CAMDEN – Senate President Steve Sweeney, Assembly Majority Leader Lou Greenwald and Assemblyman Troy Singleton joined with the South Jersey business community today to discuss about how the business community will follow through on the restoration of the reciprocity agreement between New Jersey and Pennsylvania that allows taxpayers to pay income tax in the state where they live, not where they work. Ending the agreement, which has been in effect for close to four decades, would have negatively impacted residents, businesses and their employees, and made filing income taxes more complicated.
The termination of the decades-old pact would have resulted in dramatic tax increases for more than 100,000 New Jersey residents who are employed in Pennsylvania.
“This was a fight for the residents and businesses of South Jersey and the end result was a win for the taxpayers and public employees,” said Senator Sweeney. “The state will save $200 million and the employees will maintain their benefits with a plan that I brought to the table. It will make a real difference for middle class families throughout the state.”
“This would not have happened without the work of Senator Sweeney,” said Debra P. DiLorenzo, President & CEO of the Chamber of Commerce Southern New Jersey. “Immediately after we learned of the governor’s plan to rescind the decades-old agreement, Senator Sweeney marshaled the active support of the business community, including our members, and public officials in South Jersey to fight in opposition. At the same time, he was working with unions, other legislators and health care experts to develop a plan to save money in the prescription drug benefits plan. This was key in getting the governor to continue the reciprocal agreement.”
The Legislature approved and sent to the governor a plan that will save at least $200 million in prescription drug costs by rooting out profiteering by drug companies and the “pharmaceutical benefit manager” responsible for purchasing and supplying medications for public employees.
Authored by Senator Sweeney, the reforms will help eliminate overcharges and other wasteful spending for state, county and municipal government workers and teachers throughout the state. New Jersey will be the first state in the nation to put this program in place.
“Ending this agreement would have created a substantial and unfair burden on South Jersey's working families,” said Assemblyman Greenwald. “Our goal is to make New Jersey a competitive state to attract businesses and create real job opportunities for our residents. The governor made the right decision by rescinding his termination notification.”
“For working people who live in South Jersey the continuation of the tax agreement will protect them from increased tax bills that would make it harder to support themselves and their families,” said Assemblyman Singleton. “Public officials, the business community and residents in the region worked together and we succeeded. It’s a satisfying victory that demonstrates the strength of unified action on behalf of South Jersey.”
The Christie administration in early September notified officials in Harrisburg that the governor was providing the 120-day notification required to withdraw from the Reciprocal Personal Income Tax Agreement, reached in 1977. The change would have taken effect Jan. 1, 2017.
Approximately 125,000 New Jersey residents commute to Pennsylvania and another 125,000 make the reverse trip, according to Census Bureau estimates.
Pennsylvania has a flat 3.07 percent income-tax rate while New Jersey has a more progressive tax structure with rates from 1.4 percent to 8.97 percent.
New Jersey residents who earn up to about $113,000 and file jointly pay less in state taxes than they would to Pennsylvania because of the reciprocity agreement. Pennsylvania residents pay higher taxes if they earn more than $113,000. Median household income across both states is less than the $113,000 threshold, according to census data.
Without the pact, they would no longer be able to claim a credit for paying the city's wage tax, which is 3.47 percent for nonresidents.
And, nearly 250,000 New Jerseyans and Pennsylvanians who cross the Delaware to work each day would have had to file two income tax returns each year – one to each state.