3/13/2014 9:30 PM ET|
Can New Jersey hold on to its rich taxpayers?
Wealthy Garden State residents can keep more of their money by moving to nearby Pennsylvania, or retiring to a tax haven such as Florida.
"Does it make economic sense to move out of New Jersey?"
That's the troubling repeat question from clients that led David Bugen, head of the wealth management firm RegentAtlantic in Morristown, N.J., to commission a study: "Exodus on the Parkway: Are taxes driving wealthy residents out of New Jersey?"
"We were selfish," Bugen says. "We wanted to make sure we can keep our clients and be responsive to their needs." But beyond his firm's interest (it has $3 billion in client assets under management), he hopes his research will open a serious dialogue regarding the tax climate in New Jersey.
His team found support for two significant trends: working millionaires leaving New Jersey for Pennsylvania, and rich Jersey guys and gals heading to Florida to retire.
The calculus for high earners moving to Pennsylvania is straightforward. New Jersey's top income tax rate is 8.97 percent; Pennsylvania's levy is a flat 3.07 percent. A reciprocal tax agreement (enacted when the states' taxes were nearly the same) says that if you live in Pennsylvania and work in New Jersey you pay the Pennsylvania tax.
"Major executives at large corporations based in New Jersey like Johnson & Johnson (JNJ) and Merck (MRK) live in Pennsylvania to save a tremendous amount in income tax," Bugen says. Discussion point: Repeal the reciprocal tax agreement.
Florida's big draw for retirees is that it is a no income-tax state. It also has no death tax. New Jersey's estate and inheritance taxes are a sore point for wealthy retirees.
New Jersey has the lowest estate tax exemption -- at $675,000 -- of all the states that impose death taxes. Even high-tax neighboring New York has a $1 million exemption, and Gov. Andrew Cuomo has proposed increasing it to match the federal exemption, currently $5.34 million. Discussion point: increase the state estate tax exemption.
When he talks to clients about the big move, Bugen says they fall into two camps. For people who have transferred to New Jersey, say to work on Wall Street for 15 years, it's easy for them to pick up and move because they don't have the emotional and family ties to the state.
For people who have grown up in Jersey, it's a harder decision. One client is ready to move to Florida, but his wife is involved in the local emergency rescue squad and doesn't want to give it up. When the couple sit down with Bugen, client to advisor but also friend to friend, they talk about how they could leave more money to their kids and grandkids if they left. "The world is based on incentives," Bugen says he tells them.
Bugen, 65, can relate to the conflicted group. He grew up in Belvidere, N.J., went to college at Rutgers, and lives in New Vernon (he also has a shore house in Spring Lake). He's planning to retire at the end of 2015, and he and his wife intend to stay put in the Garden State for the time being to be near family -- his mother-in-law and his two daughters live in New Jersey.
"We love New Jersey; that's why we're emotional about the topic," he says, but he says that moving out of state one day is a possibility. (He owns land in South Carolina).
Of the 540 clients surveyed, the largest concern was the state's high property taxes, then estate taxes, then income taxes. Discussion point: Consolidate municipalities to help lower property taxes.
There are other peculiarities to New Jersey that hit the wealthy hard: Not allowing residents to deduct their charitable gifts on their state income tax returns, and not allowing residents to carry forward previously realized capital losses to offset capital gains.
Paying more to the state than the federal government at tax time because of the inability to carry forward losses in New Jersey pushed one RegentAtlantic client quoted in the study to move: "That's what broke my back, and I said, 'That's it. I'm getting out of the state.'"
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NJ's nothing. California starts at 9.3 and goes over 13% if you make good money. Even the Liberal Hollywood nuts are leaving! Liberals are leaving Secretly of course - because they're all hypocrites. Bill Maher anyone?
Next up Obama Taxes the Rich out of the country - the US will become a Welfare Dump.
More immigrants more Democrats more taxes.
More public employees more Democrats more taxes.
More welfare programs more voters for Democrats more taxes.
List could go on but that is a good start.
It's not just taxes, but rather across the board. The one thing, arguably the only thing that is cheaper in NJ, is gasoline, vs Pennsylvania, which they mentioned in the report. Other areas that NJ residents flee too include Delaware, and other southern states (not just Florida), such as North Carolina.
But as example, electric rates in New Jersey are about 18 cents per KW/hour as charged by PSE&G, as opposed to 12 cents per KW/hour as charged by PECO (in PA). NJ car insurance is also a lot higher, and once again significantly above the national average. So much so, that some who live in NJ but have friends in PA, have taken to registering their cars at their friend's address, so they can pay PA car insurance rates, rather then NJ car insurance rates. Prices at stores from the grocery store to others, are also quite noticeably higher in NJ, which also has a 7% sales tax beside, vs the 6% sales tax in PA.
An exception should be mentioned though. Philadelphia does have it's own sales tax of now 2% above and beyond the states, making it 8% in Philadelphia, 6% in PA outside Philadelphia, and 7% in New Jersey. The cost of living in Phila is also higher, as you'd expect, then it would be in one of the surrounding suburbs outside the city. Something to keep in mind if one is thinking of moving ;)
I live just inside NJ now, within 1 mile of the Delaware river, which is the border between PA and NJ, so see the costs and what not, quite regularly. And yes, if I were in the market for a house right now, I would move over to PA. It wouldn't add much travel time at all to my commute to work, so would still be well within reason, travel wise. I already do a lot of the shopping in PA now, due to the cost differences, except gas, lots of people, on the NJ or the PA side of the border do buy their gasoline in NJ.
If you work for a living, why share your money with the parasites? Let them leech off other parasites. Leave them behind. Vote with your Feet to keep your hard earned money, and let them vote to steal someone else's money...
Let the parasites feed off democrats. Move to places where those that work get to keep their money and let the leeches flock to NJ, NY, IL, CA, MA, etc. Let the democrats support their own kind.
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