1. Money
Julie Garber

Do the Rich Leave New Jersey to Avoid Income Taxes and Estate Taxes?

By November 22, 2011

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Yes, they sure do, according to a study recently commissioned by the chief economist of the New Jersey Department of the Treasury, Charles Steindel. Analysis of IRS studies of the movement of taxpayers across state lines, information from the National Bureau of Economic Research, and survey responses from New Jersey financial advisers were combined to complete the study. Last week Mr. Steindel reported to the Garden State Economic Forum that 25,000 people moved away from New Jersey between 2004 and 2009. In 2004 the state's highest income tax rate was raised from 6.37% to 8.97% for those making $500,000 or more, and in 2009 a one year 10.75% income tax rate was assessed on those making $1 million or more. The estimated revenue lost during this time period was $3 billion.

The 200 financial advisers surveyed listed state income taxes, local property taxes and estate taxes as the top reasons why their wealthy clients left New Jersey. In fact, for every four clients who left the state, only one moved into New Jersey.

While all of this data supports Governor Chris Christie's fight against reintroduction of the 2009 millionaire's tax, critics believe that the study is flawed because the IRS data included people in all tax brackets, not just the wealthy, and the financial adviser's survey was small and not random. According to Charles Varner, a sociology professor at Princeton University, "Ultimately, the data they use doesn't address the question they want to be addressing." Mr. Varner is a co-author of a report released back in April that came to the exact opposite conclusion of the Steindel study - that New Jersey's 2009 tax increase had little effect on the movement of the wealthy out of the state.

I've said it before and I'll say it again - someone needs to conduct a scientific study based on a nationwide survey of estate planning attorneys because we are the ones who can go through our files and identify who has moved from a taxing state to a non-taxing state. I can probably think of at least 25 - 30 clients off the top of my head who I've worked with over the years who have moved from a taxing state to the non-taxing state of Florida, and it's certainly not just because of the good weather.

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