Active soldiers may not be taxed on '06 income
Panter: $9M revenue loss would be insignificant
BY LAYLI WHYTE
Staff Writer

Assemblyman Michael J. Panter

OCEANPORT - Soldiers are expected to pay the "ultimate price," not the "ultimate price, plus tax."

Assemblyman Michael J. Panter (D-12) said he is appalled that U.S. Army Pfc. Paul J. Newell, who has been on active military duty in Germany since joining the Army in November 2005, is having state income tax deducted from his military pay.

Panter, whose district includes Oceanport where Newell lives, has drafted a bill that would exempt New Jersey soldiers based out of state and overseas from having to pay state income tax on their military earnings.

The bill is currently in front of the Assembly's Military and Veterans Affairs Committee, which is chaired by Assemblyman Jack Connors (D-7) who is one of the primary sponsors of the bill, according to Panter.

"I expect the bill to be posted in committee in the upcoming weeks," Panter said in an interview Monday. "The committee will either release the bill or oppose it, but I don't expect it to be opposed."

According to the bill, A3988, which is currently posted on the New Jersey legislative Web site, state income tax exemption would be extended for certain military compensation "for those members of the U.S. Armed Forces domiciled in New Jersey but serving their duty or deployment outside of the state of New Jersey for a minimum of six months during the payable years."

Panter said that Newell joined the Army shortly after high school, and that since he signed up in 2005, he was posted in Arizona and now Germany.

"He hasn't been in New Jersey for over a year," Panter said. "He started talking to people in his unit, and he found out that a lot of people don't have income taxes taken out."

According to Panter, New Jersey is one of 24 states that still garnish income tax from wages of soldiers on active duty outside of the state.

"They're not taking advantage of the state's infrastructure," he said.

Panter said that Newell makes less than $18,000 annually from his military pay, and that last year $260 was taken out of his paychecks for income tax.

"When I first brought this issue to the floor," Panter said, "both Democrats and Republicans were shocked that New Jersey still takes income tax from active-duty soldiers. Nobody really knew about this."

Panter said he believes that the current conflicts in which the U.S. is involved have a lot to do with the kind of support this bill has received.

"When we're in a time of war," he said, "like we are in Afghanistan and Iraq, people become more sensitive to the military, and military families' needs. If there is an upside to a perilous time like this, it's that folks really pay attention to the needs of our soldiers."

Panter said that although Gov. Jon Corzine is working to rein in the state budget, and that this would remove $9 million of revenue, the decrease would be "relatively diminuous."

"When you look at the state's budget from last year," said Panter "which was $33.3 billion, that $9 million is only one-tenth of 1 percent of the entire budget."

Panter said that he hopes Corzine's previous military experience will encourage him to support the bill, regardless of any drop in state revenue.

There is a procedure in place for New Jersey residents serving out of state or overseas to gain exemption from state income tax, but Panter said "the exemptions are not worth the paper they're printed on.

"Soldiers can gain permanent residency where they are serving," said Panter, "but the military says that soldiers can't do that just to avoid paying taxes. Besides, if a New Jersey soldier is serving in Arizona, and they get permanent residency there, they risk being taxed by Arizona as soon as New Jersey stops taxing them."

Panter said that support for this bill has been great, and that he hopes to have it signed by Corzine in time for it to apply to 2006 income taxes.

"If we want to do it," he said, "we'll have to move rather quickly. It's a rare thing in politics, but I have not heard from one person, through a letter, an e-mail, a phone call or otherwise, voicing any opposition to this bill."

Both Democrats and Republicans are sponsoring the bill, and Panter said this is because when it come to the military, party lines fall away.

"People always say issues aren't political," he said. "This really isn't."