(The Center Square) – A New Jersey bill could allow the state to retain income tax revenue paid by people who used to commute to jobs in New York, but are now working from home.
“It would be huge in terms of its impact on the New York state budget, because Jersey commuters have been paying $3 billion a year in taxes to Albany,” E.J. McMahon, senior fellow at the Empire Center for Public Policy, told The Center Square by email.
“Economically, it would be neutral to favorable, since it would remove a disincentive for NY firms with many key Jersey-based employees to consider relocating,” said McMahon.
McMahon noted that while many states have reciprocity agreements, New York is not one of them.
“It looks more like a symbolic gesture than a plan, because all New Jersey can do, in effect, is to stop allowing a credit for New York income taxes paid to NY-based employers, which would actually impose double taxation on the people involved,” McMahon said.
“If a significant number of former nonresident commuters to NY become full-time or nearly full-time work at home residents, the pressure will grow in their home states to seek different tax treatment from New York,” McMahon told The Center Square.
“New York City employers dependent on key employees who prefer to work at home in neighboring states will have an incentive to open satellite offices in those states, which New York will challenge with litigation,” McMahon said.
New Jersey senators on Thursday voted unanimously in favor of S3064, which directs the state Treasurer to report back to lawmakers on New York’s taxation of New Jersey residents’ income, and whether it should change now that so many people are working remotely.
The bill, which is sponsored by NJ Sen. Steven Oroho (R-Sussex) and Senate President Stephen Sweeney (D-Gloucester) now goes before the state Assembly.
“One way or another, a lasting shift to more remote working by people who formerly commuted will pose a big threat to the nonresident taxation arrangement that has profited New York for decades,” McMahon said.