Democrats say they may propose a new millionaires tax, and Christie vows to veto it again
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A report issued by the Christie administration's chief economist says New Jersey's high taxes drive out the state's wealthiest residents, slowing economic growthTRENTON — New Jersey's high taxes drive out the state's wealthiest residents, slowing economic growth, according to report issued Monday by the Christie administration's chief economist.
The new report is the latest attempt to understand the migration patterns of one of New Jersey's studied and debated species: the wealthy.
It will likely also be used by Gov. Chris Christie to counter other reports cited by Democrats that suggest tax policy doesn’t prompt the rich to leave. Democrats have been critical of Christie for blocking efforts to raise taxes on millionaires while making sharp budget cuts. Democrats say they may propose a new millionaires tax, and Christie vows to veto it again.
"Our analysis of the New Jersey 2004 ‘millionaires’ tax" suggests that, over time, migration effects could offset a meaningful share of the revenue boost," chief economist Charles Steindel wrote.
Steindel argues Democratic Gov. James E. McGreevey’s millionaire’s tax in 2004 caused 20,000 taxpayers and $2.5 billion in gross income to leave the state.
Steindel also released the results of a survey of subscribers to the state’s online newsletter, which includes financial advisers to high-wealth clients. More than half of the respondents said their clients had recently left or expressed interest in leaving, Steindel said.
Three-fourths of those who expressed interest in leaving have annual incomes over $100,000, while 15 percent earn more than $1 million, according to the survey.
Derek Rosesman, a spokesman for state Senate President Stephen Sweeney (D-Gloucester), said, "It's no surprise that a self-selective survey of those who admittedly cater to the uber-wealthy, compiled by a person chosen for the job by the governor, would come to this conclusion."
Charles Varner, a Princeton University sociologist who co-wrote a report published this year in the National Tax Journal that found no meaningful relationship in New Jersey between taxes on millionaires and migration, said the Treasury report uses migration data that does not actually take into account income.
Without an income breakdown, he said, it’s impossible to tell how many of the people entering or leaving the state are millionaires affected by the tax.
"They don’t know how many millionaires are leaving but they’re saying it," he said.
Varner was in the audience Monday when Steindel released the report and said panelists mischaracterized his own findings, which were based on all income tax filings in New Jersey from 2000 to 2007.
"In academic research you’ll encounter this kind of sparring," he said. "They say we studied three years of data; we studied eight years of data. They say we only looked at out-migration in New Jersey and in fact we looked at both in-migration and out-migration."
Mary Forsberg, research director at New Jersey Policy Perspective, a liberal think tank, questioned other conclusions aired Monday. Small businesses, for example, wouldn’t necessarily be run out by a millionaire’s tax increase.
Some small business owners file their company taxes as part of their personal income, she said, but at any time those same people can change their corporation status to avoid being hit.
"They have that option," she said. "Nobody else has that option."
By Jarrett Renshaw and Salvador Rizzo/The Star-Ledger