Sorry Pennsylvania

From the Star Ledger:

Christie eyes scrapping tax deal with Pa., which could cost some N.J. residents more

Gov. Chris Christie will contemplate ending a 38-year-old agreement with Pennsylvania that allows New Jersey and Pennsylvania residents who work across the river to pay income taxes where they live

In an executive order Thursday night, the governor instructed state officials to explore the consequences of withdrawing from that income tax pact.

Christie’s order comes 12 years after former Gov. James E. McGreevey proposed to end the reciprocal tax agreement, but dropped the plan after angering south Jersey residents and lawmakers who said many New Jerseyans who worked in Pennsylvania would have paid more in taxes.

Currently, New Jersey doesn’t collect income taxes from people living in Pennsylvania and working in New Jersey. Christie’s former treasurer has estimated the Garden State would reap $180 million in revenue from Pennsylvania residents forced to pay taxes here.

The treasurer and attorney general, Christie said in an executive order, are to explore what it would take to pull out of the agreement and “prepare an estimate of the effects such a withdrawal would have on New Jersey’s revenue collections.”

Under the reciprocal agreement, a resident of New Jersey who works in Pennsylvania need only file a tax return in New Jersey. The same is true for a Pennsylvania resident working in New Jersey.

In a column in NJ Spotlight last year, former Treasurer Andrew Sidamon-Eristoff predicted ending the arrangement would bring $180 million into the state.

“New Jersey’s losses from not being able to tax wealthy Bucks County residents who commute to high-paying jobs in New Jersey far outweighs the taxes New Jersey collects on low- and moderate-income Camden and Gloucester County residents who work in Pennsylvania, typically Philadelphia,” he wrote.

He said it wouldn’t take an act of the Legislature to cancel the pact, and that the state can terminate it with 120 days notice.

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43 Responses to Sorry Pennsylvania

  1. grim says:

    Suspect this would be largely negative for Bucks County real estate.

  2. leftwing says:

    Functional equivalent of digging into the extra change jar to make the mortgage payment.

    We’ve blown the income, leveraged ourselves to the max, run up the credit cards to limit, and still can’t see where the money will come from.

    Quite frankly, the fact that the State sees this as necessary to net only up to $180m scares me more than anything else recently. Bankrupt transport funds and credit agency downgrades included.

    “Hey, honey, how about that jar of quarters?”

  3. grim says:

    Counterpoint – there is no single line item that can be struck to fix the budget, the spending and giveaways are buried in obscure provisions like this, everywhere, probably thousands of them. Wouldn’t then, fixing the spending issue be a matter of rooting out the quarters from the budget and fixing them one by one?

  4. grim says:

    Two points about the reciprocal agreement stand out to me.

    NJ’s lack of reciprocity with NY doesn’t appear to hinder economic movement/employee movement.

    Creates a tax arbitrage incentive for highly paid NJ workers to move over the border into PA, to yield a lower tax rate.

    I’d like to see both numbers side by side, to see if this it truly equal/beneficial for both sides, or this leans towards being pro-PA, which I suspect is the case.

  5. Outofstater says:

    I have to smile while reading about the outrage over Christie’s school funding plan. The best line of his piece in today’s paper is “… not just more money thrown at failure to assuage liberal guilt.” So Abbott districts use 26% of their tax revenue for schools while other districts pay 52%. 26% left over for more layers of bureaucracy and patronage. What is the response of the Abbott districts to the question, “How do charter schools in your district manage to educate students at half the cost of the public schools?”. Crickets.

  6. grim says:

    The two states entered into the Reciprocal Agreement with the goal of simplifying tax compliance for their respective residents. At the time, the two states’ income-tax structures were comparable.

    But times change and so do taxes. Notably, Pennsylvania maintains a flat income tax rate of just over three percent with no credits for local income taxes paid, while New Jersey has developed a highly progressive rate structure and does provide a credit for local taxes paid. As a consequence, although the Reciprocal Agreement is still a convenience for some taxpayers, it has become a bad fiscal deal for both states, especially New Jersey. As I said, current estimates are that New Jersey’s net annual loss is about $180 million.

    The impact is asymmetric: New Jersey’s losses from not being able to tax wealthy Bucks County residents who commute to high-paying jobs in New Jersey far outweighs the taxes New Jersey collects on low- and moderate-income Camden and Gloucester County residents who work in Pennsylvania, typically Philadelphia.

    There are two reasons for the asymmetry.

    First, New Jersey’s income tax is much more “progressive” than Pennsylvania’s. Although Pennsylvania imposes a flat tax of just over three percent on most taxpayers, New Jersey’s effective tax rates are lower than three percent for most moderate-income taxpayers and much higher (up to 8.97 percent) for high-income taxpayers. There’s a reason why high-income earners move across the Delaware.

