One man acts and it may hit thousands in the wallet

I wrote a blog back in May about the tax situation in California that was inspired by a George Skelton column in the Los Angeles Times.  In that blog I pointed out that a recent decision by a resident of New Jersey, one David Tepper to move to Florida was going to cost New Jersey tens of millions in lost income tax revenue.

Now with the stroke of a pen, Governor Chris Christie has potentially solved the problem.  According to a piece written for Forbes by my favorite writer on things related to taxes, Kelly Phillips Erb, Governor Christie has ended tax reciprocity between New Jersey and Pennsylvania.  What that means is that up until Governor Christie ended the policy, people who lived in PA and worked in NJ were taxed where they live, rather than where they work.  Considering how many people do so, it makes their lives a lot less complicated.  They need file only one state income tax return.

That is going to change for anyone living in one of the two states and working in the other.  What it could mean is over $150 million more in tax revenues for New Jersey.  That revenue is going to come from the Pennsylvania coffers to some degree.  It means those living in PA and working in NJ will pay state tax at a higher rate.

The Pennsylvania state income tax rate is a flat 3.07%.  The top tax rate in New Jersey is nearly 9%. What I find really interesting is that someone currently working in NJ and living in PA, with a family of four, won't pay more state income tax in NJ until their income goes above roughly $125,000.  So only the really high income taxpayers will pay more.

What Governor Christie, who might have been the Czar of Fast Food in a Trump Administration, is doing is robbing the coffers of his neighbor state to try to balance the budget of his own state.  It isn't legally wrong, but after decades of the agreement being in place, perhaps it could have been handled differently.