Above: Gottheimer and Oroho in Hardyston today.
NORTH JERSEY — Today, U.S. Congressman Josh Gottheimer (NJ-5) and NJ State Senator Steve Oroho (LD 24) announced new efforts to fight back against the State of New York that is continuing to collect state income tax from New Jersey commuters who have been working remotely since the COVID-19 pandemic began. In a letter to the U.S. Treasury Secretary and IRS Commissioner today, Gottheimer and Oroho asked for new federal guidance to make clear that states cannot tax those who neither live nor work within their boundaries.
Prior to the pandemic, about 400,000 New Jersey residents typically commuted to New York each day for work, and the income taxes paid by New Jersey commuters working in New York City have historically equaled the total income tax owed by 1.3 million people in the Western New York region, including places like Buffalo and Rochester.
On New Jersey residents’ 2020 state income tax forms, nearly $3 billion will be heading to New York, instead of supporting New Jersey.
New Jersey commuters would have lower taxes if they only had to pay New Jersey state income tax, since New York’s rate are higher.
- A teacher living in New Jersey and making $50,000, who worked from home over the past year rather than commuting into New York, would save $1,500 if they only had to pay New Jersey state taxes.
- A New Jersey commuter making $100,000 would save $2,900.
- A New Jersey commuter making $200,000 would save $8,555.
“We’re formally requesting that the U.S. Treasury Department and the IRS provide new federal guidance to our residents, especially as the new May 15th tax date approaches, to make clear that states cannot tax those who neither live nor work within their boundaries,” said Congressman Josh Gottheimer (NJ-5). “Doing so will help New Jersey families keep more of their hard-earned dollars in their own pockets, and to ensure their tax dollars are going to support our own state, instead of someplace else.”
“In a clear overreach of state-level taxing authority, New York is attempting to apply their state tax regime upon New Jersey residents who have not worked in their state since the pandemic began,” wrote Gottheimer and Oroho in a letter today to U.S. Treasury Secretary Yellen and IRS Commissioner Rettig.
Gottheimer and Oroho held a press conference today in Hardyston Township to help cut taxes for New Jersey workers and families, and to support our own state. They were joined by Hardyston Township Mayor Brian Kaminski.
Watch today’s announcement here.
Gottheimer and Oroho’s joint letter can be found here and below.
April 28, 2021
Honorable Janet Yellen Honorable Charles Rettig
U.S. Department of the Treasury Internal Revenue Services
1500 Pennsylvania Avenue N.W. 1111 Constitution Avenue N.W.
Washington, D.C. 20220 Washington, D.C. 20220
Dear Secretary Yellen & Commissioner Rettig:
In response to the COVID-19 public health emergency, on March 21, 2020, New Jersey Governor Phil Murphy issued a statewide stay-at-home order in accordance with Center for Disease Control (CDC) guidance. New Jersey was one of the earliest hotspots for the pandemic. In accordance with this directive, many of the 400,000 New Jersey residents who typically commute to New York sheltered in place and worked from home. This transition was not made out of convenience for New Jersey residents, but out of necessity to save lives. As tax law dictates, barring an agreement between states, income taxes are levied where the work is actively conducted — not in the location of the employer. The Supreme Court of the United States has previously ruled in support of the principle that taxation is tied to location under Shaffer v. Carter, 252 U.S. 37, 57 (1920) and in Oklahoma Tax Commission. v. Chickasaw Nation, 515 U.S. 450, 463 n. 11 (1995). Yet, in a clear overreach of state-level taxing authority, New York is attempting to apply their state tax regime upon New Jersey residents who have not worked in their state since the pandemic began. These workers lack a tax nexus to New York, and as such New York’s actions are a violation of both the Dormant Commerce Clause and the Due Process Clause of the Constitution.
We are requesting the federal government provide guidance on inter-state taxing authority which would clarify that American workers should not have their income taxed by states where they neither live nor work.
For many of our constituents, given modern technology, this shift to working from home may become a permanent arrangement with their employers. This would mean that for many New Jersey residents, employed by a business in New York, they would nonetheless never set foot within the state. This person would be a resident of New Jersey, working in New Jersey, utilizing public resources provided by New Jersey. Their hard-earned income tax should support their local community, not taken across state lines to be spent by a different state government with no connection or accountability to them, the taxpayer.
