The transition of New Jersey workers to telecommuting is something we’ve been watching for a long time,” Senate Budget Chair Paul Sarlo, D-36h District, said in a Thursday statement. “It’s clear that the state of New Jersey can no longer afford to ignore the substantial tax implications of this shift, which has been supercharged as a result of COVID-19.
Lawmakers in the Senate Budget and Appropriations Committee approved in the measure in a 12-0 vote on Thursday.l