Tag: Jon Corzine

Class Warfare Tax Policy May Be Emotionally Satisfying to Some People, but It Is Bad Economics

Barack Obama wants higher tax rates on the so-called rich, including steeper levies on income, capital gains, dividends, and even death. Along with other politicians in Washington, he acts as if successful taxpayers are like sheep meekly awaiting slaughter. I’ve explained in this video why class-warfare tax policies are misguided, and a new study from Boston College provides additional evidence about the consequences of hate-and-envy tax policy. The research reveals that high tax rates in New Jersey have helped cause wealthy people to leave the state, leading to a net wealth reduction of $70 billion between 2004 and 2008. Wealth and income are different, of course, so it is worth pointing out that another study from 2007 estimated that the state lost $8 billion of gross income in 2005. That’s a huge amount of income that is now beyond the reach of the state’s greedy politicians. Here’s a report from the New Jersey Business News:

More than $70 billion in wealth left New Jersey between 2004 and 2008 as affluent residents moved elsewhere, according to a report released Wednesday that marks a swift reversal of fortune for a state once considered the nation’s wealthiest. …The exodus of wealth…was a reaction to a series of changes in the state’s tax structure — including increases in the income, sales, property and “millionaire” taxes. …the report reinforces findings from a similar study he conducted in 2007 with fellow Rutgers professor Joseph Seneca, which found a sharp acceleration in residents leaving the state. That report, which focused on income rather than wealth, found the state lost nearly $8 billion in gross income in 2005. …Ken Hydock, a certified public accountant with Sobel and Company in Livingston, said in this 30-year-career he’s never seen so many of his wealthy clients leave for “purely tax reasons” for states like Florida, where property taxes are lower and there is no personal income or estate tax. In New Jersey, residents pay an estate tax if their assets amount to more than $675,000. That’s compared to a $3.5 million federal exemption for 2009. Several years ago, he recalled, one of his clients stood to make $60 million from stock options in a company that was being acquired by another. Before he cashed out, however, the client put his home up for sale, moved to Las Vegas, and “never stepped foot back in New Jersey again,” Hydock said. “He avoided paying about $6 million in taxes,” he said. “He passed away two years later and also saved a huge estate tax, so he probably saved $7 million.”

Still not convinced that high tax rates are causing wealth and income to escape from New Jersey? The Wall Street Journal wrote a very powerful editorial about the Boston College study, noting that New Jersey “…was once a fast-growing state but has now joined California and New York as high-tax, high-debt states with budget crises.” But the most powerful part of the editorial was this simple image. Prior to 1976, there was no state income tax in New Jersey. Now, by contrast, highly-productive people are getting fleeced by a 10.75 percent tax rate. No wonder so many of them are leaving.

Good Policy and Strategy in NJ

Chris Christie, the Republican candidate in New Jersey’s gubernatorial race this year, has some life in him. He’s going to hit incumbent Jon Corzine hard on the education issue and is making urban education reform and private school choice a central part of his platform.

Some highlights on Christie from the NYT:

He’s white, he’s conservative, and his support is strongest in New Jersey’s suburbs, where the public schools include some of the nation’s best.

Yet Christopher J. Christie, the Republican candidate for governor, is hunting for votes in cities like Newark, Camden and Trenton, where Democrats routinely pile up big margins, but where black and Hispanic parents are increasingly running out of patience with the public schools, among the nation’s worst…

But what could emerge as the sleeper issue is Mr. Christie’s push for education reform: merit pay for teachers, more charter schools, and above all, [education tax credits] as a way to give poor and minority children better educational choices and create competition that would improve the public schools…

Mr. Christie said that he did not expect to carry any heavily Democratic cities. But he is gambling that school choice has become popular enough among urban blacks and Latinos that he can cut into their support for Mr. Corzine, who opposes it.

Just a note: The article talks primarily about “vouchers,” but the private school choice plan being pushed there is a donation tax credit program. Reporters have difficulty with the distinction.