To avoid double taxation, the State of New Jersey credits residents for taxes paid to other states. Nearly $1.2 billion will be credited to New Jersey workers on their 2020 state income tax forms for income taxes paid to New York for work performed in New Jersey. These resources could instead be used to help fund schools or lower the cost of living in New Jersey, such as helping fund the Senior Freeze program and the Homestead Benefit program. These programs provide vital property tax relief to lower-income and elderly homeowners in New Jersey, which has the highest property taxes in the nation.
This issue, of course, is not limited to only affecting New Jersey; it has a nationwide scope. In October 2020, the State of New Hampshire filed a claim in the Supreme Court to challenge Massachusetts’ policy of imposing their own income tax on New Hampshire residents who worked in Massachusetts prior to the COVID-19 pandemic, but have worked remotely in New Hampshire since. In their filing, New Hampshire asserts that Massachusetts tax laws are unconstitutional extraterritorial assertions of taxing power. New Jersey submitted an amicus curiae brief in support of New Hampshire’s case, joined by Connecticut, Iowa, and Hawaii. Separately, Ohio also submitted an amicus curiae brief in support of New Hampshire, joined by Arkansas, Indiana, Kentucky, Louisiana, Missouri, Nebraska, Oklahoma, Texas, and Utah. Together, these states represent nearly 100 million Americans, nearly a third of the nation.
In Congress, a legislative fix is also in the works. Last week, Senators John Thune (R-SD) and Sherrod Brown (D-OH), both members of the Senate Finance Committee, reintroduced the Mobile Workforce State Income Tax Simplification Act. In the coming weeks, Members of the House of Representatives, with my support, will introduce similar legislation. However, the legislative process takes time, and until a permanent statutory fix is signed into law, federal guidance would provide significant fiscal certainty and relief for residents in states like ours. We look forward to your timely response and appreciate you addressing these matters for the benefit of New Jersey and our country.
MEMBER OF CONGRESS
New Jersey 5th Congressional District
New Jersey’s 24th Legislative District
CC: New Jersey Governor Phil Murphy
Gottheimer’s full remarks as prepared for delivery are below.
We’re here today to announce a new effort to fight back against New York and follow long-held Supreme Court precedent to help cut taxes for New Jersey workers and families, and to support our own state, which could use the extra nickels.
We all know this hasn’t been an easy time for our country, or for New Jersey. More than a year ago, we were literally in the eye of the COVID-19 storm.
Back then, New Jersey issued its statewide stay-at-home order — in accordance with CDC guidance — so that we could help stop the spread of the virus, prevent our hospitals from becoming overwhelmed, and save lives.
I think it’s fair to say that we learned a lot — and were forced to adapt quickly — when life shut down, and businesses, schools, and families across our state were forced to quarantine. For New Jersey residents, who were used to heading into an office or workplace every day, life changed drastically overnight. Work meetings moved onto Zoom and Teams, and remote work became the norm for much of North Jersey.
That’s meant that most of the 400,000 New Jersey residents who typically commuted to New York for work — before the pandemic — instead worked from home and didn’t cross state lines each day.
Now, in normal times, New Jersey and New York have long agreed that people from one state who work in the other pay part of their income taxes to the place they go to work in every day. I know Steve used to commute to New York City and, at the end of the year, part of what he paid all year income tax was sent from Jersey to New York. The same goes of those who commute from New York and work in Jersey every day. That makes sense – they use our services, our roads, our law enforcement, you name it.
The Supreme Court has long held that these arrangements between states are allowed and that they should be enforced. The same goes if you work for a California company but work remotely from Jersey – you pay taxes in Jersey.
To put this in perspective, in normal years, 400,000 people commute from Jersey to New York every day and Jersey residents send nearly $3 billion to New York to cover those income taxes.
During COVID, $1.2 billion came from people who worked in New York.
In recent years, the income taxes paid by just New Jersey commuters to work in New York City equaled the total income tax owed by 1.3 million people in the Western New York region, including places like Buffalo and Rochester.
That’s how much our own residents historically have helped out New York’s bottom line!
That $1.2 billion from New York to New Jersey could instead be used to help fund Jersey schools, or even help lower New Jersey’s cost of living by providing vital property tax relief to lower-income and elderly Jersey homeowners. But instead, it’s going to New York.
