“Any state that depends on income taxes is going to get sick whenever one of these guys gets a cold.”— Kevin B. Sullivan, commissioner of the Connecticut Department of Revenue Services
A single taxpayer’s exodus from high-tax New Jersey sent the Garden State’s budget office into a tailspin. Hedge fund manager David Tepper, formerly one New Jersey’s wealthiest taxpayers, now calls no-income-tax Florida home. After Tepper’s move, Frank Haines, budget and finance officer with the New Jersey Office of Legislative Services, testified before the Senate Budget and Appropriations Committee. Haines warned, “We may be facing an unusual degree of income tax forecast risk.” As New Jersey officials scramble to address a budget shortfall estimated at nearly $1 billion, Florida taxpayers are enjoying an estimated $635 million surplus. The policy choices of New Jersey and Florida demonstrate that pro-growth policies, not tax hikes, expand opportunity.
New Jersey’s heavy taxes put families and businesses at risk. The high personal income tax is a key contributor to the Garden State’s disappointing economic outlook in every edition of Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index. According to the Legislative Services Office, the personal income tax makes up 40 percent of overall revenue, and less than 1 percent of taxpayers contribute about one-third of personal income tax revenue collections. It is dangerous for the state to rely so heavily on a highly unpredictable revenue source. As Kevin B. Sullivan, commissioner of the Connecticut Department of Revenue Services, explained, “Any state that depends on income taxes is going to get sick whenever one of these guys gets a cold.” In addition to high personal income taxes, New Jersey’s death tax policy adds financial stress for families and businesses. For the privilege of dying in New Jersey, the Garden State both imposes an inheritance and an estate tax. New Jersey is one of the only states to impose both an estate and inheritance tax, making it difficult for families to live, work and invest in the state.
In contrast, Florida’s pro-growth tax policies expand economic opportunity. The Sunshine State levies the most competitive personal income tax rate in the country: zero. Furthermore, Florida does not have a death tax, meaning that taxpayers do not have to worry about additional financial burdens for their loved ones. These smart economic policies have earned the Sunshine State one of the top ten best economic outlook rankings in the 2016 Rich States, Poor States index. Research shows the nine states without a personal income tax outperform the nine states with the highest personal income taxes. Over the past decade, states without personal income taxes have enjoyed significantly higher levels of growth – in population, jobs, gross state product and even revenue collection. Instead of relying on unpredictable personal income tax revenue, Florida mostly relies on sales tax revenue. The data demonstrate that revenue generated by broad-based consumption taxes, such as the sales tax, are far more stable and predictable then income tax revenue.
David Tepper is not the only former New Jersey taxpayer to leave for the Sunshine State. Over the past decade, an estimated 189,576 New Jersey taxpayers escaped to Florida, bringing their incomes with them. Overall, New Jersey has lost an estimated $14.79 billion in adjusted gross income (AGI) to Florida over the same time period. According to Save Taxes by Moving, a New Jersey taxpayer with a $50,000 salary could save $1,160 per year just by moving to Florida. Florida’s competitive tax rates, reasonable spending and thoughtful regulations create an environment full of economic opportunity. “If you’re making hundreds of millions of dollars and you’re paying close to 10 percent to the state of New Jersey, you do the math,” said New Jersey Assembly Minority Leader, Assemblyman Jon Braminck. “You can save millions a year by moving to Florida. How can you blame him?”