N.J. lawmaker: Stop tax on soldiers

N.J. lawmaker: Stop tax on soldiers

	Published : Tue, 27 Feb 2007 17:02 By : Agencies Print this Story

TRENTON, N.J. (AP) - Army Pfc. Paul J. Newell grew up in New Jersey but hasn't lived here since enlisting in November 2005.

Yet every month New Jersey deducts $20 from his Army pay -- and the state plans to keep doing so even though he's stationed in Germany for the next two years. New Jersey is among at least 24 states that tax soldiers with overseas assignments, a practice that is drawing criticism from some lawmakers, soldiers and their families.

'It seems a little silly that I'm taxed even though I have no ability to control where I'm stationed,' Newell said. 'I only come home once or twice a year.'

Newell earns $1,485 a month, or less than $18,000 a year, as an Army intelligence officer. He estimates that he pays about $250 a year in state income tax.

His father thinks that's $250 a year too much.

'Whether it's $40 or $60 or more (a month) the state takes, for what they do and the risks they take, it's not right,' said Newell's father, Paul Edward Newell, an attorney. 'It's taxation without habitation.'

Newell's father wrote letters to several newspapers, every member of the state Legislature and Gov. Jon S. Corzine.

'It may be appropriate to tax military personnel who are stationed in New Jersey because they receive the benefits of our infrastructure,' Newell wrote. 'However, to tax my son for the next two years while he is in Germany seems to be little more than picking his already small pocket.'

Lawmakers took notice, and Assemblyman Michael Panter introduced legislation to stop the state from taxing the military paychecks of New Jersey soldiers while they are stationed out of state or overseas.

'Our state's men and women in uniform are already sacrificing enough. To have the state reach into their paychecks is unfair considering all they are doing on behalf of our nation for already modest wages,' said Panter, a Monmouth Democrat.

Federal law allows soldiers to exclude for tax purposes any income they earn while serving in a designated combat zone, or income they earn while hospitalized as a result of serving in a combat zone.

Fourteen states provide additional tax exemptions or credits for active duty soldiers. Five states -- Illinois, Michigan, Montana, New Hampshire, and Tennessee -- exclude military pay from taxation. Pennsylvania excludes military pay for soldiers stationed out-of-state.

'At first I figured it was just me, but eventually I heard from people in my training class who didn't have to pay the tax,' the soldier said Friday from his base in Germany.

Though Newell doesn't serve in a combat zone, he does maintain computer systems for soldiers who serve in war zones.

In order to stop New Jersey from taking his income, he would have to establish residency somewhere else. There's just one hitch: That's illegal.

While he initially considered changing his 'home of record' to his aunt and uncle's place across the Delaware River in Pennsylvania -- where he wouldn't pay state income tax -- he said he learned through the Army that it's a crime to change his home of record for tax purposes only.

According to the New Jersey Department of Military and Veterans Affairs and the state Treasury Department, military members can avoid state taxes in select circumstances.

But Panter, a Harvard Law School graduate and financial planner, said the exemptions were 'difficult to understand' and didn't really provide relief to soldiers.

Specifically, the exemption says military personnel are not subject to the state income tax if they don't maintain a permanent home in New Jersey. But the exemption also says that all military personnel who maintain a home in New Jersey while residing on ships, in barracks, or officer quarters would be required to pay New Jersey income taxes.

Before enlisting in the military, Newell lived at his mother's home in West Windsor.

Panter's bill would exempt all active-duty soldiers serving in another state or country from paying New Jersey income tax. According to an estimate by the Office of Legislative Services, the exemption would cost the state about $9 million a year.

Panter says that's the least the state can do for the men and women defending the country.

'For the brave men and women who are willing to pay the ultimate price to protect our freedoms, it is simply unjust for the state to turn around and tax their wages.'