    Second, New Jersey state tax law provides a credit for tax paid to localities such as the Philadelphia Wage Tax on nonresidents (currently 3.4828 percent), while Pennsylvania state tax law does not. That means a New Jersey resident who works in Philadelphia gets a credit for the Philly wage tax while her coworker living in Pennsylvania does not. Keep this confusing tidbit in mind as we continue the narrative.

    As former Gov. Jim McGreevey found out when he proposed, and ultimately had to back away from, abrogating the Reciprocal Agreement as part of his 2002 Budget Message, asymmetric financial impacts can have incendiary political consequences. The political problem for any New Jersey politician is that abrogating the Reciprocal Agreement would result in relatively large numbers of low- and moderate-income New Jersey residents (voters) who work in Pennsylvania, mostly Philadelphia, paying more tax (albeit to Pennsylvania) while a relatively small number of high-earning Pennsylvania residents (voters) would pay more tax to New Jersey. Even though New Jersey would come out ahead, even the dimmest politician will understand the challenging voter math.

    So, why is time to abrogate the Reciprocal Agreement? Here are some reasons:

    We need the money. The aforementioned $180 million is not a total solution, but it’s real money that could make a difference. Take transportation funding, for example. Without finding some new source of revenue, the Transportation Trust Fund will not have enough dedicated revenues to support significant extra borrowing beyond fiscal year 2016. An extra $180 million a year could provide welcome flexibility. The state constitution’s dedication of all income-tax receipts to property-tax relief will prevent the use of this extra revenue for general TTF purposes. However, the State could probably use the extra revenue to support county- or local-government projects, either by using it to service debt allocable to local projects ($180 million a year could support approximately $2.7 billion in borrowing) or to provide debt-service aid and/or capital aid to local governments. Indeed, this may provide an opportunity to accommodate legislators’ desires to increase the amount of annual TTF funding for local projects beyond the approximate $200 million of recent years.

    In the face of Trenton gridlock, this is as easy as it gets. Either state can withdraw from the Reciprocal Agreement on 120 day’s written notice. That’s it. No legislative action is required, which means no voting for or signing a tax increase bill.

    Withdrawal is fair to the vast majority of New Jersey’s taxpayers. Yes, some New Jersey residents will lose a special benefit and have to pay more tax to Pennsylvania than they now pay to New Jersey. In some cases, due in part to the fact that Pennsylvania does not give a credit for the Philadelphia Wage Tax, the extra amount will be significant. But there’s no getting around the fact that the vast majority of New Jersey’s taxpayers bears the burden of covering the shortfall created by this special benefit. Is that fair?

    Withdrawal is fair to those high-wage New Jerseyans who didn’t move across the Delaware. A New Jersey resident working alongside a Pennsylvania resident at a highly paid corporate headquarters job in, say, New Brunswick pays a marginal state income tax rate more than twice as high (8.97% versus 3.07%). Is that equitable? Even allowing for the small local earned income or local services taxes imposed by most of Pennsylvania’s municipalities and school districts, the state income tax differential combined with Pennsylvania’s generally lower property taxes can be an overwhelming incentive to move across the Delaware at, to be frank, minimal disruption to one’s lifestyle. Trouble is, when the Chairman of NJ Industries lives in Pennsylvania, the rest of us get stuck holding the bag.

    Why should New Jersey’s taxpayers subsidize jobs in Philadelphia? If you think it through, the Reciprocal Agreement acts as a New Jersey taxpayer-financed subsidy for jobs in Philadelphia. As noted, Pennsylvania does not give a credit for the Philadelphia Wage Tax, but New Jersey law does. By giving New Jersey residents who work in Philadelphia access to the New Jersey credit, the Reciprocal Agreement takes some of the political and financial sting out of the Philly wage tax and thus, everything else being equal, makes it artificially attractive to create or accept a job in Philadelphia. Why should New Jersey’s taxpayers subsidize jobs in Philadelphia, especially when Pennsylvania’s taxpayers don’t provide a similar subsidy to Pennsylvania residents who work in Philadelphia? At a time when New Jersey is granting hundreds of millions of dollars in economic development incentives for job creation in Camden, just across the river from Philadelphia, the current agreement makes no sense.

    The Reciprocal Agreement is bad for Pennsylvania, too. As a former secretary of revenue for Pennsylvania, the current governor of Pennsylvania probably appreciates the little-known fact that Pennsylvania is also a net loser under the Reciprocal Agreement to the tune of some $35 million annually. Pennsylvania gains less from taxing the relatively small number of residents who commute to high-paying jobs in New Jersey than it loses from not taxing the larger number of New Jersey residents who commute to Pennsylvania. This is a function of the fact that Pennsylvania has a low flat rate (limiting the revenue gain on ex-commuters) and does not grant a credit for local taxes (augmenting the amount of foregone revenue in respect of in-commuters to Philadelphia). Now that a bitter political dispute over raising taxes has scuppered his most recent budget deal with the Pennsylvania Legislature, perhaps Gov. Tom Wolf might consider taking bold action that will coincidentally help his neighboring state.

