TRENTON, N.J. (AP) - New Jersey Gov. Phil Murphy rejected legislation on Monday that would have made it more difficult for him to end a tax reciprocity agreement with Pennsylvania.
The Democratic governor’s rejection is the latest in a two-state tax drama that goes back to GOP Gov. Chris Christie’s threat to end the deal as part of budget negotiations with lawmakers.
Christie reversed course in 2016 and left the deal in place, but the threat was enough to spur Democratic Senate President Steve Sweeney to sponsor the legislation that Murphy rejected.
The bill would have required separate legislation to end tax reciprocity agreements, which the state has with Pennsylvania. It has no such deal with its other neighbors, New York or Delaware.
Murphy pointed out that he has never threatened to end the deal and that for more than four decades the executive branch has “appropriately retained unilateral authority” to enter into and end tax reciprocity deals.
He says the rationale for that setup stems from the governor’s access to confidential tax collection data that gives the executive a basis to evaluate whether withdrawal is a good idea.
The 1977 pact with Pennsylvania keeps tax rates lower for thousands of residents in both states who commute across the Delaware River for work. It particularly benefits higher-earning Pennsylvania residents who commute to work in New Jersey but it’s also a boon to residents in southern New Jersey who work in Philadelphia and its suburbs.
Sweeney estimates eliminating the deal would result in a roughly $2,000 a year tax hike.
“I think it’s unfair. We weren’t doing anything except saying, listen, Governor, what happens when the next Chris Christie comes here and all of a sudden you feel you need something so you’re gonna pick the pockets of people from one section of the state for $200 million,” Sweeney said.
Estimates figured that ending the deal could bring in an additional $180 million in revenue for New Jersey.
Christie threatened to end the deal in 2016 because he said New Jersey lawmakers failed to identify $250 million in public worker health benefits cuts.
But he relented when lawmakers passed a bill aimed at reining in health care costs for public employees. He said at the time that eliminated the need to pull out of the deal, a move that had been sharply criticized by residents and business owners in both states.
Subaru of America President Thomas Doll, for example, had said he was “blindsided” and “very disappointed” by Christie’s decision to kill the deal.
It wasn’t the first time a New Jersey governor considered ending the deal. Democrat Jim McGreevey made the same proposal in 2002 but drew criticism from New Jersey lawmakers who represent workers in southern New Jersey.
Pennsylvania has a flat personal-income tax rate of 3.07 percent, while New Jersey’s rate ranges from 1.4 percent for incomes under $20,000 to 10.75 percent for incomes over $5 million.
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