"Special report on taxes: Where we are today."
The most interesting graph (to me) comes in the middle.
When taxpayers feel the pinch, it becomes a downward spiral. Those with money and skills leave the state. That leads to less tax revenue, which leads to higher debt “because they try to borrow their way out of their problems,” he said.
Leaving New Jersey with billions
Former state residents have taken $35 billion out of state from 2009 through 2013, the latest year available from IRS income data. That’s 5 percent of the state’s entire economy. New workers haven’t replaced all of that income, leaving a net loss of $8.2 billion. With less income tax revenue, state coffers struggle, leaving fewer dollars available to offset local taxes through school and town aid.
The state’s bond rating has been downgraded nine times since 2010, making it more expensive for New Jersey to borrow money for essential items like road repairs and infrastructure upgrades.
If this scenario continues to play out, it will lead to bankruptcy, similar to what has happened in Detroit and other cities.
“I think we are going to see it in Illinois,” McQuillan said. “New Jersey and New York could be next."
Will New Jersey go bankrupt? I don't think so. New Jersey has assets that Detroit doesn't have. But can taxes contribute to a downward spiral, it seems certainly seems like it.
Although it's hard to say exactly how much outmigration is caused by New Jersey's high taxes versus other issues, it is a real phenomenon. Outmigration of high earners is yet another reason why fully funding SFRA and the Pension Funds through tax increases is so problematic. People who want the state to raise taxes for fund state aid should consider all the implications of this policy proposal.