Some residents from New Jersey and Pennsylvania will pay higher state income taxes in 2017.
TRENTON -- Gov. Chris Christie's decision to end a four-decade-old tax arrangement with Pennsylvania will mean higher taxes for many New Jersey and Pennsylvania residents who work across state lines.
Without the agreement, Garden and Keystone state residents will pay taxes on their income where it's earned.
For New Jersey, the impact is greatest in south Jersey, where many Garden State residents commute to Philadelphia. In total, each state has 120,000 residents who cross the Delaware River to work in the other.
For New Jersey commuters, here's the dollars and cents impact:
* Low- and middle-income New Jerseyans commuting to the Keystone State will owe hundreds more in state income taxes, according to a fiscal analysis by the nonpartisan Office of Legislative Services.
* Under the current agreement, a person living in New Jersey and making $40,000 while working in Pennsylvania pays $630 in New Jersey state income taxes. Once that deal is scrapped, that same worker would instead owe $1,220 to Pennsylvania, a $590 increase, according to OLS's analysis.
Christie ending income tax pact with Pa.
* A New Jerseyan earning $80,000 at their Pennsylvania job would go from paying $1,645 to Trenton to $2,440 to Harrisburg. The estimates don't take into account additional local income taxes owed.
* New Jersey's graduated income tax becomes higher than Pennsylvania's 3.07 flat tax at about the $120,000 mark. So New Jersey residents earning more than $120,000 a year won't owe any additional taxes once the deal is scrapped. They will, however, have to file tax returns in both states and claim a credit against taxes owed where they live for taxes paid in the state where they work.
For these residents, their New Jersey liability is higher than their Pennsylvania liability. But because wages aren't taxed twice, they'll get a credit for taxes paid in Pennsylvania against their taxes owed in New Jersey.
In OLS's example, a New Jerseyan earning $120,000 across the river pays $3,885 to Trenton under the reciprocal agreement. After Jan. 1, that individual would instead owe $3,660 to Harrisburg and the difference -- $225 -- to Trenton.
* Higher income Pennsylvania residents working in New Jersey, which has a top rate of 8.97 percent, are likely to pay much more without the agreement in place. In the example provided by OLS, a Pennsylvanian earning $1 million a year in New Jersey would see the state income tax liability more than double from $30,500 to $72,658.
Here's an OLS breakdown showing some New Jersey residents who would pay more:
Samantha Marcus may be reached at smarcus@njadvancemedia.com. Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.