Escape from Taxation
The study by Boston College’s Center on Wealth and Philanthropy—’Migration of Wealth in New Jersey and the Impact on Wealth and Philanthropy’—looked at 1999 to 2008. It found that in the decade’s first half New Jersey experienced a « substantial increase in both household wealth and charitable capacity, » otherwise known as « expected giving. » During those five years the Garden State had a $98 billion net influx of capital due to wealthy households moving into the state, and it enjoyed a corresponding $881 million increase in « charitable capacity. »
The Garden State was blooming. Then the trend reversed. From 2004-2008, author John Havens found « a large decline in the number of wealthy households entering New Jersey » as well as « a moderate increase in the outflow of wealthy households leaving. » The result: a net decline of $70 billion in household wealth while the « expected giving » became a net outflow of $1.132 billion.
So what happened in 2004? The study doesn’t purport to explain what caused the wealth movements. But the state’s most notable economic policy event that year was an increase in its top income tax rate to 8.97% from 6.37%, on incomes starting at $500,000. That’s a 40% increase.
Chamber Chairman Dennis Bone says it is « crystal clear that the state’s tax policies are resulting in a significant decline in the state’s wealth. » New Jersey’s estate tax, which kicks in at 2.5% on assets of as little as $675,000, goes up to 16% on assets over $10 million.
The study found that the state’s out-migration from 2004-2008 went primarily to New York and Pennsylvania, both of which have lower top tax rates. But the third most popular destination was Florida, which has no income tax and no estate tax.