TRENTON, N.J. (AP) Gov. Chris Christie said Friday he is pulling out of a almost 4-decade-old income tax agreement with Pennsylvania, all but ensuring that thousands of residents in each state will see their tax burdens go up. Either governor can pull out of the deal at the start of the year but must give 120 days’ notice. The order was aimed at forcing $250 million in cuts to public retiree health benefits.
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He called ending the deal the “least painful action” but left the door open for a quick reversal if lawmakers take action to give him the authority to reduce public employee health care costs.
A Pennsylvania state representative from Bucks County who decried the move as a “cash grab” said earlier this week he’d gathered more than 3,500 signatures from Pennsylvanians opposed to scotching the agreement.
“Right now our clear mandate as elected officials is to save the taxpayers of New Jersey money in a sustainable way”, said New Jersey Democratic Assembly Louis Greenwald in response to Christie’s suggestion. Christie’s decision did not require approval of the Legislature.
The 1977 reciprocity agreement allows residents who work in either state to pay income taxes at their home state’s rate.
The pullout 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.
Pennsylvania has a flat 3.07 percent income tax rate; New Jersey has a more progressive tax structure, with rates from 5.53 percent to 8.97 percent on income from $40,000 and above. He wrote that while some New Jersey residents stand to see their rates go up, ultimately the state would net $180 million in new taxes.
“This will also hurt our mutual interests in creating jobs and opportunity in the region”.
A spokesman for Pennsylvania Democratic Gov. Tom Wolf said Friday Christie has “erred significantly” in his decision.
Hespe, who was confirmed as education commissioner in December 2014, oversaw New Jersey’s first foray into the Partnership for Assessment of Readiness for College and Careers, or PARCC tests.
Christie, a Republican, issued an executive order on June 30, the end of the last fiscal year, asking his administration to examine the issue. The state attorney general was also ordered to weigh in and report back to the governor.
The trio said ending the agreement would force thousands of South Jersey residents who work in Pennsylvania to pay higher taxes and that many South Jersey businesses would also suffer because many of their employees work in Pennsylvania and commute to Jersey. By the afternoon, Christie’s office said it had no update on the agreement and a spokesman for the Pennsylvania Department of Revenue said it had not received any notice from the Christie administration.
Currently, New Jersey doesn’t collect income taxes from people living in Pennsylvania and working in New Jersey.
About 125,000 Pennsylvania residents commute to New Jersey, and vice versa, according to Census Bureau estimates. “The burden falls completely on working families in New Jersey, especially those in South Jersey who work in Philadelphia”.
More than 120,000 New Jerseyans commute to Pennsylvania, and a similar number of Pennsylvanians work here, according to the USA census.
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“Today’s action was made necessary by the Legislature irresponsibly creating a $250 million state budget hole in June”, Christie said.
