Christie ends reciprocal tax agreement with PA

[Leps12]

Originally Posted by NatasNJ

If I take some general numbers. Say $200k total salary for married couple living in Philly and working in NJ.

Current:
PA Income Tax (3.07% * $200k) = $6140
Philly Wage Tax (3.92% * 200k) = $7840
NJ = NONE
TOTAL = $13980


If agreement ends:
NJ Income Tax = (Tiered * 200k) = $10613.75
PA Income Tax = NONE Correct?
Philly Wage Tax = $7840 - (Deduction of Difference between NJ vs PA where 10613.75 - 6140 =) 4473.75 = $3366.25
TOTAL = $13980


Something is wrong. I always break out to be equal. I think I am calculating the Philly Wage tax wrong with deduction or missing something with the PA income tax.

Any ideas?

If I'm correct, you don't get a deduction on the Philly wage tax. Those who work in Philly but live in NJ can deduct the Philly wage tax from their NJ state tax owed, but those who live in Philly and work in NJ get no such equivalent deduction. Philly always gets the money it's "supposed" to get, whether you live there, work there, or both. The change proposal is only between the states of NJ and PA and has nothing to do with the city of Philadelphia if I understand correctly. So in this new case, you still pay $7480 to Philly, bringing your total tax burden to $18454. You pay the same to Philly but now pay $4474 more on your state income tax...it's just now that money goes to NJ, not PA.

I would just like to say that under both scenarios, one thing is glaringly obvious. It is a bad financial decision to live in Philly if you work in NJ. It really is under any level of income, since you never get a deduction on that Philly wage tax. Not to say this is true of working in NJ only though. It's also bad to live in Philly and work in PA outside of the city as well. Avoid the Philly wage tax if you can, and it really makes no sense to live in Philly if you don't also work there. I understand about issues like quality of life, amenities, entertainment, etc. but just from a strictly financial perspective, it's bad, whether working in NJ or PA outside of Philly, only slightly worse for NJ since you have to pay bridge tolls as well.

[withasigh]

Originally Posted by Leps12

If I'm correct, you don't get a deduction on the Philly wage tax.

That is my understanding of this as well.

[NatasNJ]

http://www.bizjournals.com/philadelp...pa-tax.html#i1


Per this it mentions credit against Phila tax. Is this wrong?


It mentions Wynne Case which I think just recently occurred and hence may not be truly reflected here yet.


I agree that living in the Philly city limits costs more and I have to weigh that against other things considered but right now I am okay paying a tad more for the benefits.

[withasigh]

Originally Posted by NatasNJ

http://www.bizjournals.com/philadelp...pa-tax.html#i1


Per this it mentions credit against Phila tax. Is this wrong?


It mentions Wynne Case which I think just recently occurred and hence may not be truly reflected here yet.


I agree that living in the Philly city limits costs more and I have to weigh that against other things considered but right now I am okay paying a tad more for the benefits.

The case they are talking about is COMPTROLLER OF THE TREASURY OF MARYLAND v. WYNNE, a US Supreme Court case from 2015. Here's the opinion if you want to read it. Here's an WHYY article about the potential impact of the case on the Philly Wage Tax. I'll admit I had not heard about this yet, but I don't know if there are any Pennsylvania courts which have held that the rule in Wynne applies to the Philly wage tax. And even if it is obvious that it should (I don't know), that doesn't mean that Philly taxing authorities won't fight you over it until a court tells them they can't. But overall it looks like Wynne might apply and NJ tax paid should be a credit against philly wage tax.

[bellmark]

To clarify this thread... Christie changed his mind about nixing the agreement, and is leaving it in place. There was a lot of pressure from businesses against Christie's efforts to cancel.


Funny how the original story is ALL over the media, but then try to find an article where he announced he wasn't changing anything! ha the one I did find is a blog post in Philly.com
Commute across the Delaware? Christie's changed his mind, keeping your taxes simpler