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NJSL: N.J. lost $70B in wealth as rich move to other states

N.J. lost $70B in wealth during five years as residents depart

By Leslie Kwoh/The Star-Ledger
February 04, 2010, 5:15AM

More than $70 billion in wealth left New Jersey between 2004 and 2008 as affluent residents moved elsewhere, according to a report released Wednesday that marks a swift reversal of fortune for a state once considered the nation’s wealthiest.

Conducted by the Center on Wealth and Philanthropy at Boston College, the report found wealthy households in New Jersey were leaving for other states — mainly Florida, Pennsylvania and New York — at a faster rate than they were being replaced.

“The wealth is not being replaced,” said John Havens, who directed the study. “It’s above and beyond the general trend that is affecting the rest of the northeast.”

This was not always the case. The study – the first on interstate wealth migration in the country — noted the state actually saw an influx of $98 billion in the five years preceding 2004. The exodus of wealth, then, local experts and economists concluded, was a reaction to a series of changes in the state’s tax structure — including increases in the income, sales, property and “millionaire” taxes.

“This study makes it crystal clear that New Jersey’s tax policies are resulting in a significant decline in the state’s wealth,” said Dennis Bone, chairman of the New Jersey Chamber of Commerce and president of Verizon New Jersey.

The report was commissioned by the state Chamber of Commerce and the Community Foundation of New Jersey to study the effects of wealth migration on charitable giving after executives noticed more affluent philanthropists were moving away. Wealth includes assets such as real estate, stocks, bonds, 401ks, mutual funds and vehicles.

But economists say there are many other implications for the state’s financial health.

Wealthy residents are a key driver for everything from job creation and consumer spending to the real estate market and the state budget, said Jim Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. In New Jersey, the top 1 percent of taxpayers pay more than 40 percent of the state’s income tax, he said.

“That’s probably why we have these massive income shortfalls in the state budget, especially this year,” he said.

Until the tax structure is improved, he said, “we’ll probably see a continuation of the trend, until there are no more high-wealth individuals left.”

He added the report reinforces findings from a similar study he conducted in 2007 with fellow Rutgers professor Joseph Seneca, which found a sharp acceleration in residents leaving the state. That report, which focused on income rather than wealth, found the state lost nearly $8 billion in gross income in 2005.

Findings from the Boston College report show that about 302,780 households left New Jersey between 2004 and 2008, only slightly lower than the 323,350 households that moved into the state. However, the average net worth of the departing households was about 70 percent higher, at $618,330.

Those who left were also more likely to be older and more educated, with jobs as entrepreneurs or in the finance and professional industries, the study found. Those replacing them tended to hold management or support jobs in the manufacturing industry. The study analyzed data from three main sources: The Federal Reserve’s Survey on Consumer Finances, the Census Bureau and the Internal Revenue Service.

Experts pointed to an abundance of anecdotal evidence to support the numbers. Ken Hydock, a certified public accountant with Sobel and Company in Livingston, said in this 30-year-career he’s never seen so many of his wealthy clients leave for "purely tax reasons" for states like Florida, where property taxes are lower and there is no personal income or estate tax. In New Jersey, residents pay an estate tax if their assets amount to more than $675,000. That’s compared to a $3.5 million federal exemption for 2009.

Several years ago, he recalled, one of his clients stood to make $60 million from stock options in a company that was being acquired by another. Before he cashed out, however, the client put his home up for sale, moved to Las Vegas, and “never stepped foot back in New Jersey again,” Hydock said.

“He avoided paying about $6 million in taxes,” he said. “He passed away two years later and also saved a huge estate tax, so he probably saved $7 million.”

Meanwhile, Gov. Chris Christie’s administration said the report is just another reminder of the difficult tasks ahead.

“It’s the consequence that we’ve been talking about for so long, of the spending and taxing habits that we’ve all experienced,” said Mike Drewniak, a spokesman for Christie. “It’s the sort of thing that we feel the need to stop so we can get New Jersey back on a prosperous path.”

