Election Day is just a few weeks away and the one point all sides can agree on is that whoever voters send to the Governor’s office will face a monumental task in 2018.
New Jersey taxpayers are at a breaking point and both families and businesses are demanding that this state’s affordability crisis be the No. 1 priority of their new Governor and Legislature. Opportunity NJ, a nonpartisan grassroots coalition, recently organized an “Affordability Summit” precisely because this complex challenge defies simple solutions. The path may not be easy, but the urgency is clear. Kicking the proverbial can down the road is not an option.
Too many young adults – our future workforce – are leaving this state because of high taxes, steep housing costs, and crushing college loan debt that make New Jersey unaffordable for them. In 2015 alone, the US Census showed New Jersey had a NET loss of 22,500 young adults, more than any other state in the nation. New Jersey cannot prosper if our economy loses the workforce our businesses need to stay competitive in the years ahead.
The economic impact of outmigration from residents of all ages is significant. New Jersey has lost nearly $21 billion in net adjusted gross income over 11 years as people left for tax-friendlier states. Yes, people still moved into New Jersey during that time period, but the fact remains that IRS data shows a NET loss of $21 billion in income tax revenue from 2004 to 2015.
Millennials, those between 18 and 34, were our biggest outmigration group, but senior citizens and those approaching retirement, including small business owners concerned about succession planning, were the second-largest cohort. New Jersey’s high taxes were powerful outmigration motivators for this latter group, which sought tax-friendlier states in order to protect their pension checks from state income taxes and their heirs from the estate tax.
Solid progress occurred last year with the enactment of a new law that raises the exemption threshold for taxing pensions and retirement income, as well as the phase-out of the estate tax by Jan. 1, 2018. Seniors and small business owners now have a powerful incentive to stay in New Jersey, where their spending will bolster economic activity and state revenues. Accountants and financial planners tell us the estate tax elimination in particular has made a big difference in their clients’ decisions on where they plan to retire.
However, the estate tax was just one piece of our complex affordability challenge. New Jersey still has the nation’s highest property taxes, and that drives up rent, makes homeownership increasingly difficult, and continues to impact business location and relocation decisions. Rising healthcare costs take a bigger bite out of the family budget each year and the increasing cost of providing health benefits diverts a company’s limited resources that could otherwise be spent on reinvesting and growing the business. Energy costs in New Jersey remain among the highest of all states in the PJM power grid, and that’s due in no small part to state-imposed fees and surcharges. Our state’s already high income tax rates and business taxes continue to put us at a competitive disadvantage with other states – especially our No. 1 and No. 2 outmigration states of Pennsylvania and New York.
This is why our new Governor and Legislature must view any proposed solutions through the lens of how it impacts New Jersey’s affordability and competitiveness at the regional level. The goal must be to continue tax reforms that drive down the cost of doing business, and make New Jersey a less expensive place for residents to live, start careers and retire. Any plan to raise taxes, when taxes are at the root of what’s wrong in New Jersey, will only exacerbate the challenges we face.