Having declared in early September his intention to end the reciprocal income tax agreement between New Jersey and Pennsylvania that has existed since 1977, Governor Chris Christie announced today that he will, in fact, uphold the 40-year old agreement, leaving it in place, as is.
The reciprocal tax agreement benefits workers in both states by ensuring that employees pay income tax only to the state in which they live.
At the time Christie announced the revocation of the agreement, it was viewed as one of the most viable options available to him to expediently reduce New Jersey’s considerable budget deficit. He was careful to add the caveat that, should the Legislature propose healthcare reforms which would free up needed budget dollars before the “in-effect” date of January 1, 2017, he would reconsider his decision to end the reciprocal agreement. On Monday, the caveat became a reality when a bipartisan bill, making adjustments to the state’s pharmacy benefits system, was officially signed into law, allowing Christie to spare the agreement. The new law, expected to generate approximately $200 million in taxpayer savings, will go a long way towards offsetting the current deficit.
The news comes as a welcome relief to workers on both sides of the Delaware who work in the opposite state from where they live as well as to businesses housed in New Jersey which will no longer need to consider whether or not to relocate to minimize their tax consequence.
“By addressing a potential $250 million budget deficit from growing healthcare costs,” said Christie, “we are now able to save an income tax reciprocity agreement with Pennsylvania that protects tens of thousands of hard working New Jerseyans from having to pay more income taxes.”