  7. Amerigeddon says:

    Abbott is a failure. Just a cesspool of mismanagement, corruption and the extension of a legacy of ignorance.

  8. Amerigeddon says:

    But think of the children…

  9. Amerigeddon says:

    Add another one to the “dead associates of the Clintons” list:

    “Call it conspiracy theory, coincidence or just bad luck, but any time someone is in a position to bring down Hillary Clinton by testifying they wind up dead. In fact, there’s a long history of Clinton-related body counts, with scores of people dying under mysterious circumstances.

    Perhaps the most notable is Vince Foster. Foster was a partner at Clinton’s law firm and knew the inner workings of the Clinton Machine. Police ruled that death a suicide, though it is often noted that Foster may have been suicided.

    Now, another official has found himself on the wrong end of the Clintons. That John Ashe was a former President of the United Nations General Assembly highlights the fact that no one is safe once in their sights.

    And as you might have guessed, there are major inconsistencies with Ashe’s death. It was not only conveniently timed because Ashe died just a few days before being set to testify against Clinton in a corruption case, but official reports indicated he died of a heart attack.

    The problem, however, is that police on the scene reported Ashe died when his throat was crushed during a work-out accident.

    The New York Post’s Page Six reported that after Ashe was found dead Wednesday, the U.N. claimed that he had died from a heart attack. Local police officers in Dobbs Ferry, New York, later disputed that claim, saying instead that he died from a workout accident that crushed his throat.

    Adding to the mysterious nature of Ashe’s death was the fact that he had been slated to be in court Monday with his Chinese businessman co-defendant Ng Lap Seng, from whom he reportedly received over $1 billion in donations during his term as president of the U.N. General Assembly.

    And then there was this: During the presidency of Bill Clinton, Seng illegally funneled several hundred thousand dollars to the Democrat National Committee.”

  10. Homeboken says:

    2 Leftwing… That response is precisely with the bureaucracy wants its voters to think. 180mm, won’t make a dent so why bother. I realize in relation to the total budget is just 1/2 of a percent, but like grim said, imagine finding 6 programs just like this that could be changed and produce a net oositive to our budget deficit. Now we are 700mm better off. Is that enough to get your attention?

    Point is – this is a 180mm benefit to the state- as a taxpayer I’ll take anything I can get. Now let’s go after every single double dipping Union employee in the state and cut one of their salaries.

  11. grim says:

    Fireworks accident most likely

  12. walking bye says:

    im tired as a NJ resident, paying NY state tax on my nj muni bonds.

  13. Comrade Nom Deplume. Citizen, 2nd Class. says:

    [7] grim

    Your math seems off. Both states can’t be net losers. I also don’t know that the PA residents working in NJ all qualify as high income. Unless everyone in Trenton fits that bill.

    I also think this analysis misstates or oversimplifies how the tax laws work and their effects.

    Both states and Philadelphia will have to amend their laws. Not sure what will result.

  14. A Home Buyer says:

    “The explosive appeared to have been in the area more than a day, according to Lt. Mark Torre, the commanding officer of the NYPD’s Bomb Squad said. He ruled out authorities’ initial suspicion of a self-inflicted fireworks mishap.”

  15. grim says:

    PA would gain $35 million in tax revenue if this is eliminated. Due to the offsets in tiers, there are a group of NJ taxpayers that gain a benefit because the PA flat tax they would be paying is actually higher.

    It’s a lose lose deal.

  16. Comrade Nom Deplume. Citizen, 2nd Class. says:

    [17] grim

    I’ll have to look at the studies even though I don’t do SALT work I’m sure my partners will have questions.

  17. Ottoman says:

    Here’s a better question: why do you ignore the fact that charter schools are legally allowed to pick and choose which students they take based on fixed enrollment numbers? So problem or low performing kids get the heave ho back to public schools or never even make it into the charter, meanwhile public schools have no choice but to take everyone. BTW it’s also been proven that public schools still perform better than charter schools even with all the advantages charters enjoy.

    How do charter schools in your district manage to educate students at half the cost of the public schools?”. Crickets.

  18. nwnj3 says:

    It looks like the cutoff line for people working in PA who will be hit by this is around 40k, and anyone living in NJ and commuting to PA who makes more than 40k would be hit.

