According to a new study conducted by the chief economist of New Jersey’s Department of Treasury, wealthy residents are being driven out of the state because of high taxes. This, in turn, is slowing the rate of recovery in the state. According to Bloomberg Economic Evaluation of States Index-which looks at data on employment, income, real estate, taxes and local stocks-New Jersey’s economy was the third worst perform economy in the United States through June 30.
Among the top reasons wealthy people leave New Hersey is property taxes, income taxes and estate taxes. Experts say there is a close relationship between state tax rates and where wealthy people move. Generally speaking, states with higher tax rates lose more people.
There is some amount of disagreement as to why wealthy people are moving out of New Jersey. According to the Center on Budget and Policy Priorities, housing prices and job opportunities have more affect on migration patterns than tax rates. That group recommends increased government spending for programs for the poor
Regardless of why wealthy people are choosing to leave New Jersey, it is true that estate planning requires a bit more managing of taxes than in other states. As we mentioned in a recent post, New Jersey is commonly considered one of the worst places to die because of the way it imposes both estate and inheritance taxes.
For those who do not have great wealth and who keep their assets within their immediate family, there will be fewer tax concerns. For those with great wealth and who wish to pass their assets to more extended family members, there will be additional taxes to plan for.
Source: Bloomberg, “New Jersey Taxes to Blame for Richest Moving, Economist Says,” Terrence Dopp and Elise Young, November 15, 2011.