Crusader Christie Tries to Save New Jersey from new Millionaire Tax

It is a well-known fact that people and businesses migrate from high-tax states like New York and Illinois to low-tax states. New Jersey is no exception, something that the state’s budget-crusading governor Chris Christie and his administration are well aware of. The latest contribution to the debate over the state’s excessive tax burden comes from the governor’s chief economist. The Star Ledger reports:

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. … “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.

Of course, finding themselves on the losing end of fact, tax-hike advocates immediately resort to class warfare rhetoric:

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.”

And,  of course, the newspaper gives room for a liberal talk tank to express their ignorance of the negative relationship between taxes and incentives to work or live in a certain jurisdiction:

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.”

It would have been fair of them to give equal time to Jerry Cantrell, president of New Jersey’s prominent free-market think tank, The Common Sense Institute. He has a lot of good to add to the debate over the millionaire tax.

One mistake that high-tax advocates make when they look at the correlation of migration data and tax rates is that they assume that only the directly felt tax burden matters. But people leave high tax states even if they themselves do not gain a lot from the move. High taxes affect everything from labor supply to entrepeneurship to consumption and the size of markets for private businesses. High-tax states have higher unemployment and slower growth than low-tax states. A quick look at New Jersey migration data from the 2009 Census interstate migration study gives credibility to this conclusion: in 2009 190,000 people left New Jersey while 136,000 moved to the state. Other states that rank high in taxes and low in economic freedom exhibit similar migration deficits.

Crusader Christie is taking New Jersey in the right direction. Stopping another millionaire tax is one small step.