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I didn't know NJ had one with PA. NJ does not have one with NY. You pay income taxes in both states but NJ allows a tax credit for the taxes you paid in NY.
I am a layman when it comes to taxes... My guess..
When one files taxes in both NJ (resident) and NY (work) yet gets credits when you file in NJ, the tax dollars go to NY. When one file only in NJ (resident) and is exempt to pay taxes in PA (work), the tax dollars stay in NJ.
As you said, there are a lot of NJ residents that work in NY. If NY adopted a reciprocal tax agreement with NJ, they stand to lose a lot of tax dollars from NJ residents. There are parts of NJ that are basically a suburb of NYC.
I've heard long standing debates regarding this as a NJ resident. NJ roads do get used a lot for NYC commuting and many NJ residents feel that NYC/NY should contribute more to the cost of maintaining them.
New Jersey residents pay $3 billion in income tax to New York, according to this article that does a nice job describing the situation. Why would New York agree to a reciprocity arrangement that gives up this $$?
The default is to pay income taxes to the state you work in, not live in. So NJ residents working in NY paying to NY is the norm. The reciprocal agreement with PA is the deviation from the norm. Reciprocal agreements are just that…BOTH sides must agree to it. Why would NY ever agree to give up all of that tax revenue from NJ residents?
Several years ago, Christie proposed ending the deal with PA because it was estimated NJ stood to gain more from upper middle class workers living in Bucks County and some in the Lehigh Valley who commuted into parts of Central and North NJ but lived in PA for more affordability/lower property and income taxes than would be lost from South NJ commuters into Philadelphia who were on average lower middle to middle class (and whose NJ state income taxes are further reduced because they get a credit against city of Philadelphia income tax they must pay).
Despite the net benefit estimated for NJ, Christie never carried through because of the anger generated by South NJ residents who expected their state income taxes to PA to be higher than what they pay to NJ due to differences in the brackets. So it was political blowback which prevented that. And the balance of difference on that agreement is pennies compared to what NY collects from NJ residents vs. NJ collecting from NY residents.
There might be limits for NJ residents deducting 100% of NYS income taxes on the NJ filing. We had to pay additional tax and a penalty to NJ one year after we deducted the full payment to NYS on our NJ filing. That was using an accountant. I was working in NYC and my wife was working in Hoboken. This was over 10 years ago, so I do not know if it has changed.
What sparked this question is that I have a choice to work in NYC or Philadelphia hospitals.
PA is closer to me,but NY has better pay AND working conditions. Both cities have world class hospitals.
But the working conditions are just flat out better in NYC. But then I saw that Ny does not have a tax agreement like PA does.
I do not think Nj residents get credit for the Philadelphia wage tax. I could be wrong though
They do. NJ lets you take credit on any income tax paid to another jurisdiction. Just as you still file NJ taxes if you work and pay in NY state, you get to do that for Philadelphia as well.
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