“Deal Reached in N.J. for ‘Millionaires Tax’ to Address Fiscal Crisis” (NYT):
Gov. Philip D. Murphy, a Democrat, announced a deal with legislative leaders to increase state taxes on income over $1 million by nearly 2 percentage points, giving New Jersey one of the highest state tax rates on wealthy people in the country. The agreement also includes an annual rebate of as much as $500 for families making less than $150,000.
The good news is that Governor Murphy will be a hero in literature and movies 800 years from now, just like Robin Hood. Murphy is taking from the rich (assuming that they can’t figure out how to escape to Florida, Wyoming, Nevada, Tennessee, Texas, Alaska, et al) and giving to the poor (where “poverty” starts at $150k/year, not a great argument for attracting new residents hoping to enjoy a comfortable lifestyle!). New Jersey is already the third highest tax state (percentage of residents’ income harvested for state and local government).
On the one hand, people are fleeing Manhattan to get extra space, which favors suburban New Jersey. On the other hand, New Jersey is not blessed with a California-style climate that might induce people to pay huge $$. year after year.
(You might reasonably ask “If tax rates are relevant, why didn’t rich people move away some years ago?” It is true that New Jersey has been a high-tax state for a long time. However, until 2018, roughly half of those high taxes were paid by the generous folks in Kansas, Indiana, Texas, Florida, etc. A wealthy New Jersey resident might pay a lot to New Jersey, but could turn around and deduct this payment from his/her/zi/their federal taxable income. So we would expect people today to be a lot more sensitive to state tax rates than they were back in 2017, for example. And the fact that work and social life are now Internet-based should also reduce barriers to moving.)
Readers: What’s a good test to see if this tax hike works as advertised. My theory is that it takes people about three years after a tax law change to get organized and adapt. So we should try to look at New Jersey’s relative fiscal health in 2024. But what do we look at? Unfunded pension and health insurance liabilities for state and local government employees? Right now it is “$151 billion, the worst in the nation”. But if the stock market rises or falls under the able stewardship of President Harris, that might move this number enough to swamp any effect from this tax. How about IRS data? Try to find the percentage of America’s high earners (over $1 million/year in income) who live in New Jersey in 2020 and then in 2024. (example map of money migration produced with these data)
From the glorious days of film… pig racing at the New Jersey State Fair:
And, even before 93 percent peaceful protests…
Related:
- “One Top Taxpayer Moved, and New Jersey Shuddered” (NYT, April 2016): the hedge-fund billionaire David Tepper … declared himself a resident of Florida after living for over 20 years in New Jersey. He later moved the official headquarters of his hedge fund, Appaloosa Management, to Miami. … Tax experts say his move to Florida could cost New Jersey — which has a top tax rate of 8.97 percent — hundreds of millions of dollars in lost payments.
- Pennsylvania’s top income tax rate is 3 percent; if you need to go into Manhattan only once per week, why not drive an extra hour and save $100,000/year in tax?
There will be some adjustment costs in the short run, that’s for sure. In the long run, if people don’t feel like contributing, there passports should be made (I trust they have enough crowns for convoy!)
Rich people pay taxes but also have a tendency to think their tax paying should give them a bigger say in the kind of public services everybody gets. And their ideas are often self serving or dumb.
Is your town better off because it has so many rich taxpayers? Sure. And yet they also drove the town into enormous debt to buy a pointless school building that was not even needed, AND will be the most expensive ever.
Would the town be better off if some of those taxpayers had flown to Miami, with their millions, but also their dumb ideas, and been replaced by a few teachers and people that went to “normal” public schools (such as, I am guessing, yourself)?
Well, here is the math – they expect it to raise around $390M a year, and they have spent $350M of that up front. Ballpark, it hits 16,000 tax payers, so let’s say it raises around $25k per tax payer – incrementally by taking the tax from ~9% to ~11% – which says that those people, in total are paying about $120K per year in state income taxes now (which will go up to $140k+ after this). So, if 5% of the people leave, NJ stands to lose over $100M of this amount – which means it will be a net loser. All you have to do is look up David Tepper to see how well NJ’s tax policies have worked in the past. What amuses me the most are the comments in the NYT where people who don’t make this much money are so sure that no one would ever move because of taxes – of course, if they actually knew how successful people behave, they might well be subject to taxes like this. Before this, NJ had the 2nd highest total tax burden in the US, and the largest unfunded pension problem, so I don’t think the problem was taxes being too low. I am very fortunate in that I am subject to this tax (as are many of my friends) – most of us are thinking about leaving NJ – the finances of the state are a disaster, and in a world where I don’t need to be in NYC every day, there are lots of other places that are both nicer and cheaper.
Hey, look, when you’re 5% or less of the population and already supply 80% of the money to the state government, who cares if you have any say in what they do with the money?
I know a lot of people in NJ who aren’t millionaires under this new tax and want to leave anyway. Badly.
You pick who is the villain:
> assuming that they can’t figure out how to escape to Florida, Wyoming, Nevada, Tennessee, Texas, Alaska, et al
But then they have to live in Florida, Wyoming, Nevada, Tennessee, Texas, Alaska, et al.
> the generous folks in Kansas, Indiana, Texas, Florida, etc.
Even back then those “generous folks” were piggies at the federal trough. Now it’s even worse. New Jersey was always a net payer to Washington. It is team red that should be called team pink for being piggies.