S. Jersey employers furious as Christie rescinds PA-NJ tax reciprocity

Subaru may put 85,000-sq-foot national training center on hold

 If you work in South Jersey and commute from Pennsylvania, or vice versa, you may pay much higher wage taxes in 2017.

And South Jersey employers including Subaru, Campbell Soup Co. and Destination Maternity, which made a big splash moving from Greater Philadelphia to New Jersey, are furious.

So furious they're discussing putting million-dollar projects on hold.

Last month, New Jersey Governor Christie ended the Pennsylvania/New Jersey Reciprocal Income Tax Agreement, in place for nearly 40 years. 

Thomas "Tom" Doll, president and COO of Subaru of America told the Inquirer he was "blindsided" and "very disappointed" by Christie's decision.   Subaru is now re-evaluating the building of its national training center in Camden as a result, he said.

"We're disappointed in it. Had we known about this, before our construction of headquarters and our national training center, we may have reached a different conclusion. it would have factored into whether we moved" at all, he said.

Campbell Soup also fiercely opposes scrapping the tax reciprocity.

"More than 40 percent of our Camden-based employees are Pennsylvania residents," said Campbell's spokesman Tom Hushen.

"So, we strongly supported the reciprocity agreement and it serves both states well. We hope the governor overturns the decision," Hushen said. As background, the PA/NJ Reciprocal Income Tax Agreement was put in place in 1977 and allows New Jersey and Pennsylvania residents to pay income taxes in the state where they live – not where they work.  While Pennsylvania has a low, flat personal income tax rate of 3.07 percent, New Jersey’s income tax ranges from 1.40 percent for incomes under $20,000 to 8.97 percent for incomes over $500,000 -- nearly triple Pennsylvania’s rate. The old agreement also allows New Jersey residents who work in Philadelphia to obtain a tax credit against the Philadelphia City income tax. 

That's all going away.

New Jersey-based companies with majority of employees who live in Pennsylvania or that look to attract talent from Philadelphia and surrounding suburbs will be at a huge disadvantage, according to Kathy Davis, president of the Chamber of Commerce of South Jersey.

Nearly 250,000 workers in both states will file income tax returns in both states. About 125,000 Pennsylvania residents commute to New Jersey, and 125,000 make the reverse trip, according to Census Bureau estimates.

"We had no idea this was coming," explained Doll, himself a Pennsylvania resident.

"For a company like ours making an investment in Camden, one reason was proximity to Philadelphia and  its western suburbs. We'd be able to attract good candidates supplementing our South Jersey workforce. Their state income taxes will increase significantly," he said.

Pa. state representatives Steve Santarsiero and Madeleine Dean last week introduced a Pennsylvania House resolution urging New Jersey Gov. Chris Christie to reconsider ending the 39-year-old tax accord between New Jersey and Pennsylvania.

House Resolution 1060 asks Christie to reverse course on his plan to dissolve the reciprocal agreement. A petition for Pennsylvania residents to reverse Christie's decision can be found online here.

About 170 people cross the Ben Franklin bridge everyday out of Subaru's 700-person workforce in Camden.

"It's a big deal. The employees are going to complain to the company and we have a choice; gross them up, which raises salary increases and creates inflation and higher costs," or they don't recruit from Pennsylvania.

Doll said the 250,000-square-foot headquarters build-out is already happening, but "as for our national training center, we're evaluating our options until we learn definitively what's going to happen" with the tax reciprocity agreement Christie rescinded.

Subaru of America's headquarters and a separate 83,000-square-foot training facility are located on the site of the former Sears store. The carmaker broke ground in December 2015.

"This could have really changed" the decision to move to New Jersey, said Ronald  J. Masciantonio, chief administrative officer for Destination Maternity in Moorestown. The Garden State poached Destination Maternity in 2013, when the public company shifted its offices from Spring Garden Street plant to Moorestown for $40 million in tax credits.

"An advantage for us in recruiting was there's no difference tax wise where you live," one reason that justified the move to New Jersey, he added. "I have no doubt we'll lose people once they see their paychecks impacted in January."

Masciantonio even contacted Donald Trump's campaign, asking "did Trump actually support what Christie's doing? It's effectively a tax increase to close a budget gap. I reached out to the Trump campaign and didn't get an answer," he said.

Working folks are panicking as well.

"My husband is semi retired and I was hoping to work at least three more years," wrote one reader, who lives in South Jersey and commutes to work in Philadelphia, driving in and paying a daily $5 toll.

"If working is no longer profitable -- because commuting expenses are high and soon to go higher with the new 23 cents-a-gallon gas tax increase and the added state tax-- then we need a Plan B," she said.

"New Jersey residents working in Philadelphia  will have to pay two state taxes, one city tax and a toll," she added. "The loss of reciprocal agreements are terrible for the regional economy."