M E M O R A N D U M


TO:                         Members of the New Jersey General Assembly

FROM:                   Christina M. Renna, Vice President

RE:                         Support of S-878 (Madden/Sweeney) / A-3084 (Greenwald/Moriarty)

DATE:                    June 21, 2018


The Chamber of Commerce Southern New Jersey is pleased to strongly support of S-878 (Madden/Sweeney) / A-3084 (Greenwald/Moriarty), which restricts authority to terminate reciprocal personal income tax agreements with other states. 

The CCSNJ was proud to be the leading business organization in the state to engage on this critical issue with the outstanding support of Senate President Steve Sweeney and Assembly Majority Leader Lou Greenwald in 2016.  At that time, then-Governor Chris Christie announced his intent to dissolve the New Jersey/Pennsylvania Income Tax Reciprocity Agreement.  He argued that this agreement, which has been in place since 1976, would raise the additional revenue needed fill an unanticipated budget shortfall.

For those unfamiliar with the reciprocal income tax agreement, it can be best explained as follows: New Jersey does not collect income taxes from people living in Pennsylvania and working in New Jersey. In return, Pennsylvania does not collect income taxes from people living in New Jersey and working in Pennsylvania. Instead, Pennsylvania residents report and pay tax on income earned in New Jersey on a Pennsylvania tax return; similarly, New Jersey residents report and pay tax on income earned in Pennsylvania on a New Jersey tax return. 

Census estimates show approximately 250,000 workers commute across the border between the two states, about 125,000 from each state, including 90,000 in Burlington, Camden and Gloucester Counties alone. That makes the math behind this agreement significant: New Jersey’s income tax is one with several graduated tax rates – the highest 8.97%, whereas Pennsylvania has a flat income tax rate of 3.07%.


It is important to note that the New Jersey Statute adopted in 1976 provides the Director of the Division of Taxation the authority to enter agreements with the taxing authorities of other states.  New Jersey’s reciprocal income tax agreement with Pennsylvania includes language that allows for the agreement to be dissolved when one of the parties indicates its intent to withdraw from the agreement with written notice 120 days before the start of the next calendar year.  This can be done with no input or oversight from the Legislature or the taxpayers; as written it is purely an Executive Branch decision.

On September 2, 2016, exactly 120 days before the end of the year, Governor Christie announced his intent to end the reciprocal income tax agreement, which sent shockwaves throughout the state.  The CCSNJ immediately responded by meeting with then-New Jersey Treasurer Ford Scudder, Senate President Sweeney, Majority Leader Greenwald and senior staff in the Governor’s office.  We assembled a high-level Working Group of both member and nonmember companies from all regions of the state in order to assess the impacts of the dissolution of the agreement and to educate policymakers on these impacts.  

The threat of income tax reciprocity being dissolved highlighted this agreement’s importance to companies’ strategies to attract and retain the right workforce, especially businesses located in close proximity to great Philadelphia, including Camden and Trenton. Companies were worried about the potential of losing their employees to Pennsylvania companies and equally worried about the ability to attract new talent to New Jersey. 

CCSNJ member companies – including Campbell Soup Company, Destination Maternity and Subaru of America, just to name a few – heard directly from their Pennsylvania resident employees who were extremely concerned over the impact that ending the agreement would have on their paychecks. Campbell Soup Company employees alone sent approximately 4,000 emails to legislators and the Governor. 

Additionally, an important part of the equation for New Jersey’s business incentive programs, many of which are focused on generating and maintaining jobs, is the downstream economic benefit of jobs in New Jersey regardless of where employees may reside. In fact, the most successful of these programs ignores, for application and qualification purposes, whether the workers reside within or outside of New Jersey. This makes sense as the economic benefit of a worker is mostly driven by their behavior while in New Jersey before, during and after the workday, i.e., buying gas, using public transit, shopping, dining, child care and other services.

Changing the rules of taxation after four decades would have forced employers to take action in order to protect current employees and remain attractive to future employees. For example, Campbell Soup Company estimated that approximately 500 employees – nearly 40 percent of their workforce – live in Pennsylvania, but work in New Jersey.  Subaru’s workforce is very similar with 40 percent of their workforce coming from outside New Jersey, including the Pennsylvania area. Destination Maternity, which relocated its headquarters and logistics facilities (and over 500 full-time employees) from Philadelphia to Burlington County in 2015 after receiving a Grow New Jersey incentive, stated that they would not have relocated if they knew income tax reciprocity would be eliminated, as a majority of their employees are Pennsylvania residents who would have been negatively impacted.  Subaru of America, which recently chose to move its North American headquarters to Camden City, was actively pursuing options relocation options, including constructing one of its facilities in Pennsylvania.

On November 22, 2016 – nearly three months after announcing his intention to end the agreement – Governor Christie changed course and decided to keep it in intact.  However, this experience shed light on how readily – and with no input from residents and businesses – this agreement can be dissolved.  


S-878 (Madden/Sweeney) / A-3084 (Greenwald/Moriarty) is the legislative fix the CCSNJ has encouraged the Legislature to pursue in order to ensure a situation similar to that of 2016 does not happen again.  Should there ever be a discussion about dissolving the agreement in the future, this legislation assures that the Legislature and most importantly, those impacted by the agreement – the taxpayers and businesses - have a voice in the process. 

Requiring both executive and legislative approval on tax policy that has such significant impacts on taxpayers is sound public policy and a measure that we commend Senator Madden and Senate President Sweeney for putting forth.  For these reasons, we respectfully urge you to vote “yes” on S-878 (Madden/Sweeney) / A-3084 (Greenwald/Moriarty).