Rich Stay Despite Higher Taxes

By John Van Hecke, Executive Director & Fellow, August 24, 2011 at 11:30 am

A new report from the Center for Budget and Policy Priorities (CBPP) shows conservatives’ argument around high income earners leaving states when taxes rise is just empty rhetoric.

Yesterday, we looked at how tax hikes in Oregon played a negligible role in people moving to Washington. Today we jet east to look at the Garden State.

New Jersey

Using data from a study that examined out-migration from New Jersey from 2004 to 2008, the Wall Street Journal and New Jersey Governor Chris Christie argued that a decline in the number of millionaires was the result of an increase in income taxes on households with income in excess of $500,000. This assertion was flawed on a number of levels.

First, the report cited by the Wall Street Journal and Governor Christie did not examine the level of taxes paid by the households that had left the state. In fact, most of the households examined in the study were unaffected by the New Jersey income tax increase.

The author of the report cited by the Journal and Christie cautioned against using data from his report to support unwarranted conclusions about the impact of income taxes.

Second and more importantly, during the period from 2004 to 2006, the income of migrants coming to New Jersey exceeded the income of those who were leaving. The CBPP notes that, if anything, the data cited by the Wall Street Journal and Governor Christie suggests that “high income households flocked to New Jersey after the tax went up.”

The impact of the New Jersey income tax increase on out-migration was tiny to non-existent and did not have a significant effect on the amount of new revenue gained from the tax.

Moreover, for many areas larger revenues help fund the investments that will attract more people to communities, like better schools, better roads, and cultural attractions.

Posted in Fiscal Policy | Related Topics: Economic Growth  Income Tax  Tax Fairness