Over 120,000 people who live in New Jersey commute across state lines into Pennsylvania for work each day. Furthermore, thousands of Pennsylvania residents work in New Jersey. To simplify tax matters for such commuters, the two states have had a long-standing agreement that residents must only file income tax returns in the state in which they live. This prevents the need for two sets of tax returns but also means that each state gives up the taxes for people who commute into the state for work.
In fall of 2016, New Jersey Governor Chris Christie announced plans to end the income tax agreement, citing the need for additional tax revenue for the state budget. This would have meant a significant change for many employees, as New Jersey has a significantly higher income tax rate than Pennsylvania. Because people living in Pennsylvania but working in NJ have higher average incomes than the reverse, New Jersey would stand to make more revenue. However, an end to the agreement would cause complications for many employees and may even deter Pennsylvanians from working in NJ.
Fortunately, thanks to state budget savings found in another public worker health care bill, Christie changed his mind and decided not to cancel the agreement. In addition, the health care bill has bipartisan support and the entire decision is being lauded as a “win-win” for employees in New Jersey.
Income Taxes can be Complicated
The threat to end the Pennsylvania and New Jersey income tax agreement is only one example of how income tax laws have the potential to change in our state. Employers must stay on top of all new developments in income tax laws and requirements to ensure that they are in compliance with the law at any time. The same is true for any type of employment law, as non-compliance can result in legal liability both to the state and to employees. This is only one of many reasons why it is always wise to have the guidance of an experienced business and employment attorney.
Call 732 238-8686 today for more information.
At the law firm of Bowne Barry & Barry, we stay apprised of all changes in New Jersey employment law so that you do not have to spend your time learning about new developments in the law. Your focus should be on your business operations, so please call us for more information about our legal and consulting services today.