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Last month, New Jersey Governor Chris Christie made a bold and reckless promise to cut personal income taxes across the board.
Christie used his annual budget address this week to spout conservative talking points to justify his tax cut plan. There are two claims in particular we take issue with: the idea that high tax rates harm economic growth; and that high tax rates cause families to flee states.
From Christie’s speech:
“First, any job growth plan for New Jersey has to start with cutting taxes… So, to the naysayers, I say this. We have been down the road of high taxation. It didn’t work. The result was high unemployment, high taxes and low growth. The result was families leaving New Jersey. The old way was a dead end for New Jersey. High taxes and excessive spending left us stranded in a world of declining growth, declining prospects and a diminished ability to compete as a state.”
Christie’s claim that cutting taxes will lead to job growth is one of the most frequently repeated talking points used by conservative lawmakers seeking to reduce or eliminate state personal income taxes.
Two new reports from ITEP clearly dispel this conservative tenet. “’High Rate’ Income Tax States Are Outperforming No-Tax States” explains that the nine states with the highest top marginal tax rates (New Jersey included) are outperforming the nine states without income taxes, in terms of both growth in economic output per person and median income levels.
Between 2001-2010, New Jersey beat six out of nine states with no-personal income tax in terms of lowest unemployment rate. And over the same time period, New Jersey topped four out of nine no-tax states in terms of economic growth per-capita.
A second report, “Athur Laffer Regression Analysis is Fundamentally Flawed, Offers No Support for Economic Growth Claims” shows that an analysis on which tax-cutters like Christie rely, that predicts huge economic gains as a result of cutting state personal income taxes, is fundamentally flawed.
The conclusion of both reports: there is simply no evidence that state income tax rates harm state economies (or the national economy, but that’s another matter).
Then Christie invoked the millionaire-migration canard:
“Our tax rates, and our overall tax burden, were also the worst in the region. And the effects were being felt: a study by scholars at Boston College found that $70 billion of wealth had left the state in the prior five years. That exodus hurt jobs, economic growth and yes, even state tax revenues…”
This claim – that high taxes will (and have) force wealthy New Jerseyans to flee the state – is yet another unfounded conservative myth.
In fact, as ITEP has pointed out in the past, the Boston College study Christie referenced made no mention of taxes at all, let alone in New Jersey families’ migration decisions. A second study that actually looked at the role of taxes in New Jersey migration decisions (which Christie did not mention), found the impact of the state’s “half-millionaires’ tax” on New Jersey’s high-income earners was “small,” and that the change in the net out-migration rate following the enactment of the tax was “negligible.” The researchers for this second study also review Census Bureau interviews that show that while people gave a lot of reasons for leaving the state – retirement, new jobs, family needs – none reported they were leaving because of tax rates.
Photo of Governor Chris Christie via Bob Jagendorf Creative Commons Attribution License 2.0