"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.