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Position Papers

CCSNJ Seeking Amendments on A4694

Workforce Economic Development Taxation



TO:                  Members of the Senate Budget and Appropriations Committee 

FROM:             Hilary Chebra, Manager Government Affairs, Chamber of Commerce Southern New Jersey

RE:                   A-4694 (Tully/Swain) seeking amendments

DATE:              May 17 2023


We would like to respectfully request A-4694 (Tully/Swain) be amended to mirror the Sentate version. The senate companion, S3128 (Lagana/Bramnick), was amended to clarify that it will have no effect on the New Jersey/Pennsylvania Income Tax Reciprocity Agreement.

We appreciate the bill’s prime sponsor, Assemblyman Tully assurances that this bill is in no way intended to affect the New Jersey/Pennsylvania reciprocity agreement, and his willingness to work with us. Similarly, our concerns are in no way about the bill’s provisions with regard to income tax paid by New Yorkers who work in New Jersey and vice versa.

We would like to respectfully request the following amendment:

The provisions of subsection (e) of N.J.S.54A:4-1 and subsection e. of N.J.S.54A:5-8 shall not affect any agreement entered into by the Division of Taxation and the taxing authorities of another state pursuant to this subsection.

For those unfamiliar with the reciprocal income tax agreement, it can be best explained as follows: New Jersey collects income taxes from New Jerseyans who work in Pennsylvania and Pennsylvania collects taxes from people living in Pennsylvania and working in New Jersey. Neither state collects income taxes from residents of the other state whose employers are across the river from their home.

The reciprocity agreement, which was signed in 1976, is critical to companies’ strategies to attract and retain the right workforce, especially those companies located in municipalities close to greater Philadelphia such as Camden and Trenton. When the agreement was under threat in 2016, these affected companies joined together with the CCSNJ to raise the red flag, as dissolving the agreement could have led to their losing employees to Pennsylvania companies and struggling to attract new talent to New Jersey. Ultimately, the decision to dissolve the agreement – which the Governor can do without legislative input – was reversed.

The differences in tax rates between New Jersey and Pennsylvania are stark: New Jersey’s income tax is one with several graduated tax rates – the highest 10.75% , whereas Pennsylvania has a flat income tax rate of 3.07%.  The dissolution of the reciprocity agreement would be costly to affected companies located in New Jersey and would very likely affect their decisions about in which of their facilities across the nation to invest, and where to locate new facilities.

Additionally, an important part of the equation for New Jersey’s businesses is generating and maintaining jobs, along with the downstream economic benefit of those jobs in New Jersey. This makes sense as the economic benefit of a worker is mostly driven by their behavior during and after the workday, i.e., buying gas, using public transit, shopping, dining, childcare and other services.

It's also important to note that the reciprocity agreement helps New Jerseyans with modest incomes, as New Jersey’s progressive tax rates compare favorably to Pennsylvania’s flat tax for incomes in the lower tax brackets. New Jersey residents working in Philadelphia would be especially hard hit if the reciprocity agreement were to end, as that city imposes its own wage tax as well.

Again, we appreciate the sponsor’s assurances that the bill is not intended to affect the New Jersey / Pennsylvania Income Tax Reciprocity Agreement at all. We urge this Committee to include our proposed amendatory language to make sure that the bill is consistent with the sponsor’s intent.

Thank you very much.

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For any Government-related comments, questions or suggestions please contact:

Hilary Chebra 

Manager, Government Affairs, CCSNJ

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