There’s No ‘Exodus’ of Rich New Jerseyans

FOR IMMEDIATE RELEASE: JUNE 8, 2016

Contact: Jon Whiten, NJPP: 609-393-1145 ext. 15 (office) | whiten@njpp.org

There’s No ‘Exodus’ of Rich New Jerseyans

Latest research shows that the benefits of maintaining – and even raising – taxes on the wealthy far outweigh the costs

millionaires-growing-01-768x590As New Jersey’s budget negotiations heat up, vitally important tax policy changes are being considered in a haze of anecdote and misinformation about who is moving in and out of New Jersey, why they do and what it means for the state’s wellbeing.

The idea that wealthy New Jerseyans are leaving the state in large numbers to avoid high personal income taxes or taxes on inherited wealth, thereby endangering the state’s prosperity, receives a lot of attention from politicians and State House insiders. But this so-called “exodus” is more like a trickle, and widespread tax flight among the well-off is little more than a myth, according to two new comprehensive reviews of data on interstate moving patterns.

Continuing to give undue attention and credence to this myth harms New Jersey’s ability to create economic opportunities and prosperity for all its residents, as experts from New Jersey Policy Perspective (NJPP) and Stanford University’s Center on Poverty and Inequality explained on a press conference call today.

“Some political leaders are imprudently connecting the widely recognized need to fund our road and transit assets with yet another tax break for the wealthiest among us,” said Gordon MacInnes, President of New Jersey Policy Perspective. “New Jersey can’t meet its current obligations nor invest in its most treasured advantage: its location and transportation networks in the middle of the world’s richest market. Tying essential investment to elimination of the estate tax is reckless economics and unfair to the bottom 96 percent of us.”

The call coincided with the release of a new NJPP report examining New Jersey’s population and moving trends over the past decade. The report makes clear that the billing of “outmigration” as a crisis by some lawmakers and lobbyists is overblown, and very dangerous to the state’s economic future, as the proposed solutions to this purported “crisis” involve tax policy changes that would harm New Jersey’s ability to invest in the assets that form the building blocks of a strong economy.

The report’s key findings:

  • There is no significant correlation between state taxes and interstate moves.
  • Proponents of cutting taxes for the wealthy use a misleading reading of Internal Revenue Service data when they contend that if a person moves from one state to another that automatically means the state they leave loses income as a result.
  • Even if one accurately uses IRS figures on the number of households moving, the patterns and data – if presented in context – tell a very different story – one of population, income and wealth growth – than that peddled by business lobbying groups and others who would deprive New Jersey of resources needed to help communities thrive.
  • Many of the households that do leave New Jersey depart for other high-cost, high-tax states.

“There simply is no empirical evidence to support the notion that New Jersey’s taxes, specifically its income or estate taxes, are driving hordes of people or billions of dollars away and shrinking the state’s economy,” said Sheila Reynertson, Senior Policy Analyst at New Jersey Policy Perspective and report author. “Without that data, there is absolutely no reason to offer tax breaks for wealthy heirs in the hopes that they will stay.”

The NJPP report comes just weeks after the release of a new landmark academic study published in American Sociological Review, which looks at tax returns of wealthy Americans over 13 years, tracking the states from which these millionaires file their taxes. The findings, which are based on data from 45 million tax records, show that millionaire tax flight occurs only at the margins of significance, Charles Varner, a co-author of the study and the Associate Director of Stanford University’s Center on Poverty and Inequality, explained on the call.

“Our study shows that millionaires are quite reluctant to leave a place where they are enjoying great success.” Varner said. “In contrast to the conventional view that elite migration threatens progressive tax policy, state millionaire taxes can be effective levers in moderating economic inequality, particularly the rising share of income held by the top 1 percent.”