Think revenue from oil-and-gas taxes is volatile? Take a look at the states that have targeted “millionaires” for sky-high levies on personal income.
In New Jersey, Governor Chris Christie is planning to close a $1 billion budget gap for the current and 2017 fiscal years. The red ink is the result, NJ Advance Media reported, of “lagging gross income tax collections from workers’ withholdings and from such non-earned income as capital gains, which together account for 40 percent of the state’s total revenue.”
The Garden State imposes an income-tax rate of 8.97 percent on both singles and married couples with annual earnings greater than $500,000. Such greedy government played a role in the decision of hedge-fund manager David Tepper to flee. Earlier this year, the Associated Press reported that
legislative budget forecaster Frank Haines cited the billionaire’s move to Florida as a potential factor in how much income tax revenue the state brings in. Income tax revenues make up the biggest share of cash in state coffers, and a shift in projections of as little as 1 percent amounts to about $100 million, forecasters say.
It’s unclear how much effect Tepper’s departure could have, because his tax returns haven’t been made public and it’s unknown how much taxes affected his move. Tepper didn’t return messages seeking comment.
But his move has caught the attention of the usually headline-shy legislative budget office.
“If a very wealthy individual — potentially a significant taxpayer to the state — relocates and relocates not only as we’ve been reading about it but really relocates for tax purposes … beyond our reach, then that’s something to be aware of,” said Haines, the legislative and budget finance officer.
Nearby, in Connecticut, “Thomas Peterffy, one of three Connecticut residents with an 11-figure net worth,” joined Tepper in Florida. “C. Dean Metropoulos, an investor and food industry executive who controls Hostess Brands, is also now a Palm Beach resident, according to Forbes.”
Even the left-ish Pew Research Center has concluded that “states are finding that taxing the incomes of the rich means living with unstable budgets.”
Policy has consequences. Politically popular “fixes” to fiscal woes often have unintended impacts. Something to remember the next time New Mexico’s liberals — taxpayer-funded and otherwise — call for higher taxes on “the rich” as a tool to address the Land of Enchantment’s mounting deficits. Hiking marginal income-tax rates makes the state less attractive for residents and relocators alike. But it also makes budgeting more difficult.