Prior to the onset of the COVID-19 pandemic, nearly a half million New Jerseyans worked in New York.
With many Garden State residents still working from home, New Jersey legislators are looking to change where they pay their income taxes.
The State Senate passed a bill on Oct. 29 to examine the continued taxation’s impact on New Jersey and what it stands to gain if the income tax revenues were redirected from New York.
A companion bill was introduced the same day by Assemblyman Ronald Dancer (R-12).
Current Taxation ‘Unjust’
State Sen. Steven Oroho (R-24), one of the bill’s sponsors, said it was unfair for New York to tax former commuters from New Jersey who have been working remotely during the public health crisis.
In a press statement, Oroho, the Senate Republican Budget Officer, said, “It’s no surprise that New York wants to keep padding its budget at the expense of New Jersey, even if it no longer has a legitimate claim to our residents’ tax dollars. What is surprising, however, is that New Jersey has been so timid in addressing New York’s unjust taxation of New Jerseyans who are working from home and no longer commuting across the Hudson.”
State Sen. Paul Sarlo (D-36), bill co-sponsor, pointed out that many businesses “are shedding expensive New York office space as they realize telecommuting works.”
Income Tax Relief
“It’s likely that many of our former commuters will work completely or primarily from home going forward,” Sarlo said. “That makes New York’s continued taxation of New Jerseyans even more unjust.”
According to Oroho and Sarlo, most former commuters to New York would pay less if subject to New Jersey’s lower income tax rates.
New Jersey would also “benefit from hundreds of millions or even billions of dollars” in redirected income tax revenues currently paid to New York. Under the bill (S-3064) approved, the State Treasurer would be required to compile a report that Oroho said “will show the scope of the problem and set the stage for future action.”
State Treasurer Examine
According to the bill, the state treasurer would be required to report to legislators within six months on:
- An explanation of efforts the state has taken to address the inequity of New York’s taxation of New Jersey resident’s income.
- Estimated total credits the state has granted, or will grant, to New Jersey residents for income taxes paid to New York in each tax year in each tax year beginning with Tax Year 2011 and ending with an estimate for Tax Year 2020.
- A discussion of steps that the state may take to protect New Jersey’s public finances, and the paychecks of New Jersey residents, from New York and its political subdivisions taxing authority
- An estimate of New Jersey residents’ tax savings should the state be able to shift residents’ income tax payments from New York and its political subdivisions to New Jersey.
- An analysis of how other states and jurisdictions address the tax implications of residents living in one state and commuting to another.
- Recommendations as to how the state may resolve the inequitable tax treatment of New Jersey commuters working for employers in New York.
Looking At Legal Options
Oroho and Sarlo noted that other states with similar concerns are taking action as well.
Last week, New Hampshire announced a federal lawsuit against Massachusetts for taxing the income of remote workers who no longer commute to the Bay State.
According to the newly-passed Senate bill, the state treasurer’s report will examine whether New Jersey should join the lawsuit.