New Jersey is not the only state losing wealth to low-tax states, according to a report published by Bloomberg news this morning. Writer Martin Braun, who penned the article, indicated the blame lies with the 2017 tax reform law and its cap on deduction for state and local taxes (SALT).
“In 2018, low- and lower-tax states gained $32 billion more in adjusted gross income than higher tax states,” Braun writes, citing a Bank of America Global Research analysis of income migration data. “The net gain — almost $2 billion more than in 2017 — was nearly twice the average over the last 13 years. The Republican overhaul capped state and local deductions at $10,000, making it harder for people to shield as much income from taxes as they could before.”
Earlier this year, NJBIA reported that New Jersey experienced an outflow of nearly $3.2 billion in Individual Income Tax Return Adjusted Gross Income (AGI) for tax year 2017-2018, bringing the state’s total net loss is $28.1 billion from 2004 through 2018.
According to Bloomberg, New Jersey is one of four states with the highest average SALT deductions (New York, California, and Connecticut are the others). Those states lost about 455,000 people between July 1, 2018 and July 1, 2019, compared with 408,500 the prior year, according to U.S. Census data. Most of the increase came from people leaving California.
Braun points out that the data is especially worrisome for New Jersey, New York and California because those states rely on the wealthiest 1% to provide nearly half of all of their income tax collections.