New Jersey’s economic growth continues to be plagued by a lack of affordability, competitiveness and outmigration.
Gov. Phil Murphy has proposed an increase in the “millionaire’s tax” designed to raise $447 million — about 1% of the $38.6 billion proposed in the fiscal 2020 budget.
By raising this relatively insignificant percentage of the budget, the governor is potentially jeopardizing the fair economy he has been trying to build since his inauguration.
The problem is the “net” contribution of the proposed tax will be far less than the “gross” $447 million.
There are roughly 37,000 taxpayers in New Jersey who would be affected by the governor’s proposed tax hike. The administration has based its $447 million projection on the untenable assumption that none of these high-income residents moves out of the state.
Recently, state Treasurer Elizabeth Maher Muoio stated that the administration sees no outmigration trend.
The administration needs to look a little harder.
A study by the financial research firm Wealth-X, which received broad coverage in January, showed 5,700 millionaires moved out of New Jersey and the New Jersey area in 2018 alone.
James Hughes, a Rutgers University economist, said U.S. Census data shows that New Jersey is losing at least a thousand people a week, and this group includes a significant number of high-wage earners.
It would be unreasonable to assume that high-income residents (who have the financial means to move) will not continue their flight to more financially friendly environs where state income taxes are considerably less.
Using the administration’s numbers, the 37,000 taxpayers eligible to pay this new tax have, on average, $1.6 million in taxable income. They are already paying $148,000 in taxes based on current New Jersey rates. The governor’s proposal would require each of them, on average, to pay $12,000 more annually.
To be conservative, assume that only half (2,850) as many high-income earners leave New Jersey in 2019 as Wealth-X says left the area in 2018.
If 2,850 high income earners leave the Garden State, they would take with them the $148,000 each currently contributes to the state coffers. That total is $422 million.
The 34,150 high-income earners left in New Jersey to pay the new tax (at $12,000 per taxpayer) would raise a total of $410 million.
That means $410 million received, $422 million lost.
Looking at these numbers, there is only one question to ask: Why are we considering a new tax that will hurt our state’s economy, exacerbate our affordability, competitiveness and outmigration issues and, in all likelihood, lead to a loss — not a gain — in revenue?
Tom Bracken is CEO and president of the New Jersey Chamber of Commerce, based in Trenton.