    Due to bracket creep the number of NJ voters hit by this is probably less than it was 12 years ago so the pols might not fear the backlash but how often are these projections actually realized? There will be a subsequent reaction and businesses/people will move to avoid the exposure if it’s all possible so it really sounds like another quick fix maneuver.

  19. nwnj3 says:


    If the charter schools are helping even %1 of the motivated kids escape these hellholes then they are worthwhile. Liberals love trapping people in hopelessness rather than providing a way out and then claim the next big gov program will solve all of their problems.

    Enough, might as well drop the charade and everyone acknowledge that many of these “schools” are just people warehouses and the stated mission of education is just about impossible.

  20. The Great Pumpkin says:

    Otto understands the charter issue. Some people continue to believe in fairy dust, the idea that because a school carries the title of “charter”, it can solve all education problems. Yes, taken for a ride based on manipulated data, and supposedly “cheaper” costs. The cheaper costs really have me laugh, you are telling me a “for profit” school is a better value for the taxpayer? ROTFL! And fairy dust can help you fly.

  21. The Great Pumpkin says:

    These kids created theses hellholes with the choices that they make. Take a look at these urban schools that are supposedly failing their students. For example, how come the Indian immigrant population does so well under the same circumstances and school conditions as these other minorities? They go to the same so called “failing” school, but end up becoming doctors.

    So let’s stop blaming the schools already, the education is there. Don’t blame the schools or feel sorry for a group of students who refuse to take advantage of their free education. The school didn’t fail them, they failed themselves. They would have failed at any school they went to because their parents failed them. They never taught them how to learn or respect an education. Here in lies the problem. Blaming schools and teachers will not solve this problem. Never did, never will.

    “If the charter schools are helping even %1 of the motivated kids escape these hellholes then they are worthwhile. Liberals love trapping people in hopelessness rather than providing a way out and then claim the next big gov program will solve all of their problems.”

  22. grim says:

    The vast majority of states do not have reciprocal tax agreements with their neighbors. These agreements are by far exceptions, and not norms.

    While they exist, they are largely phenomenon of the Northeast, and a small pocket in the midwest.

    Pennsylvania, actually, holds the largest number of reciprocal tax agreements in the Northeast, which is a major reason for their prevalence.

    The normal model across the majority of the country is that you are taxed on income where it is earned. New York and New Jersey do not have any sort of reciprocal agreement.

  23. 3b says:

    #21 I thought you left?

  24. grim says:

    Not to mention that in it’s current state, the PA/NJ reciprocal agreement creates a major loophole for NJ high-wage earners to reduce their income tax obligations by moving across the river.

    If the intent was simply to eliminate paperwork, it’s now very far from its original intent.

  25. Anon E. Moose, Second Coming of JJ says:

    Gourd-o [24];

    Be careful. I have seem people be called Klansmen for less… unless they are established leftists who spout all the “correct” pieties, in which case the Screaming Campus Garbage Babies just nod an go about their merry way. How confident are you in your leftist status to be sure you’ll get that pass?

  26. Anon E. Moose, Second Coming of JJ says:

    Otto [19];

    So you’re saying that Public Schools ex. charter are like Special Ed; charter does the same job for normal kids at half the price; then there is always private.

    Parents, choose accordingly.

  27. grim says:

    What impact did Zuckerberg’s $100 million donation have on Newark’s dropout rate?

  28. Juice Box digging his own grave ( joys of home ownership) says:

    re #30 – One thing is for certain. . . . .If you give a liberal education system 200 million, don’t expect much change.

  29. Amerigeddon says:

    Liberals love trapping minorities in helplessness because that swells their voter base.

  30. Amerigeddon says:

    grim (30)-

    Zuckerberg’s 100mm probably went up 1,000 people’s noses.

  31. Amerigeddon says:

    When the f- did punkin come back?

    Go away, arsehole.

  32. Amerigeddon says:

    Really, the only solution for schools like Camden HS is to shut them down and blow them up.

  33. 3b says:

    Beautiful weekend at the shore in Spring Lake. Lots of houses for sale though many have been on the market since last year or are back on the market.

  34. grim says:

    What’s the graduation rate in Trenton and Camden?
    I think one of the two is actually less than 50%.


    Drop out, you will live a life of poverty. It’s your choice, don’t blame anyone else.

  35. Punkin’ should change his handle to The Great Herpes, but that would be an insult to herpes. Herpes goes away for longer.

  36. GOP's broken (the good one) says:

    i take your word for it as no doubt you have personal experience with it

    The Original NJ ExPat says:
    July 4, 2016 at 1:06 pm

    …..The Great Herpes, but that would be an insult to herpes. Herpes goes away for longer.

  37. Comrade Nom Deplume. Citizen, 2nd Class. says:

    [39] twitiot

    Agent Smith accurately identified you best

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