newjerseynewsroom.com

Chief Economist Steindel says state lost $150 million annually from '04 to '09

BY TOM HESTER SR.

NEWJERSEYNEWSROOM.COM

Higher state income taxes on wealthy New Jerseyans have driven many of them to leave New Jersey and discouraged others from moving to the state, according to a study by state Chief Economist Charles Steindel that was made public, in part, Thursday.

The study estimates that income tax collections were reduced by $150 million a year and that the total adjusted gross income of the state fell by $3 billion between 2004 and 2009 “because higher tax rates were linked to the departure of some high income individuals…”

The loss of the $150 million loss in revenue in 2009 does not include reductions in corporate, sales and property tax collections that resulted because of outmigration of higher-wealth residents, Steindel notes.

The study’s findings come at a time when Legislative Democrats have been criticizing Gov. Chris Christie for not supporting their proposals to hike the income tax rate on New Jersey’s 16,000 wealthiest income earners as a way to ease the state’s budget woes. The governor maintains that placing extra taxes on the wealthy drives them from the state and hinders its economy.

Steindel will provide additional details of a study and a survey as part of the Garden State Economic Forum at the State Museum in Trenton on Monday.

The study, based on federal tax data, suggests that while income tax increases in 2004 and 2009 resulted in increases in single-year revenues, tax collections came under noticeable downward pressure over time because a significant number of high-income earners left the state.

Steindel also conducted a survey of subscribers to the state’s online newsletter Tax Notes, which keeps professionals such as financial advisers, accountants and attorneys up to date on changes in law, rules and court decisions governing tax matters. Subscribers include advisers to high-wealth clients.

More than half of the respondents said that clients had recently left or expressed interest in leaving the state. Respondents said the top three reasons that clients gave for leaving were state income taxes (85.4 percent), local property taxes (77 percent) and estate taxes (67 percent). The next two reasons most-often cited were retirement (47.6 percent) and housing costs (43.7 percent).

Steindel is a former senior vice president of the New York Federal Reserve Bank, where he oversaw creation of regional and U.S. economic forecasts and provided monetary policy advice. He has a doctorate in economics from the Massachusetts Institute of Technology.

Assisting in oversight of the research were Roger Cohen, director of Revenue and Economic Analysis in the Office of the Chief Economist, Ranjana Madhusudhan, a senior research economist and OREA deputy director.