Wednesday, October 10, 2007

Crushing Taxes Will Do That

New Jersey lost 72,547 more residents to other states than it gained from them last year, the fourth-largest such exodus in the nation, according to a new study by Rutgers economists.

The loss of residents has had a big impact on the state's bottom line over the past several years, costing an estimated $10 billion in personal income alone from 2000 to 2006, for example. The study estimated a loss of $680 million in state tax revenues from 2005 to 2006, just as Governor Corzine's administration is hoping to grow the economy and use higher tax revenues to forestall budget problems.
Why are people leaving New Jersey in droves?

High taxes plays a huge role in that. People simply see that they can get more bang for their buck by moving where taxes are lower and the costs of living are lower. That's why places like North Carolina are so enticing. So, what does Trenton figure to do? They're going to likely need to raise taxes to cover the shortfalls in order to maintain services and gold plated benefits packages for state workers who are servicing fewer residents than previously. Cutting spending never even enters the equation.

Meanwhile, New Jersey taxpayers also get hit with a double whammy today. Those NJ property tax rebates that were supposed to save taxpayers a whole bunch of money are going to be treated as ordinary income by the federal government if you itemized your return and took a deduction for property taxes.

In other words, if you got a property tax rebate and itemized your return with the deduction for property taxes (which if you're a homeowner is most likely), it must be declared as ordinary income on your federal 1040 and is taxable. That also means that your rebate isn't worth nearly as much as Gov. Corzine claimed since it gets reduced by the federal tax rate.

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