The New Jersey Business & Industry Association supported legislation advanced by a Senate committee on Thursday that would restrict the to terminate reciprocal income tax agreements with other states.
The bill, S-878, co-sponsored by Senators Fred Madden (D-4), Steve Sweeney (D-3) and Troy Singleton (D-7), would limit the authority to terminate the agreement to an enactment of law by the legislature and the governor directing the termination.
In November 2016, then-Gov. Christie announced that he was maintaining the New Jersey-Pennsylvania reciprocal income tax agreement, which calls for residents of each state to pay income taxes where they live, instead of where they work.
Christie had previous planned the end of that bi-state tax reciprocity agreement in 2017 due to a projected budget shortfall. But he reversed course after signing new healthcare legislation resulted in an estimated $200 million in savings.
NJBIA had lobbied for the restoration of the agreement, as New Jersey’s top graduated income tax rate of 8.97 was significantly higher than Pennsylvania’s flat rate of 3.07. New Jersey businesses were at risk of losing valuable employees or raising wages to compensate for the possible tax change.