Study finds taxes do not make New Jersey's millionaires flee the state | State | -- Your State. Your News.

Jun 02nd
  • Login
  • Create an account
  • Search
  • Local Business Deals

Study finds taxes do not make New Jersey's millionaires flee the state

moneyhouse_optRaising state taxes on the wealthy New Jerseyans does not cause them to leave the state and results in substantial new revenue, according to a new report released Thursday by Trenton-based liberal think tank New Jersey Policy Perspective.

The findings bust what Policy Perspective staff describes as the common myth advanced by opponents of tax increases. Americans move from state to state for a variety of reasons, but tax rates rarely factor into such decisions, the report declares.

Policy Perspective is a proponent of the Democratic proposal to hike state income tax rates on New Jerseyans who earn more than $1 million annually. Gov. Chris Christie has vetoed the so-called “millionaire’s tax.’’ The governor has stated that a tax hike on the wealthy would drive them out of New Jersey.

"This claim is false,” said Robert Tannenwald, co-author of the report and a senior fellow at the Center on Budget and Policy Priorities, a Washington, D.C.-based nonpartisan, nonprofit policy research organization that published the new report.

"The effects of taxes on migration are, at most, small – so small that states that raise income taxes on the wealthiest households will see a substantial net gain in revenue," Tannenwald said.

In the study, sociologists at Stanford University looked at the effect of New Jersey's 2004 tax increase on people making more than $500,000 per year. They found that while the number of people leaving the state in this income group increased very slightly after the tax increase went into effect, the number was insignificant because people unaffected by the new tax were moving at a similar rate. The end result was that the new tax rate produced a large increase in revenue for the state without prompting people to leave.

The report also examines the Boston College study commissioned by the New Jersey Chamber of Commerce last year. This study has been used as proof by opponents of taxes that high-income people are leaving New Jersey because of the state's income tax structure, when in fact the author acknowledged no tax impact.

The CBPP report reiterates that most of the people examined in this study had incomes of less than $500,000 and thus were not subject to the state's highest marginal income tax rates.

The report cites numerous examples of research debunking the migration myth and, through case studies, shows how misinformation about the impact of taxes on migration can influence policymakers and the media. Those who support the migration myth often wrongly assume a cause and effect relationship, promote irrelevant findings, and inaccurately measure migration, the report found.

"As we focus on creating new jobs and getting our economy back on track, it's clear residents are not running away from our state if we take a balanced approach that includes new revenues," NJPP President Deborah Howlett said. "False claims like this shouldn't deter policymakers from making the right choices for New Jersey."

Few Americans move between states, according to the report. And the little interstate-migration that does occur is more frequently due to job opportunities and housing prices than tax rates. Specifically, the report illustrates that housing costs may have a significantly larger impact on Americans' finances than tax levels.

"Investing in our state's future is more important than ever right now and that's why it's important not to rely on flawed information about the effect of taxes on residents' decisions about where to live," Howlett said. "Failing to raise the resources needed to maintain strong schools and universities, safe communities, and quality roads and bridges will hurt us now and in the long run."

The center's full report can be found here.


Comments (5)
5 Friday, 05 August 2011 15:30
Let's get back to basics....You shall not covet thy neighbor's house or anything that belongs to your neighbor.
4 Friday, 05 August 2011 13:38
Middle Class Jersey Boy

Maryland Millionaires tax, 1/3 leave state!!

Maryland Was Depending On Taxing Millionaires, But They're Disappearing

'But as the state comptroller's office sifts through this year's returns, it is finding that the number of Marylanders with more than $1 million in taxable income who filed by the end of April has fallen by one-third, to about 2,000. Taxes collected from those returns as of last month have declined by roughly $100 million.'

Lying liars!! The jig is up. Stop the spending, stop the crazy taxes! Top 1% of earners pay 40% of income taxes!!! Enough already! They are the job suppliers, the investors!!
3 Friday, 05 August 2011 08:47
T Gallagher
Yes - people who have high wage jobs may not be able to move to avoid higher taxes because they need to be close to work. But people who are going to sell a business, receive a large one-year capital or stock windfall, plan those events, and get out of NJ before they have to pay state income taxes or state capital gains taxes.

Not to mention estate planning!

Milton Friedman proved long ago that marginal tax rates impact behavior.

To suggest otherwise, is just silly.
2 Friday, 05 August 2011 07:57
I personally know three people; my accountant to Delaware, my partner to PA and a client to FL who left NJ due to taxes. My client told me he could fly back and forth to work every week and rent an inexpensive apartment with what he would save in real estate taxes alone. It is not about solely the state income taxes but the combined real estate, income and sales taxes all of which are the highest in the land. Why do so many wealthy retiress move to FL? It is the weather AND the taxes. Only idiots would advocate raising taxes in a state that is already the highest in the country. The wealthy have the means to relocate so they will, saddling those who remain with more of the burden.
1 Thursday, 04 August 2011 17:48
That wealthy people are "tax rate insensitive", is undoubtedly true in tiny doses, but where's the line? Are we now suggesting a dollar invested in the private sector generates less societal wealth compared to a dollar invested in the public sector? I think this is true only when money is idle.

In New Jersey, raising another billion in taxes means nothing next year when another deficit is projected. Then what? I'd be interested in the results of repeated tax increases on flight, but definitely do not want to be living in the experiment!

Add your comment

Your name:

Follow/join us

Twitter: njnewsroom Linked In Group: 2483509