Op-Ed: Fuzzy Math Can’t Change Facts: There’s No ‘Exodus’ of People or Dollars from New Jersey

This op-ed appeared in the February 24, 2016 edition of the Bergen Record.

opedgraphicFor years, business lobbyists seeking to reduce taxes for corporations and wealthy New Jersey families have pointed to an “exodus” of people and dollars from the Garden State as a “problem” that only their policy prescriptions can fix. But in reality, there’s no exodus – only normal moving patterns that are overstated and turned into a stubborn mythology.

The latest salvo came last week from the New Jersey Business & Industry Association, in the form of what it dubbed a “major report” and “in-depth study” on the issue. It is, unfortunately, a polemic masquerading as an analysis.

The report offers two “significant” findings: that New Jersey “lost more than 2 million residents” between 2005 and 2014 and that the state lost $18 billion in income between 2004 and 2013.

These look like staggeringly big numbers, enough to frighten any casual reader. But, wait, it gets worse. These significant “findings” led to the loss of 75,000 jobs and billions and billions in lost economic activity, wages and household spending.

Here’s the problem with the BIA report: it’s flat wrong.

Start with the 2 million residents lost: If New Jersey had really “lost” 2 million residents in a decade, its population would have shrunk by almost a quarter. In other words, one of every four of your neighbors would have disappeared, with no one replacing them. Think back to your commute this morning and you’ll quickly realize how unlikely that seems. In fact, New Jersey’s population actually grew from 8.7 million in 2005 to 8.9 million in 2014. Those numbers come from the US Census.

So what gives? Turns out the business group’s screaming headline is missing essential facts. The data show that 2.1 million New Jerseyans departed over that time, and 2.0 million “New” New Jerseyans moved in – about 1.4 million from other states and about 600,000 immigrants from abroad. This is a drop of just 86,000 over the decade – not even 100,000, never mind one million. Add babies born who stay in New Jersey and you have the increase noted by the Census.

Now, let’s look into the “disappearance” of $18 billion over a decade. The number lacks context and is seriously misleading.

First, the IRS data used in the report provide an incomplete picture of whether states experiencing out-migration like New Jersey actually “lose income.” All the IRS can do is track when the tax returns tied to a particular Social Security number are filed in different states in two consecutive years. It can’t track – or even define – “lost income.”

That’s because, in reality, the income allegedly lost when someone leaves New Jersey generally goes to other people: If a doctor leaves, another doctor picks up the patients. If a business owner retires the customers shop elsewhere. If a welder leaves, the boss hires another welder. For most people, income isn’t portable; they can’t take it with them to a new state, like they can take a TV or their favorite pair of pants, because they work for someone else.

In fact, during the time these business lobbyists say New Jersey “lost” $18 billion in income, the amount of income in the state actually grew by $103 billion. Figuring out why requires us to include some all-important context left out of the report altogether.

During these same ten years, total incomes in New Jersey equaled $2.5 trillion – yes, that’s trillion with a “t.” The total loss comes in at 0.7 percent, not quite a rounding error.

But even if you take these income migration numbers at face value, there is not a shred of credible evidence pointing to estate taxes or income taxes as the reason these people go elsewhere – there’s only myth and anecdote, fueled by juked statistics and incomplete data.

In fact, the vast majority of Americans who move from one state to another in a given year cite jobs or family as their reason for leaving, not taxes. Others – particularly retirees – leave in pursuit of lower housing and property tax costs. So it’s not surprising that, in the last year for which data is available, just about as many tax filers left New Jersey for high-tax states New York and California (29,601) as did so for lower-tax Florida – which also has warm weather benefits for retirees – and Pennsylvania (30,542).

Let’s be clear: cutting or eliminating taxes for the state’s wealthiest to try to retain people and income that are leaving is a fool’s errand. It will do very little to keep people and their income in the state, while making it all that much more difficult for the rest of us who are already here, since every dollar wasted on a tax cut is a dollar New Jersey can’t invest in critical services for its residents or core investments that help grow the economy.