New Jersey's 24th Legislative District

Senator Steven Oroho

Senator Steve Oroho

Editorial: Working from Home and Still Paying a Bundle in Taxes to NY? Let’s End That

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The following editorial by Sen. Steven Oroho (R-24) on the need for New Jersey to pursue tax fairness with New York was published by NJ.com on August 21, 2020:

With the rapid and likely permanent shift to telecommuting for many workers since the emergence of COVID-19, hundreds of thousands of New Jerseyans may be paying significantly more in taxes than they should. That’s because New York continues to levy income taxes on remote workers just as if they were still crossing the Hudson every day. As we will demonstrate, the cost of New York’s unjust taxation to both our state and impacted residents is substantial.

With many former commuters now working from home due to COVID-19, a shift that’s likely to become permanent for many workers, Sen. Steven Oroho said New Jersey should pursue tax fairness with New York to lower their tax bills. (SenateNJ.com)

Let’s start by examining the impact of this policy on an unmarried, single worker who earns $50,000 annually. If they were no longer taxed by New York while working from home in the Garden State, they would pay less than $1,300 in taxes to New Jersey. Under the existing policy, however, they pay more than $2,800 in taxes to New York when subject to the Empire State’s higher rates. New Jersey collects nothing from the worker under this arrangement since we give a full tax credit for every dollar paid to New York to prevent double taxation. In this example, the worker pays an extra $1,500 in income taxes to New York due to our neighbor’s unfair tax policies.

Now let’s look at a married filer with a $100,000 salary. Just as in the previous example, this former commuter would pay much less in taxes if no longer subject to New York’s higher rates. Under the current taxing scheme, New York charges the worker more than $5,600 in taxes, which is nearly $2,900 more than the approximately $2,750 they would pay if only taxed by New Jersey. Again, New Jersey currently collects zero in income taxes from this worker due to the tax credit we offer for taxes paid to our neighbor.

If New York were prevented from taxing New Jersey residents who no longer go to work in that state, 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. In both scenarios above, the workers could have their tax bills cut by more than half, if this unfair tax grab by New York is addressed.

Before COVID-19 hit, nearly 400,000 New Jerseyans regularly went to work in New York. We know from commuter data collected by our bridges, tunnels and rail systems that many of those workers have not yet returned to their offices on a regular basis. It’s increasingly likely that many never will.

The financial implications of the shift to remote work and the potential redirection of tax payments from New York to New Jersey are immense. In 2016, our residents claimed $3.4 billion in New Jersey income tax credits for taxes paid to other jurisdictions, mostly our neighbor on the other side of the Hudson. Given the scale of that potential loss, it’s no surprise that New York wants to continue taxing New Jerseyans as if it’s business as usual.

Even if the pandemic had never happened, this is an issue that needed to be addressed. We’ve known for years that more workers were slowly transitioning to telecommuting. Stay-at-home orders in March quickly accelerated that trend. Five months later, employers and employees alike are increasingly acknowledging that their return to pre-COVID work arrangements may never occur, making a sudden reversal unlikely. This makes New York’s continued taxation of income no longer earned in the Empire State even more egregious, and it should hasten our efforts to finally address this inequity.

Workers who have proven their ability to do their jobs from home are questioning if they want to go back to a hectic lifestyle that included hours of commuting, crowded trains and buses, and frequent delays. Many are saying “no.” That’s led many businesses to seriously consider if they should continue paying a king’s ransom to maintain costly office space in New York for thousands or tens of thousands of employees who don’t want to return. What’s the point if employees armed with laptops and webcams can get the job done working from their homes or anywhere else?

Add in the public health concerns of commuting and working in a crowded city during a pandemic that could linger for some time, and it becomes more and more likely that remote work policies that started as temporary measures for many employees will ultimately become permanent.

Given this understanding, New Jersey must act quickly to put an end to New York’s unfair taxation of our workers. It’s not every day policymakers in Trenton can help our residents to pay less in taxes while generating billions of new revenues for the state.

In a few days, the governor will release his spending plan for next year. We’ll likely see him call for raising taxes and borrowing billions. Given those alternatives for balancing the state budget, we’d be wise to pursue tax fairness with New York.

Sen. Steven Oroho is the Senate Republican Budget Officer. He represents the 24th Legislative District.

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