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New Jersey's past two governors, Democrats Jim McGreevey and Jon Corzine, followed the liberal, progressive playbook right down the line. Rule #1 is "raise taxes on the rich". And raise taxes they did! They raised income taxes, sales taxes, property taxes, business taxes, and of course created a whole new "millionaires tax" (which curiously applies to anyone making more than $250,000 per year).
We saw one impact of their tax policies last November when the people overwhelmingly voted for Republican Chris Christie. But a new study issued by Boston College indicates that "the millionaires" voted with their feet too.
More than $70 billion in wealth left New Jersey between 2004 and 2008 as affluent residents moved elsewhere, according to a report released Wednesday that marks a swift reversal of fortune for a state once considered the nation's wealthiest.
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."
The study focused on interstate wealth migration, where "wealth" is defined as assets such as real estate, stocks, bonds, 401ks, mutual funds and vehicles. The people with "wealth" are a key driver of economic activity. They create jobs, they buy real estate, they pay the majority of our state's taxes.
In New Jersey, the top 1 percent of taxpayers pay more than 40 percent of the state's income tax.
"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.
Yup. When the wealth leaves town the tax revenue dries up. It's one reason New Jersey is facing an almost $10 trillion dollar budget shortfall this year.
With Chris Christie as our new governor there is at least some hope for a reversal of New Jersey's fortunes. But what is going to happen now that these destructive tax policies are going national?
President Obama has latched on to that $250,000 per year number as his threshold for "soaking the rich". He plans to impose an additional $1.9 trillion dollars in new taxes on that group in fiscal 2010.
If New Jersey is any kind of example he's in for a rude surprise. Class warfare is a funny thing. Sometimes people will stand and fight. (Hello Tea Party activists!) And sometimes people will walk away.
So which nearby low tax countries look appealing to you? Bermuda? The Cayman Islands? In an age of ubiquitious high speed data and satellite television it's not necessary for a person to reside in one particular location in order to do his job. Talent, and the wealth which accompanies it, can go almost anywhere.
As Lady Margaret Thatcher famously said, "the problem with socialism is that you eventually run out of other people's money." And I believe that Barack Obama will soon discover that you run out of other people's money a whole lot faster when you paint a target on their backs and give them an incentive to seek out greener pastures.
UPDATE 04 Feb 2010 16:02:
New Jersey's legislative "budget expert" does his best Alfred E. Newmann impression.
TRENTON -- A state budget expert today disputed the importance of a study released Wednesday that said affluent residents were fleeing New Jersey.
The state's fiscal health is more dependent on the number of people who make big bucks and live in New Jersey than those with a high net worth, David Rosen, budget and finance officer for the Office of Legislative Services, said today to a Senate budget commission.
"We don't tax wealth, we tax income," Rosen said.
Hello? McFly? Anybody home?
Wealth can take many forms, and New Jersey has a lot of taxes. Wealthy people own expensive real estate, and we have the highest property taxes in the nation. Wealthy people buy and sell assets, and New Jersey taxes capital gains at the same rate as ordinary income.
And New Jersey most certainly does tax wealth at death; our death tax was never indexed (or phased out) like the federal death tax. Assets in excess of $750,000 are subject to New Jersey's death tax.
Sheesh. It's no wonder our state is so screwed up. The legislature's budget and finance guy doesn't understand how our tax system works.
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