New Jersey Legislator Starts to Scrutinize New York Commuter Taxes in the Age of COVID

 

the staff of the Ridgewood blog

Trenton NJ, The Senate Budget & Appropriations Committee has advanced legislation sponsored by Senate Republican Budget Officer Steven Oroho and Senate Budget Chairman Paul Sarlo that would begin to address concerns that New York is unfairly taxing former New Jersey commuters who have been working from home in the Garden State during the pandemic.

“If New York were prevented from taxing New Jersey residents who no longer go to work across the Hudson, we could generate hundreds of millions – perhaps billions – of tax dollars for New Jersey, all while lowering the income tax bills of former commuters substantially,” said Senator Oroho. “It’s imperative that we understand the scale of this unfair taxation of our workers, which will be the first step pursuing tax fairness with New York.”

In a recent NJ.com editorial, Oroho noted that nearly 400,000 New Jerseyans regularly went to work in New York before the lockdown orders and workplace restrictions associated with COVID-19.

According to the Wall Street Journal, just 10% of Manhattan office workers have returned to working on site, and few have plans to return before the summer of 2021 at the earliest.

The legislators said most former commuters to New York would pay less if subject to New Jersey’s lower income tax rates.

“The transition of New Jersey workers to telecommuting is something we’ve been watching for a long time,” said Senator Sarlo. “It’s clear that the State of New Jersey can no longer afford to ignore the substantial tax implications of this shift, which has been supercharged as a result of COVID-19. By examining the issue in detail, we can develop plans to restore tax fairness, which will give a critical boost to the state budget while lowering income taxes for many New Jerseyans.”

The legislation, S-3064, requires the State Treasurer to examine New York’s taxation of New Jersey residents’ income. The report would be required to include:

an explanation of efforts the State has taken to address the inequity of New York’s taxation of New Jersey resident’s income;

the 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 the State of New Jersey’s public fisc, 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;

a discussion of any state or federal statutory or case law impediments to successfully achieving equitable taxation of New Jersey commuters working for employers in New York;

an analysis of how other states and jurisdictions address the tax implications of residents living in one state and commuting to another;

a discussion of the State’s efforts to participate in the litigation between the State of New Hampshire and the Commonwealth of Massachusetts concerning Massachusetts’ taxation of New Hampshire residents, or if no efforts have been made, an explanation of why not; and

recommendations as to how the State may resolve the inequitable tax treatment of New Jersey commuters working for employers in New York.

The legislators noted that other states with similar concerns are taking action as well. This week, New Hampshire announced a federal lawsuit against Massachusetts for taxing the income of remote workers who no longer commute to the Bay State.