The bill would allow New Jersey teleworkers to win hefty tax credits if they successfully sue New York over income taxes. (Photo by Eduardo Munoz Alvarez/Getty Images)
Two Assembly panels approved a bill meant to keep New York from taxing New Jersey workers who stopped crossing the Hudson once the pandemic hit.
Under longstanding rules, New York taxes employees of the state’s businesses regardless of where the work is actually performed. That means New Jerseyans who stopped commuting into New York once the pandemic hit are still taxed by the Empire State.
“We have New Jerseyans that have not seen Manhattan for probably years before the pandemic, and yet they’re paying all of their income taxes to New York state,” said Chris Emigholz, chief government affairs officer for the New Jersey Business and Industry Association. “There’s a lot of things we could do with that money if it was kept here.”
The measure’s advancement comes as New Jersey officials squabble with their counterparts on the other side of the Hudson River over New York’s plan to implement congestion tolling for motorists entering the city below 60th Street.
The bill would give New Jerseyans who lodge successful tax suits against another state a tax credit equal to 50% of the money they recover. Those funds would otherwise be subject to New Jersey’s gross income tax as normal.
It would also create a $25 million grant program meant to encourage out-of-state businesses to relocate workers who live in New Jersey back to the Garden State. The size of the grant would be equal to the amount of net revenue regained by the state, up to a cap of $100,000.
The Assembly commerce and appropriations committees each approved the bill in unanimous votes, the former amending it to match a Senate bill that awaits a full vote before the upper chamber.
Since 1976, New Jersey and Pennsylvania have not taxed residents working in the other state. The amendments approved Thursday would guarantee that agreement persists.
“This is particularly important for the South Jersey region of the state. A lot of folks who live close to Philadelphia travel into Philly to work and then come back to New Jersey,” said Hilary Chebra, manager of government relations for the South Jersey Chamber of Commerce.
It’s not clear how much tax revenue New Jersey might recoup from the change, and the law is likely to be litigated in federal court if signed, Emigholz said.
The bill could win a final vote before the Senate as early as Monday and could come before the full Assembly at the chamber’s May 25 session.
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