New Jersey's richest citizens flee its taxes

An income-tax preparer's sign (Credit: User
TheTruthAbout on Flickr.com; Creative Commons)

The richest citizens of New Jersey, who in the past generated most of the tax revenue, have been fleeing the State, mainly for some of the least likely tax havens, a new university study shows. That the State now has one of the worst budget problems of any State in the Union is no coincidence--and that the trend established itself six years ago and has continued through two Democratic administrations and legislatures might not be a coincidence, either.

In a study conducted by the Center on Wealth and Philanthropy at Boston College and reported today in The Star-Ledger (Newark), the total aggregate personal net worth of New Jersey's residents fell by $70 billion between 2004 and 2008--a sharp reversal of a net $98 billion inflow that had occurred during the previous five years. The New Jersey Chamber of Commerce and the Community Foundation of New Jersey had noticed that many of the state's biggest givers had moved out. But this is not the first study that has shown that the highest taxpayers have been moving out: Jim Hughes and Joseph Seneca of Rutgers University had found that total gross income had fallen by $8 billion in 2005.

Jon Corzine as Governor (Credit: User Tony
the Misfit on Flickr.com; Creative Commons)

Hughes, dean of Rutgers' School of Planning and Public Policy, blames New Jersey's tax structure. Noting that the top 1 percent of income earners pay 40 percent of the State's taxes, Hughes cited the results as an explanation for the State's current budget woes. He further warned that if some of these taxes are not repealed or reduced, every high-wealth resident will flee.

Taxes in New Jersey are certainly high enough, and all have increased during the study period. Property taxes are especially high, though this might be due in part to excessive land valuations in a State having the highest population density in the country. New Jersey also taxes all estates in excess of $675,000. More to the point, many States do not tax income or estates at all, and property valuations and tax rates are much less.

As striking as the net outflow is, the list of the tax havens that receive most of the wealth is frankly strange. Florida leads the list, as one might expect, because Florida is the favorite State in the country to which to retire. But New York and Pennsylvania also rank high on that list. Their tax structures are not much more favorable than that of New Jersey, but land valuations are considerably less.

Chris Christie (as US Attorney)

The incoming administration of Governor Chris Christie seized upon these findings as vindication of what a spokesman described as their own warnings that "the spending and taxing habits that we've all experienced" must stop.

Commenters on the article vary from those announcing their own plans to leave the State, to anecdotes about wealthy taxpayers who maintain out-of-state residences and live in those residences as long as the law requires in order to avoid filing New Jersey income-tax returns. Most commenters lay the blame on the immediate former governor, Jon S. Corzine--though in all fairness, his predecessors, James B. McGreevey and former Acting Governor Richard Codey deserve almost as much blame, since they were in office at the beginning of the study period. Other commenters noted the parallel between the tax policies followedby McGreevey, Codey and Corzine on the one hand, and President Barack H. Obama on the other.

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