Ending a reciprocal agreement could hit South Jersey residents who work in Philadelphia with a higher income-tax bill.
South Jersey elected officials should make a strong stand against a broadside from Gov. Chris Christie that could force thousands of people who live in New Jersey but work in Pennsylvania to pay hundreds of dollars more in income taxes.
When the governor OK'd the no-drama 2016-2017 state budget in the late hours of June 30, he also signed an executive order directing state officials to examine ending a 38-year-old reciprocal agreement allowing state-to-state commuters to pay income taxes only to their home state.
The practical effect for middle-class New Jerseyans working in Philadelphia or surrounding Pa. counties is that they pay lower New Jersey income taxes instead of Pennsylvania's flat 3.07 percent tax. With New Jersey's graduated tax, rates start at 1.4 percent on the first $20,000, and climb to 8.97 percent for any income above $500,000.
A Jersey resident who makes a tenth of that $500,000 figure -- $50,000 -- has an effective New Jersey tax rate of just 2.54 percent. Lose the agreement, and commuting workers could have to pay some income taxes to both states. A former state treasurer estimates that New Jersey would gain $180 million in revenue, mostly from high-wage Pennsylvania-to-New Jersey reverse commuters.
No wonder several New Jersey administrations have looked at axing the reciprocal agreement. State officials salivate at more income tax receipts from thousands of the well-paid who live in Bucks County, Pa., but work in the Garden State.
Thus, Christie's proposal strikes fear not just in the hearts of South Jersey- Philadelphia commuters, but among the executive class working in the medical, financial, etc., offices along the U.S. Route 1 corridor.
Here's the rub, though: Kill the reciprocal, and the Pennsylvania families still escape the extraordinarily high local property taxes they'd be assessed if their mini-mansions were in New Jersey. Modest split-level owners in Washington and Gloucester townships who commute over the Walt Whitman Bridge enjoy no such property tax benefit, and could see their income taxes rise significantly.
The last governor to make a serious run at killing the reciprocal was Jim McGreevey. In 2002, he ran into a wall of over-our-dead-bodies criticism from South Jersey lawmakers. Christie's new gambit has met with disturbingly tepid reaction. Although he didn't endorse the idea, state Senate President Stephen Sweeney said he'd consider the exit plan if it didn't hurt New Jersey residents.
Folks, you need to get worked up about this like you did 14 years ago.
The plan could be a Christie bargaining chip. Sweeney -- whose South Jersey constituents have the most to lose -- has been holding up a Christie-backed plan to reduce general sales taxes in exchange for a 23-cent-a-gallon gasoline tax boost.
Just in case it's not leverage, but added levies, that Christie desires, tell him this: Don't inflict collateral damage on the middle class in Gloucester, Camden and Burlington counties just so New Jersey can wring a few more dollars from wealthier folk who make that Yardley-to-West Windsor trek every morning.
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