Category Archives: median household income

NJPP: Taxes not to blame for NJ wealth exodus

Last week the New Jersey Chamber of Commerce and the Community Foundation of New Jersey released a report they commissioned from the Center on Wealth and Philanthropy at Boston College. This report ties the wealth of households to migration patterns in and out of the state.

It finds between 2004 and 2008, there was a moderate increase in the number of wealthy households moving out of New Jersey and a decline in the number moving in. The net effect of this, according to the report, is a substantial decrease in household wealth and charitable capacity.

The business community and various politicians are using this study to make the claim–yet again–that this exodus of wealth is a reaction to taxes such as New Jersey’s millionaires’ tax. They make this claim despite the fact that the analysis doesn’t include taxes as a variable and the report doesn’t mention them–except to say that only 6 percent of the wealthy people moving out have incomes over $500,000 (the starting point of New Jersey’s highest tax bracket).

The report looks at wealth (real estate, stocks, bonds, 401ks and vehicles) because it says investable assets are a more important determinant of charitable giving than income. But the study is being used as proof that there is a rush of wealth AND income out of New Jersey.

To the contrary, the number of high income households in the state has increased sharply during this period.

Actual tax return data from the New Jersey Department of the Treasury confirm that the number of tax returns with incomes of $500,000 and above has been growing. The current recession may tell a different story in more recent years, but in 2007 (the most recent data available), 48,500 tax returns were filed with incomes of $500,000 or more. This is nearly twice the number (25,500) filed in 2002. In each year since 2002, the number of these high income returns has grown. Their collective income in 2007 was $76.9 billion and they paid $4.6 billion in taxes to the state. Although their income was taxed at a top marginal rate of 8.97 percent, they paid an effective rate of 6 percent ($4.6 billion/$76.9 billion).

This report only looked at a ten year period–and that period just happened to be the decade when New Jersey increased income taxes on the state’s wealthiest residents. But what if the report looked at a twenty year period? It’s possible the data would show the same trend–younger people moving in have higher incomes and less wealth; older people moving out have more wealth and lower annual incomes.

What this study might suggest is that New Jersey doesn’t import wealthy people; it creates them. The report finds that the people moving to New Jersey are younger, earn higher incomes, and are more frequently employed than the wealthy people leaving. It makes perfect sense that younger, mid-career people would have less wealth because their retirement accounts would be small and their houses are probably mortgaged.

In contrast, the wealthy people leaving tend to be older, are more commonly retired or widowed and have more wealth. It’s likely that these older retired people are taking with them retirement and investment accounts and the cashed out untaxed capital gains from houses that have appreciated in value many times over the original purchase price.

New Jersey is, quite frankly, a rich state. We all know that.

In 2007, we had the second highest median household income in the country (after Maryland). We ranked third after the District of Columbia and Connecticut in per capita personal income. And in the same year, New Jersey and Maryland tied as the states having the highest percentage of households (7.1 percent) with at least $1 million in assets. These factors are unlikely to change overnight.

BUDGET SERIES

Understanding the state budget and its underpinnings are critical to any policy decision that will be made in this state. State budget decisions affect the lives of every one of the 8.7 million people living in New Jersey. They influence how much we pay in income and property taxes; the condition of our schools and healthcare facilities; the access we have to job opportunities in the public and private sectors; and the sense of security we have in our communities.

Starting next week, NJPP’s Monday Minute will begin a series devoted to issues surrounding the New Jersey state budget. Our plan is to start with a discussion of the state’s current and long term structural deficit; the taxes that support state and local spending; and simple analyses of the programs that these taxes support. Each week we will focus on something new.


Leave a comment

Filed under median household income, New Jersey Policy Perspective, NJ Chamber of Commerce, Taxes, wealth exodus

What Does Another 80 Cents a Day Buy? Not Enough!


On July 24, the federal minimum wage rose to $7.25 per hour. With it, thousands of New Jersey’s minimum wage workers saw a 10-cent increase in their hourly wage. This is nothing to be proud of, especially since the state’s median household income of $67,035 makes New Jerseyans the second highest income earners in the country.

The increase marks the first time in four years that New Jersey’s minimum wage earners will make the same as those in Mississippi, Arkansas, North Carolina and 27 other states throughout the country. This despite the fact that the state’s median household income is 84 percent higher than Mississippi’s, 75 percent more than Arkansas’ and 50 percent higher than North Carolina’s.

Housing costs in New Jersey are among the nation’s highest, with renters paying more than $400 above the national average per month. To afford a two-bedroom apartment alone, a minimum wage worker would have to work an impossible 129 hours per week every week of the year.

Housing is not the only thing that costs more in New Jersey. Groceries cost 11 percent more than in the rest of the country, utilities 16 percent more and health care an additional 10 percent.

In 2007, the state’s Minimum Wage Advisory Commission recommended the minimum wage be raised to $8.25 an hour, the federal poverty threshold for a three-person family; one year later it recommended an increase to $8.50 an hour. The commission also called on the legislature to annually adjust the minimum wage with the cost of living. To date, the legislature has done nothing.

Each year New Jersey’s elected officials do not raise the minimum wage, it’s the state’s working poor who suffer the most. Money earned today will buy less next year than it did this year, and even less in the following year. In actual buying power, the state’s minimum wage has declined since it was first introduced in 1968. That means the $7.25 per hour workers earn today buys less than the $1.40 they earned in 1968 or the $3.10 they received in 1980. Had it kept pace with inflation, the minimum wage would now be $8.68, or $1.43 more than it currently is. This, combined with the fact that low-wage workers tend not to receive wage increases, health coverage or sick days makes keeping up with inflation impossible for these families.

Raising the minimum wage not only helps individuals and families who rely on every bit of their paycheck to pay their rent, buy their groceries, clothe their children and provide healthcare for themselves and their families, it also stimulates the economy. Because they earn so little, low-wage workers are less likely than people with higher salaries to save money. This means that every additional dollar they earn is needed and will be spent.

The current economic downturn has affected almost everyone, and New Jersey’s low-income earners are struggling to meet the most basic of needs. By raising the state minimum wage to at least keep up with inflation, New Jersey will lessen the hardship faced by its most vulnerable residents.

To find out more about the New Jersey Policy Perspective click >>>Here

Leave a comment

Filed under median household income, minimum wage, New Jersey, New Jersey Policy Perspective