New work world, new rules: Murphy signs bill that impacts taxes on N.J. residents who work for NYC companies

A bill that will help New Jersey fight back against tax policies that no longer seem relevant in a work-from-home world was signed into law by Gov. Phil Murphy.

In the past, New York has aggressively taxed New Jersey residents who are paid by New York employers. Taxpayers face generally higher tax rates, and, although they receive a credit when they file as New Jersey residents, New York ends up keeping the revenue. Estimates indicate the cost to taxpayers could exceed $3 billion.

State Sen. Jon Bramnick (R-Westfield), who sponsored the bill, said the stacked deck has become more obvious with technological advances and more people working from home and never setting foot in New York.

The bill (A4694/S3128) amends the existing law to adopt a similar aggressive tax treatment for nonresidents who work for New Jersey employers.

Additionally, the legislation provides tax credits for New Jersey residents who dispute aggressive tax policies imposed on them by other states. If New Jerseyans take this issue up with another state’s tax authority and receive a tax refund for work they did in New Jersey, the state of New Jersey will provide a tax credit.

The new law will also establish a pilot program overseen by the New Jersey Economic Development Authority to incent New York businesses to assign New Jersey resident employees to locations within the state. Companies who are awarded grants under this program must commit to provide bonuses or increased compensation to their employees relocating to New Jersey offices.

Grants awarded under the program will not exceed $500,000 and a total of $35 million was made available for the purpose of funding the program.

“New Jersey is being played by unjustifiable policies that not only cost individuals and families money, but also rob the state of as much as $1 billion in revenue,” Bramnick said. “We will not allow out-of-state politicians to take advantage of New Jerseyans. Workers living in New Jersey will now be able to hold on to more of their money because of this new law.”

Assembly Speaker Craig Coughlin (D-Woodbridge) said the impact of the bill will be great — and signals a new era in New Jersey-New York relations.

“The bill Gov. Murphy is signing today will help thousands of New Jerseyans seek some relief when it comes to work that’s done right here in our state,” he said.

“New Jersey’s relationship with New York has been long, fruitful and mostly friendly. Unfortunately, over the last few years, there has been an imbalance. From ill-conceived tax grabs to congestion pricing, our friends across the river are taking advantage of us. State government will stand shoulder to shoulder with local leaders and our congressional delegation on this.”

The bill was praised by the heads of key business chambers — who said it is the perfect response to the congestion pricing effort being put forth by the Metropolitan Transit Authority in New York City.

“New York’s Congestion Tax will prove one thing: it’s better to do business in New Jersey,” Meadowlands Chamber CEO Jim Kirkos said. “It not only taxes hardworking New Jerseyans who commute to Manhattan, New Jersey’s businesses that serve Manhattan will face enormous cost increases when delivering goods and services that New York City relies on.

“At a time when New York should be thinking about incentives to return to the city, they are doing the opposite. So, we have a message for them: New Jersey is open for business.”

New Jersey Business & Industry Association CEO Michelle Siekerka agreed.

“As remote work arrangements have increased greatly since the pandemic, it is simply unfair for New York to be claiming income taxes from New Jersey-based workers,” she said. “New Jersey should be seeing that money for its own fiscal benefit, especially considering there are a number of employees who have not commuted to New York for work for a span of years now.”

New Jersey Chamber of Commerce CEO Tom Bracken praised the move.

“Congestion pricing also unfairly hurts New Jersey’s economy, especially small businesses, by taking money out of the hands of our hardworking residents that could otherwise be spent on goods and services here in the Garden State,” he said. “The chamber supports today’s bill signing because, after years of unfair tax treatment towards New Jersey commuters, the state is recognizing the need to end the current tax imbalance by treating New York commuters who work in the Garden State similarly.”