New Jersey Governor Chris Christie announced on Friday that he would upend a 40-year income tax agreement with Pennsylvania, Reuters reports. The agreement allowed people who worked in New Jersey but lived in Pennsylvania to avoid paying New Jersey income tax.
The ending of the four-decade agreement would allow New Jersey to raise more revenue next year.
The move, Christie said, was forced by the Democrat-controlled legislature, which he argues created a $250 million budget hole.
The New Jersey governor said he would reconsider terminating the tax agreement if lawmakers come through with the public employee health insurance cuts they pledged to make.
“I will not raise state taxes, cut property tax relief, reduce aid to education or our hospitals, or reduce the state’s record pension payment to cover for this blunder by the legislature,” Christie said.
Jeff Sheridan, Pennsylvania Governor Tom Wolf’s press secretary, says Christie is “unnecessarily” punishing Pennsylvanians and abolishing the agreement will cost his state $5 million each year.
Sheridan said Wolf is hopeful that Christie will change his mind. The New Jersey governor’s move, Sheridan says, is the result of his “failure to enact a responsible budget in a bipartisan way.”
Residents of Pennsylvania pay a flat income tax rate of 3.07%, while New Jersey has a progressive income tax system that increases as you earn more, between 1.4% and 8.97%.
High-income Pennsylvania residents benefit from the tax agreement, as they only pay their state’s lower tax rate.