Friday, February 5, 2010

Is New Jersey a Warning to Oregon?...

With Oregon’s voters recently passing two referendums that hiked both the corporate tax and the income tax on the highest earning individuals there, they may just want to look east to see where those policies inevitably lead.

New Jersey is one example.

Not long ago, New Jersey was, by most measures, “the richest state in the nation,” but over the past half decade that state has seen a mass exodus wealth!

Between 2004 and 2008, more than $70 BILLION in wealth has left the state. That’s a complete reversal from the period between 1999 and 2003 when the Garden State saw an influx of $98 BILLION.

What happened?

The tax structure changed in the mid-2000s, when a “millionaires surtax” was placed on “wealthy individuals.” With that surcharge, high income earners are paying 10% of their taxable incomes to the state alone! Coupled with sky-high property taxes and high sales taxes, the state is simply less and less appealing to those who produce the most.

Incredibly enough, this loss of wealth is occurring even as New Jersey adds population. The reason its losing wealth is that those leaving, the most productive and entrepreneurial are worth an average of 70% more than those coming into the state.

As an IBD editorial noted, “This, of course, should be a lesson for lawmakers everywhere: Keep taxes low. If you don’t, the wealthiest among us, who tend to be the most productive, will find more favorable places to put their talents and energy to work.

“Too many lawmakers never seem to understand this. They keep raising taxes to redistribute the wealth and miss the evidence before their eyes: The rich and the productive increase wealth across the full spectrum of an economy...They create jobs. They drive consumer spending. Wealth – not stimulus spending or any other redistributive schemes – begets more wealth.”

Look away at your own peril Oregon. New Jersey's recent fiscal decline would seem to portend the following for Oregon;

1. Oregon will LOSE a significant number of its businesses and attract few, if any to take their place.
2. Oregon will see a significant loss of its "wealthier" people, its "investor class."
3. Revenues from these tax increases will fall far short of projections, leading Oregon's state government to extend the tax increase to lower brackets to make up for the shortfall.
Oregon's unemployment rate will rise appreciably.
5. Other Blue States may follow Oregon's misguided lead, as it's always easy to get people to raise taxes on OTHERS.


Skunkfeathers said...

Seems the Left is bound and determined to put ideology and populist appeal ahead of fact and evidence. And where they succeed in doing so, the economic wheels fall off.

Hard to fathom, but example after example (New Orleans, NJ, CA, probably Oregon in a short time) point it out as plainly as can be. The exodus of wealth and the giant sucking sound of entitlement-mentalitied hands-out drag down the quality of life and opportunity for all, wherever fact and evidence are ignored in the interests of promoting a failed ideology.

JMK said...

It certainly doesn't make any sense SF.

We had a Keynesian implosion after nearly two decades of reckless and irresponsible Keynesianism (1964 - 1981)....and in 2008 we fund ourselves reeling from yet ANOTHER Keynesian inspired disaster (G W Bush spent more, even adj for inflation, on social spending than LBJ did) and boosted the National Debt from the $5.6 TRILLION he inherited to about $10 TRILLION when he left office.

But after screaming about "the debt crushing our economy" for 8 years, the liberal Dems began borrowing EVEN MORE $$$ at an EVEN FASTER RATE!

This administration's "solution" to the problems they were electd to fix have been, "I know the Bush administration had us headed for a cliff at 40 mph, so we'll fix stomping on the accelerator and heading for the same cliff at 110 mph."

People HAVE to stop making excuses and laming the prior administration for our current woes. when Reagan came into office in the wake of the Carter-led Keynesian implosion, the economy IMPROVED EVERY YEAR Reagan was in offic until the Misery Index (which stood at 22 when he took office) reached single digits by 1986, where it stayed throughout the rest of his administration.

By that standard, the Obama administration is already a's first year saw the Misery Index rise, not get better and with government expanding at the expense of the private sector (the federal government plans on hiring 600,000 employees over the next three years!) the economy will only get worse.

Without a vibrant, productive and PROFITABLE private sector to fund it, the public sector CANNOT be sustaned.

The current policies, expanding government and hiking taxes leads inevitably to STAGFLATION.....we already have double digit unemployment, and we've printed more money since 2000, than was printed from Colonial times until 2000 - that will ultimately and inevitably be incredibly inflationary.....and if China and some of the other debt-holding nations ratchet up the cost of servicing our debt, interest rates here will skyrocket.

STAGFLATION looks to be on the near horizon.

Skunkfeathers said...

I agree, JMK...the coming fiscal 'storm', set up by all that this administration is recklessly doing, will likely dwarf that bestowed upon us by Carter. Watch the Misery Index peg in an entirely wrong direction. And I so wish I were wrong about that, 'cuz the Index needle will impale me, too.

JMK said...

I think the coming disaster will impact us all.

Anyone who cares to can check out the ongoing Misery Index at

It's a great site.

Ironically enough, 2009's MI declined slightly from 9.6 to 8.9 despite the fact that unemployment skyrocketed!

Inflation was THAT low.

That (low inflation) will not last, because it cannot last, given the amount of money we've printed and the debt we owe, along with the cost of servicing that debt set to go up.

Should the cost of servicing that debt rise significantly, that will put an incredible UPWARD pressure on interest rates here.

Everything's in place right now for a "perfect economic storm" - high unemployment (that shows no sign of abating), rising inflation rates (with so much money recently printed that's going to hike inflation significantly) and rising interest rates.

The fed is set to hire 1 whopping 600,000 people under the current administration!

That's why it's a VERY GOOD thing that the GOP looks poised to take back one, or perhaps (dare we dream) BOTH Houses of Congress come November.

At that point, they've got to make eradicating that federal expansion priority one....slashing the federal budget priority two...after that they can focus on reducing taxes and unleashing the private sector!

Jess said...
This comment has been removed by the author.
Jess said...

Love your description "I can't afford to be liberal!"

I was reading my recent Tax Foundation newsletter where they talked about New York and New Jersey being pummeled by higher taxes. It doesn't make sense to me to push the wealth OUT. These folks are gladly setting up business elsewhere in tax-friendly states.

My logic is states should keep taxes reasonable and have everyone pay = steady revenue = good economy = good for the people of that state. But if you raise them and have fewer pay = instability = weak economy = bad for the people of that state.


JMK said...

Hi Jess!

Your logic ("...states should keep taxes reasonable and have everyone pay = steady revenue = good economy = good for the people of that state.") requires some fiscal discipline by those in government and the willingness to say NO to Municipal Unions and others who always push for MORE spending.

Our current tax system, one in which nationally, the top 10% of income earners pay over 71% of all federal income taxes, while the bottom 50% pay less than 3% is hopelessly flawed.

As you correctly note, "EVERYONE should pay" something.

While the top 10% of income earners in the USA do take in about 44% of the total aggregate annual INCOME, there tax burden should be closer to THAT than the over 70% it is today!

In New York City, it's even MORE skewed! In NYC a mere 5,000 tax filers pay 40% of the city's income taxes...a city with 3.8 MILLION tax filers....1.9 MILLION of whom pay no income taxes at all (as they earn below the minimum taxable income of appx $34,000/year for a family of 4).

Fiscal discipline and a more equitably and widely distributed tax burden is what's needed now.

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