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 Feb. 4, 2010
More proof, if any was needed, about the disastrous impact New Jersey’s tax policies has had on the state.
Proof that ought to shut down any attempt to extend the state’s so-called millionaire’s tax before it even start.
A new study says that New Jersey has lost $70 billion in wealth between 2004 and 2008, as wealthy residents fled the state for less taxing climes.
$70 billion.
Anybody think the Obama administration is listening?
From the Star Ledger:
Conducted by the Center on Wealth and Philanthropy at Boston College, the report found wealthy households in New Jersey were leaving for other states — mainly Florida, Pennsylvania and New York — at a faster rate than they were being replaced.
“The wealth is not being replaced,” said John Havens, who directed the study. “It’s above and beyond the general trend that is affecting the rest of the northeast.”
This was not always the case. The study – the first on interstate wealth migration in the country — noted the state actually saw an influx of $98 billion in the five years preceding 2004. The exodus of wealth, then, local experts and economists concluded, was a reaction to a series of changes in the state’s tax structure — including increases in the income, sales, property and “millionaire” taxes.
“This study makes it crystal clear that New Jersey’s tax policies are resulting in a significant decline in the state’s wealth,” said Dennis Bone, chairman of the New Jersey Chamber of Commerce and president of Verizon New Jersey.
It is not a coincidence that New Jersey’s revenues, particularly income tax revenues, have been falling off the cliff as well.
According to the report, approximately 302,780 households left New Jersey between 2004 and 2008. Now Gov. Corzine, throughout the campaign, liked to say that more people moved into New Jersey than left.
He was right: just under 323,350 households that moved into the state – 20,570 more than had left.
What he didn’t say, however, was that the average net worth of the departing households was about 70 percent higher, at $618,330, than those that arrived.
Taxing the rich at the expense of everyone else always sounds so good – especially when framed in terms of “Tax the rich so poor kids can get health care,” or “we can keep teachers in school,” or “we can keep tuition low.”
But as James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, told the Ledger, wealthy residents are “a key driver for everything from job creation and consumer spending to the real estate market and the state budget.”
Hughes said that in New Jersey, the top 1 percent of taxpayers pay more than 40 percent of the state’s income tax. This group also includes small business owners, who create the most jobs, and are the backbone of the state’s economy.
“That’s probably why we have these massive income shortfalls in the state budget, especially this year,” Hughes told the Star Ledger.
Until the tax structure is improved, he said, “we’ll probably see a continuation of the trend, until there are no more high-wealth individuals left.”
Are you listening, Senate President Sweeney?
The fallacy of the “tax the rich” argument has always been that they have no options. But the wealthy are the most mobile among us – as this study shows, they can pick up and move to no income tax states like Florida, or lower-income tax states like Pennsylvania.
In New Jersey right now, we have a budget deficit this year of some $1 billion, and we’re looking at a budget deficit next year of some $9 billion.
That means that next year, if nothing was changed, New Jersey is projected to spend one-third more than the revenues it takes in. In other words, $1 out of every $3 the state would spend is $1 it didn’t have.
But things will change – because New Jersey has to have a balanced budget.
The question is, what do we do to get there?
The Democrats, who are in control of the Legislature, have been saying that they think the state should extend that “millionaire’s tax” for one more year. They noted, in a recent column by the Ledger’s Tom Moran, that the tax, which actually applies to income over $400,000, brings in an additional $1 billion -- and they criticized Gov. Chris Christie for his insistence that the tax be rolled back.
"He’ll give millionaires a tax cut, but he doesn’t want to give more aid to food pantries? We will definitely point that out," said Sweeney. D-Gloucester.
"He’s got to take a step back from that tax cut. This is reverse Robin Hood. You’re taking from the poor and you’re giving to the rich. I’m telling you that just won’t happen. This is going to be one long summer," said Sen. Joe Vitale, D-Middlesex.
"It’s nonsense. He’s helping the rich with this and leaving the middle-class to fend for itself," said Assemblyman Joe Cryan, D-Union
To be fair, it should be noted that these Democrats made these statements before the release of this report.
But if nothing else, it shows that the messages that states —and their governors – send by tax policies are important indicators of future economic growth. Christie Whitman campaigned on tax cuts and telling companies New Jersey was open for business.
Jim McGreevey came in and shut the door, raising taxes and in some cases, demonizing businesses.
Jon Corzine’s improved the state’s business climate somewhat, but expanded the state’s income tax – saying he had little choice.
But he had other choices.
Budgets are all about choices, and about a state’s priorities.
Corzine chose to raise the millionaire’s tax because, we believe, he didn’t want to make hard choices about what to cut – not when raising taxes on the rich sounds so easy.
But, as this report today makes clear, it may be easy in the short term, but disastrous in the long term, in terms of future lost revenue, lost residents and lost job growth.
If we have learned anything in New Jersey, it’s that doing what we’ve been doing isn’t helping our state – it’s making it worse.
And yes, there will be agonizing and even heart-wrenching choices that will have to be made during the upcoming budget.
But they are choices that have to be made. We simply cannot spend more than our residents can afford – or keep taxing wealthier and even middle class New Jerseyans more and hope that they don’t notice that other states are just a whole lot cheaper to live in.
So, yes, Christie is right to roll back that tax. And it may be a long hot summer in New Jersey. But what reports like this show is that taxing more isn’t helping the state, or its citizens.
We’ve been living above our means for too long. Trying to pretend we’re not, by finding more people to tax, or tolls to raise, isn’t going to solve our problems.
Making hard choices, including – unfortunately -- hard budget cuts, will.
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