22 November 2016 New Jersey Governor restores Pennsylvania reciprocal income tax agreement In a news release issued on November 22, 2016, New Jersey Governor Chris Christie stated that thanks to health benefit reforms enacted since the FY17 budget passed that will save the state's taxpayers over $200 million for calendar year 2017, he is now able to preserve the reciprocal income tax agreement with Pennsylvania. As we previously reported, earlier this year Governor Christie gave Pennsylvania the requisite 120-day notice that the reciprocal income tax agreement between the two states was terminated effective on and after January 1, 2017. Under that agreement, Pennsylvania residents working in New Jersey are subject only to Pennsylvania resident income tax and New Jersey residents working in Pennsylvania are subject only to New Jersey resident income tax. It is projected that nearly 250,000 employees will be affected by the ending of this 39-year tax pact. In October 2016, Pennsylvania issued a notice of guidance concerning the impending termination of the tax pact and steps Pennsylvania taxpayers would need to take for next year. The Pennsylvania Department of Revenue is expected to soon issue an announcement that will update guidance it issued previously instructing Pennsylvania taxpayers of steps to take as a result of the end in the tax pact. Had Governor Christie not reversed course on terminating the Pennsylvania reciprocal income tax agreement, Pennsylvania employees working in New Jersey would have felt a sizeable increase in their New Jersey nonresident income tax. The New Jersey personal income tax can be substantially higher than the Pennsylvania rate; Pennsylvania has one income tax rate of 3.07% while the New Jersey income tax rate is graduated and ranges from 1.5% to 9.9% for tax year 2016.
Document ID: 2016-2002 | ||||||||||||||||||||
