State Sen. Steve Oroho knows how to express a complex problem in simple terms:
“We’ve been ripped off by New York for ages,” says the Sussex County Republican.
The problem is tax law. New Jersey law says that if you work in New Jersey you owe New Jersey income tax – even if your employer is a New York based company.
New York sees it differently. If your employer is based in New York, you owe New York income tax – even if you live in New Jersey every working day of the year.
“I’ve spoken to people who haven’t set foot in New York all year long and who are still paying New York taxes,” he said.
Meanwhile, their families in New Jersey are availing of services, of which education is the most expensive.
“New York gets the tax revenue and we pay all of the children’s education costs,” he said.
This was a big problem even before the COVID pandemic broke out and turned New York commuters into remote workers in New Jersey. Now it’s a huge problem.
“Do you know how much money New York gets from people who live in New Jersey?” He asks. “Four billion.”
In return, New Jersey only collects a few hundred million New Yorkers who work in New Jersey.
What a rotten deal! Who agreed to this?
Nobody, that’s who.
“We have an arrangement with Pennsylvania,” said Oroho, who is a real-life financial planner. “But we don’t have an agreement with New York.”
Our agreement with Pennsylvania allows any state to collect income taxes from its residents, regardless of which state they work in. This is a far more convenient way of collecting income taxes at a time when more and more people are working from remote locations.
The lack of such a settlement was all the more important when the US Supreme Court on Tuesday declined to take up the New Hampshire v Massachusetts case. In this case, New Hampshire argued that its residents were wrongly taxed by Massachusetts employers for work done at home during the COVID-19 pandemic.
Law professor Ilya Somin of the Volokh Conspiracy blog argued that the court cannot avoid the issue forever.
“I suppose we saw this problem last,” he wrote. “Sooner or later, other states will try to tax the income of remote teleworkers employed by companies on their territory. If the courts don’t stop this, the opportunity to tax non-state residents who cannot vote in its elections will be too tempting to miss. “
When I emailed Somin he suggested a way to get the Supreme Court to look into the matter.
“New Jersey might try filing an ‘original jurisdiction’ case with the Supreme Court, as NH has tried,” Somin wrote. “It could mobilize other interested states to do the same. The judges may not be able to ignore this issue if it keeps coming up. “
Oroho suggested another way of insisting that New Jersey workers pay New Jersey taxes. That would be telling their employers to deduct New Jersey, not New York, taxes from their paychecks.
But the Murphy administration has openly agreed to give New York its first paychecks. A page on the New Jersey Department of the Treasury website advises New York residents that “during the temporary period of the COVID-19 pandemic, wages will continue to be drawn in accordance with employer’s rules in accordance with the employer’s jurisdiction.”
Oroho has been complaining loudly to the Murphy administration about this for months.
“I sent them a message asking, ‘Why are you doing this?'” He said. “The transition period is over. We should change our advice to return to normal procurement. “
We should be, but we are not. This page was still online on Wednesday.
This surrender makes it impossible for New Jersey to formulate a lawsuit on its side, Oroho said.
“Let’s say we take it to court,” said Oroho. “When I’m a judge, I say, ‘Why are you telling them to do this?'”
I suppose if you have a former Goldman Sachs executive as governor, he’ll naturally see things from a New York perspective.
But from a Jersey perspective, these ex-New Yorker commuters should be paying Jersey taxes if they work from home.
Until we do something about it, we will continue to be fooled.
READ this interview with Oroho where he explains the problem in more detail.