-Staff reporter Lisa Fleisher contributed to this report

http://www.nj.com/business/index.ssf/2010/02/nj_loses_70b_in_wealth_over_fo.html

Posted by learn3drive
February 03, 2010, 8:09PM

Well, just tax the remaining rich folk. And if there isn't enough revenue, then lower the definition of "rich". Eventually our goal will be met, and we will all be lower class except for the politically connected.


Posted by grmpyolfrt
February 04, 2010, 10:44PM

The rich would never feather their nests at our expense.....no, never.

The rich would never do that!

Goodbye and good riddance.

PS-Take some AIG garbage with you on your way out



Posted by miketernal
February 04, 2010, 11:51PM

Then where is the state supposed to get the revenue to operate? From the poor and middle class? Next time, think before typing.



Posted by patriot1775
February 05, 2010, 9:29AM

Good riddance? Didn't you read the article? The "rich" are 1% of the population yet they now pay 40% of our taxes. Who do you think will be paying your tax bills once they leave? Not me, I'm leaving too. Good luck.


Posted by Laura
February 04, 2010, 10:09AM

It's not because old people are moving to Florida. We're losing the engine of our society. People with businesses are getting out of NJ as fast as they can and taking those businesses to Florida. That's why Florida has all the high-paying jobs and we have none


Posted by ed
February 03, 2010, 8:33PM

I have been saying this for years. The house of cards is about to fall. Maybe Jon Shure can continue his rant to tax the wealthy. Maybe we can continue the crazy pension system in the country. Maybe we can continue to keep useless County government. We need to have real jobs for real people. Save us Christie


Posted by ed
February 03, 2010, 8:35PM

PS South Carolina her I come. I am tired of paying pensions for hundreds of Police chiefs,fireman,school supers and county execs. I can't wait to go.


Posted by nephewplease
February 03, 2010, 8:36PM

Could you please provide us with a plan for ridding the state of the poor and keeping the middle class and rich.. I'm so tired of working to pay for generation after generation of people on the public dole. Let some other enjoy them for a little while. Its not fair that we hog them.


Posted by Laura
February 04, 2010, 10:13AM

We should work on getting rid of the middle class, as well as the poor. I know a lot of people think the middle class are ok because they usually have jobs. But what people don't realize is that they also have kids, who take up a lot of services. And people think they pay a lot in taxes. The ugly truth is that they pay a lot less than the rich. It's true. We should be actively trying to get rid of poor and middle class people, especially those with kids. We would have absolutely no budget problems if we only had rich people who had no kids. Think about it people. It's not rocket science.


Posted by Napier1
February 03, 2010, 8:38PM

Damn! I cannot wait until retirement allows me to do the same!!! Just a couple of more years. My needs are few, a small house with enough fenced back yard to share with 3 dogs. No "adult community living" for me, and goodbye to the ever-growing tax and insurance bills. Love you, NJ, but you don't love me.


Posted by 30-378mag
February 03, 2010, 8:40PM

And this is supposed to be a surprise? Keep raping the ones who work for their money and giving it to the ones who don't work for their money and this is what happens. Like our state keeps getting worse so does the country! Obama will put us all in the poor house!!!


Posted by Manville56
February 03, 2010, 8:51PM

I have a small home in Montclair, but the taxes, including 1000 a year to the sewer authority, are driving me out. The teachers and police may want more, but who will be left to give it to them?


Posted by talkiseasy
February 03, 2010, 8:51PM

This statement was great - Until the tax structure is improved, he said, "we"ll probably see a continuation of the trend, until there are no more high-wealth individuals left."

Uh, do you really think all the rest of the middle and lower income folks will be able to stay? I always said just the opposite, that only the rich will remain as nobody else will be able to afford to pay the taxes.


Posted by kavork
February 03, 2010, 8:56PM

Florida here I come 8 months to go see ya suckers