The Millionaire’s Tax Hike Debate Begins Anew [AUDIO]
Dr. Charles Steindel, chief economist for the New Jersey Treasury, released research yesterday designed to inform the debate over the effects that tax rates have on individual decisions to leave or stay in New Jersey.
He says the study, based on federal tax data, suggests that while state 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 surveyed financial advisers this summer. Of 200 who responded, nearly half reported having advised personal or small business clients about leaving the state. The survey found three-quarters of those looking to leave had six-figure incomes.
Last week, Assembly Speaker Sheila Oliver said Democrats will bring back a millionaire’s tax increase bill. She said, “We will not let that issue rest. We have an obligation to raise that issue up as the people that sent us down here to speak for them have asked us to do.”
“Whatever you might feel about it, it would likely be associated with the loss of some people and the loss of some income to the state,” claims Steindel. “You just have to keep this in mind when considering tax policy: that there is an effect on migration and an effect on, presumably in the end, on business formation and the like.”
Democrats who control the Legislature say the tax increase would fund programs for the state’s most vulnerable residents, which Governor Chris Christie has cut. Because they gained one seat in the Assembly, Democrats now have a three-fifths majority in both houses of the legislature which means they could put a constitutional amendment directly before the voters. It would not have to be passed in the legislature for two consecutive years. Democrats are not committing to going that route just yet.
Steindel says, “Generally we find that, on average the people who would leave New Jersey as a result of a tax increase would have incomes averaging about $125,000…….It’s often the case that people in those income brackets have New Jersey business interests and would tend to employ people in New Jersey so it would have some negative effect.”
“This claim is false…..The effects of taxes on migration are, at most, small – so small that states that raising income taxes on the wealthiest households will see a substantial net gain in revenue.” says Robert Tannenwald, co-author of a report on the issue and a senior fellow at the Center on Budget and Policy Priorities, a Washington, DC-based nonpartisan, nonprofit policy research organization that published the new report.
Steindel admits the migration would be “relatively modest,” but says the number of people leaving would accumulate year over year.
More than half of the respondents to Steindel’s survey 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).