So, when COVID hit this year, and folks who could stay in Jersey didn’t commute to New York for work, it only makes sense that they pay all of their income taxes to New Jersey. They didn’t go to New York City – they didn’t use their services. They used ours.
Guess who doesn’t like this arrangement? Yes, the King Moochers – New York City. The State of New York is now attempting to continue their state tax regime — and take income tax dollars from New Jersey residents, those who formerly commuted to their state – even though they aren’t commuting anymore.
This is a clear overreach of state authority — and Steve and I, along with others, are fighting back — not only for New Jersey families, but for the State of New Jersey who deserves to keep these dollars here.
I’m sorry New York City is facing budget challenges. We have our share of challenges, too, as you know. But we aren’t trying to pickpocket New York to solve them. New York knows what they are doing here is plain wrong, and to do it in the middle of a pandemic is even more offensive. But I guess I shouldn’t be too surprised. Just last month, New York announced that they plan to go ahead with a new congestion tax and whack our commuters with a new 14 dollar a day tax for driving into Midtown Manhattan. That’s on top of the existing $16 a day toll over the GW Bridge.
But I digress.
Right now — as Senator Oroho will detail in his remarks — if you’re an unmarried New Jersey commuter — say a teacher from Hardyston — going into New York to make about $50,000 each year, you’re currently paying more than $2,800 in income taxes every year to New York State. But, if you worked from home this past year, and paid all your income taxes to New Jersey, you would only owe $1,300 in New Jersey state taxes.
That means that the $50,000-a-year Jersey teacher would save $1,500 — that’s real money.
Now, say you’re a New Jersey resident who makes $100,000 a year. If you didn’t commute to New York City this year – and paid your income taxes to New Jersey alone – your tax load would go from $5,600 to $2,750. That’s a $2,900 saving. A family making $200,000 would save $8,555. And not only would those New Jersey families save money, but New Jersey would benefit, too. Our state would get the tax dollars to invest in our roads and schools.
So, how do we fix this?
Luckily, we are here to join the state in fighting back. There’s currently a lawsuit filed in the Supreme Court of the United States that’s asking for residents in one state, who have been working remotely since the outbreak of COVID-19, to only pay taxes in the state that they’re physically working in.
The State of New Jersey has signed on to support this effort, and we aren’t alone. We’re joined by New Hampshire, Connecticut, Iowa, Hawaii, Ohio, Arkansas, Indiana, Kentucky, Louisiana, Missouri, Nebraska, Oklahoma, Texas, and Utah.
Together, these states represent nearly 100 million Americans, almost a third of the nation.
While this lawsuit gets sorted out, today, I’m formally requesting that the U.S. Treasury Department and the IRS provide new federal guidance to our residents — especially as the new May 15th tax date approaches — to make clear that states cannot tax those who neither live nor work within their boundaries. As I said, doing so will help New Jersey families keep more of their hard-earned dollars in their own pockets, and to ensure their tax dollars are going to support our own State, instead of someplace else.
Steve and I are also sending a copy of this letter to the Governor, and we are both encouraging the state to work overtime to address this issue for our residents. I want to commend the Senator for taking up this issue early and consistently beating the drum. He called me last April about this. Senator Oroho is also leading state legislation directing New Jersey to issue a report examining how New York’s taxation is impacting our own residents.
We’re also working in both the House and the Senate — on a bipartisan basis — on a legislative fix. A bipartisan bill was introduced in the Senate last week, and, with my support, a similar bill will be introduced in the coming days in the House.
But, it’ll take some time for a permanent fix to be signed into law, which is exactly why our residents need critical guidance from the Treasury and the IRS – and that is what we are asking for today. This will give our residents and our state the financial certainty and relief we need, especially as our communities recover from this pandemic.
Together, with more financial guidance from the federal level — something I’m fighting for for our families here in North Jersey — as well as Senator Oroho’s leadership on this issue in the state legislature, and the State of New Jersey advocating for these issues in the Supreme Court, we’re all fighting back against New York. We need to keep more dollars in the pockets of our residents and we need to ensure our state gets the support we need.
Working on this together, I know our best days here in New Jersey will always be ahead of us.
Thank you and God bless.