New Jersey Income Tax: The Decline of the Garden State

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New Jersey, once a thriving industrial region, is in trouble. In a comment to the Courier-Post, New Jersey resident Derek Stewart sums up how difficult it is for New Jersey residents to survive: “Unfortunately, the whole environment in New Jersey has gotten a little expensive for retirees and the middle class.” Partially to blame is the New Jersey income tax, which was enacted in 1976.

A Drastic Change for New Jersey

Before 1966, New Jersey residents enjoyed both zero sales tax and zero income tax. Back then, according to “Wealth of States,” New Jersey was one of the fastest-growing states in the country (p. 10). Times have changed, however. The Tax Foundation ranks New Jersey sixth highest out of the 50 states for its tax burden on individual income, fifth highest for corporate business taxes, and highest in the country for property taxes. New Jersey residents have responded to these high taxes with their feet: The Garden State leads the nation in out-migration and, as of January 2015, has held that distinction for four of the last five years.

Higher Earners Are Leaving

In an analysis of the adjusted gross income (AGI) of people leaving New Jersey versus people entering between 1992 and 2010, “Wealth of States” found that high income earners are leaving, and low income earners are moving in (p. 8–9). This has created an AGI loss of about $22 billion for the state during that time period, as “How Money Walks” reveals. People leaving New Jersey are taking their money with them. That money is not being replaced when new people arrive.

Bleak Job Situation

While the rest of the 48 contiguous states have seen decent job growth since the recession years of 2007 to 2009, New Jersey ranks dead last in this arena. Not only are New Jerseyans out of work, but many have practically given up looking for jobs, increasing the number of those living in poverty. New Jersey was one of only three states that saw a poverty-rate increase from 2012 to 2013, according to U.S. Census Bureau data. The Courier-Post notes that many of the jobs New Jersey residents do find are outside state lines.

Ever since the New Jersey income tax was enacted, the state’s economy has worsened. Governor Chris Christie entered office in 2010 with a plan to turn around New Jersey’s economy, which he called the New Jersey Comeback. Unfortunately, New Jersey’s problems are deep seated, and the “Jersey Comback” banner Christie used to regularly display during town hall meetings is noticeably absent these days.