“Given the unprecedented circumstances that would emerge from the virus, if there were to be a debate on the dissolution of the agreement in the future, this legislation will ensure that the legislative branch and especially those affected by the agreement – taxpayers and businesses – have a voice in this process,” said Renna. On November 22, 2016, Governor Christie changed course and said he would not pull the agreement on Pennsylvania`s reciprocal income tax in New Jersey. According to a statement, health care reforms would generate $200 million in savings next year, allowing Governor Christie and his government to “save” the agreement. “New Jersey would do very well if we had the same agreement (with New York),” said Sen. Steve Oroho (R-Sussex). But this time comes the initiative to give more votes to legislators in the future of mutual agreement, in the midst of the pandemic that has weighed on the state`s economy, including in south Jersey, where the effects of the bistt agreement are most felt. The Pennsylvania Revenue Department announced that New Jersey is ending its reciprocity agreement with Pennsylvania effective January 1, 2017, which requires individuals to file two income tax returns and withhold employers for both states starting in 2017. Residents of Pennsylvania and New Jersey receive a credit for income tax paid on wages that are earned in the other state. This is particularly advantageous for Pennsylvania residents, who pay a flat-rate national income tax rate of 3.07 percent, compared to New Jersey`s progressive tax, which ranges from 1.4 percent to 8.97 percent for those earning more than $500,000.
New Jersey residents, who are in the lowest income tax class and work in Pennsylvania, also pay less public taxes. The agreement also allows New Jersey residents to obtain an income tax credit from Philadelphia City. New Jersey and Pennsylvania have a mutual agreement. Compensation for New Jersey residents who work in Pennsylvania is not subject to income tax in Pennsylvania. Compensation means wages, tips, fees, commissions, bonuses and other allowances paid for benefits as an employee. But under a law passed last week unanimously by members of the Senate`s Budget and Appropriation Committee, state lawmakers would have the power to prevent at least one governor from taking unilateral action against mutual agreement. The bistate tax treaty, which dates back to the 1970s, is appreciated by many residents and businesses in southern Jsey as a comfort and a means of promoting economic development. Unfortunately, there is no doubt that some employers and subcontractors have wasted time and resources preparing for policy change. There is no doubt that while the change generates additional revenue for New Jersey, it would have had a negative impact on many businesses and commuters between states.
But the agreement will be maintained for the foreseeable future. The new efforts also come, as lawmakers urge Murphy`s administrators to take a closer look at how New Jerseyers who work in New York and pay income taxes in Albany are influenced by the lack of a similar income tax agreement between the two states. Pennsylvania and New Jersey are ending the reciprocity agreement and have selected two states that are expected to begin in 2017, and Chris Christie announced in September 2016 that the agreement would be repealed on January 1, 2017.