Edelstein: Phil Murphy and chasing away millionaires: Perfect together
So Phil “The Menace” Murphy introduced his 2020 budget Tuesday afternoon. Which is nice. He managed to cut some $1.1 billion in spending. So that’s really good. He called us the “Middle Class State,” which is pandering.
And then, near the end there, and just like he did last year, he announced plans to implement a millionaire’s tax. He tried last year to raise the top marginal tax rate on people making a million dollars or more, but Democratic leadership wouldn’t have it. He had to settle for raising the tax - to 10.75 percent, the second highest in the nation - on people making over $5 million a year.
But he’s trying again. Murphy expects to raise $447 million with this gambit, which comes out to roughly $11,500 per millionaire, according to an NJ.com study.
That’s assuming all the millionaire’s decide to stick around. I mean, let’s say 10 percent of the resident millionaires say “to hell with this” and set up their home in Pennsylvania, where the personal income tax rate is 3.07 percent, or even New York, where the top rate maxes out at 8.82 percent. And nevermind Florida New Jersey South - where the rate is zero.
So yes. Let’s say 10 percent of the people making between $1 and $5 million and living in New Jersey decide to leave. Well, there goes $22 million in taxes out the door, plus all the sales tax, gas tax, this tax, and that tax these Richie Riches would’ve been paying. And guess who will have to pick up the slack? That’s right, us here in the “Middle Class State.”
And don’t think this won’t or can’t happen; it already is. The New York-New Jersey region - basically, the city plus the northern ‘burbs - lost 5,700 millionaires in 2018, according to a report from Wealth-X, a research operation, as reported in a NorthJersey.com story.
Point here is simple: If you’re a millionaire who can afford to leave New Jersey, Phil Murphy - along with Donald Trump’s $10,000 cap on state and local tax deductions - are leaving a trail of breadcrumbs for you.
And let’s not forget the cautionary tale of David Tepper, the billionaire hedge fund manager who took his talents to Florida back in 2016, costing the state hundreds of millions of dollars a year. You read that right. One person, hundreds of millions in tax revenue. Poof. (It should be noted back in 1996, New Jersey’s top income tax rate was 6.37 percent.)
So while Murphy plans to raise the tax on the rich, who’s to say someone like Leon Cooperman, John Overdeck, Larry Robbins, or Doug Kimmelman - four people you’ve never heard of and who are worth, combined, some $10 billion, according to NJBIZ.com - decide to skip town? Then it’s back to square one. A few more billionaires decide Boca suits them just fine, and we’re even deeper in the red.
Maybe - and I know this is crazy - but maybe instead of slapping the second highest income tax on millionaires in the nation (only behind California’s 13.3 percent, and newsflash: For better or worse, we ain’t California) we should seek ways to bring their tax burden down.
The math to me is simple: Instead of watching our millionaires and the spending dollars flee the state, let’s instead court them to come here. I’d be a lot happier knowing the millionaires’ money is going to local restaurants and malls and shops and gas stations instead of directly into the black hole of state government.
Maybe instead of chasing the millionaires out, we should be putting the red carpet out for them to arrive in style.
Now understand: I’m all for taxing the rich. I’m behind it, 100 percent. Go back to the 1950s, the “Make America Great” times, and you’ll find the top marginal tax rate in America was over 90 percent, and that’s not a typo. I’m totally fine with evening out the playing field. Soak ‘em, especially the Wall Street types.
But - and this is a Sir Mix-ALot level big but - you can’t do it on a state-by-state basis. That’s economic suicide. Why would any millionaire or billionaire choose to live here (or move here) if they don’t have to? And so for Phil Murphy to propose raising the top marginal tax rate to 10.75 percent on anyone making over a million, well, it’s dangerous. He’s certainly not attracting people here, and it wouldn’t surprise me if another Tepper-like exodus happens sooner rather than later.
Wake me when it’s 2021, assuming New Jersey hasn’t gone bankrupt.
Jeff Edelstein is a columnist for The Trentonian. He can be reached at jedelstein@ trentonian.com, facebook. com/jeffreyedelstein and @ jeffedelstein on Twitter.