JUNE 26, 2018
The Honorable Philip D. Murphy
Governor, State of New Jersey
PO Box 001
Trenton, NJ 08625
Dear Governor Murphy:
I am writing you today to respectfully urge you to sign into law S-878 (Madden/Sweeney) / A-3084 (Greenwald/Moriarty)
, which requires both legislative and executive branch approvals in order to terminate reciprocal personal income tax agreements with other states.
The CCSNJ has been engaged in this important issue since September 2016. At that time, then-Governor Chris Christie announced his intent to dissolve the New Jersey/Pennsylvania Reciprocal Income Tax Agreement, which allows residents in New Jersey and Pennsylvania to pay taxes to the state in which they live versus where they work. The unexpected announcement sent shockwaves throughout the entire state.
Dissolving income tax reciprocity would have a real impact on the tens of thousands of residents who live in New Jersey and work in Pennsylvania. Census estimates show approximately 250,000 workers commute across the border between the two states, about 125,000 from each state, including 90,000 from Burlington, Camden and Gloucester counties.
As you are aware, the New Jersey Statute adopted in 1976 provides the Director of the Division of Taxation with the authority to exit agreements with the taxing authorities of other states as long as 180 day notice is provided. However, the CCSNJ strongly believes that those impacted by the agreement – the taxpayers and businesses - should have a voice in the process if a proposal to dissolve the agreement occurs in the future.
The threat of income tax reciprocity being dissolved in 2016 highlighted the important role this agreement plays in companies’ strategies to attract and retain the right workforce, especially businesses located in close proximity to greater Philadelphia, including Camden and Trenton. Businesses were rightly concerned over not only losing their employees to Pennsylvania companies, but also how the dissolution of this tax compact would impact their ability to attract qualified new talent to their New Jersey operations.
In fact, an important consideration of New Jersey’s business incentive programs is the downstream economic benefit of jobs created or maintained in New Jersey, regardless of where employees may reside. That is because the activities of workers before, during and after the workday, e.g., buying gas, using public transit, shopping, dining, child care and other services, brings significant economic benefits to the region and state.
Changing the rules of taxation by terminating this agreement after more than four decades would have forced employers to take action in order to protect and retain current employees, while remaining 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. 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 had they known that income tax reciprocity would be eliminated. Similarly, Subaru of America, which recently chose to move its North American headquarters to Camden City, was actively pursuing its options, including constructing one of its facilities in Pennsylvania.
We believe that it is essential for both the executive and legislative branches of state government to approve important and consequential tax policy – policy that impacts residents and businesses of our great State.
Governor, we appreciate your kind attention and respectfully urge you to sign into law S-878 (Madden/Sweeney) / A-3084 (Greenwald/Moriarty).