Christie Considers Withdrawing from Income Tax Agreement with Pennsylvania

NJ Spotlight News | July 4, 2016 | Politics
Christie issued an order to investigate how NJ could withdraw from the agreement with PA.

By Brenda Flanagan

A beef over taxes helped spark the American War of Independence. Now new battle lines could form over another tax deal — one that lets Pennsylvania residents work at well-paying jobs here in New Jersey without paying New Jersey’s high income tax rates, which can top 8 percent. Instead they pay Pennsylvania’s flat 3.07 percent income tax. That’s unfair, say some on the Jersey side of the Delaware.

“Time for a change. They should be paying, if they’re working here, paying here,” said Jerry Stomato. When told they would probably pay more, he said, “Yeah, well we pay more.”

“Well, I think they should pay taxes in New Jersey, too. Why should we have to pay for them?” asked Cathy Stomato. She said she feels like she’s subsidizing them.

Former New Jersey Treasurer Andrew Sidamon-Eristoff estimated New Jersey could reap a $180 million income tax windfall if it withdraws from the 38-year-old income tax reciprocity deal with Pennsylvania, calling it the “…mother of all South Jersey sacred cows” but adding, “We need the money…and withdrawal is fair to the vast majority of New Jersey taxpayers.”

Paul Heffernan disagrees.

“That wouldn’t be good. Because Pennsylvania’s got a lower rate,” he said.

Heffernan estimates he’s saved maybe a quarter-million bucks over 30 years, by working at a Princeton pharmaceutical company but living and paying income tax in Pennsylvania.

What does he say to people who say he’s got a pretty sweet deal since he’s paying lower taxes in Pennsylvania?

“I tell them to move here,” Heffernan said. “Yeah, yeah because even real estate, property, income taxes are lower.”

“My whole family left the state and we lived there since ’76,” said Trevor Roberts.

Roberts also lives in Pennsylvania and still works as a consultant in Jersey.

What would happen if he had to pay tax rates in Jersey?

“I would leave New Jersey completely. I would take my business out of New Jersey and move elsewhere,”  he said.

But, look — the reciprocity tax deal cuts both ways. It actually benefits thousands of low- to middle-income South Jersey residents who work across the river in Pennsylvania. That’s because New Jersey’s income tax is on a sliding scale that starts at a low 1.4 percent.

And South Jersey lawmakers like Lou Greenwald take a dim view of Gov. Chris Christie’s recent executive order, directing the state treasurer “…to determine the specific steps that would be necessary to withdraw the State of New Jersey from the Reciprocal Personal Income Tax Agreement… and (shall) prepare an estimate of the effects such a withdrawal would have on New Jersey’s revenue collections.”

Roberts’ advice? Don’t tread on me.

“Leave it alone. Leave the taxpayers alone,” he said.

Now lawmakers often revolt, rather than raise taxes for their constituents. But Gov. Christie doesn’t need legislative approval to end reciprocity. He can do it by executive order.

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