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.Politicians seem to forget that the wealthy are the most mobile people in the country.
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.
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.People respond to incentives as well as disincentives. If only other state policymakers would understand this basic principle.
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.”