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Op-Ed: We Must Take Steps to Reverse the Economic Impact of Outmigration

Anyone who does not believe our high taxes and high cost of living play a pivotal role in driving people from the state needs to have a reality check

michele siekerka
Michele Siekerka

I can’t go to a family gathering, out with friends, to a meeting with NJBIA members, or even to my local diner without hearing people talking about the cost of living in New Jersey and how they are planning their exit strategy.

Marry these real-life discussions with the findings of our recent Business Outlook Survey, where two-thirds of those responding said New Jersey will not be their domicile in retirement and that they take estate and inheritance taxes into consideration when making business decisions.

This is why we decided to conduct our own objective research and take a deep dive into this issue to learn about and understand the impact of outmigration on the New Jersey economy.

Our findings were released on February 11 in a report titled “Outmigration by the Numbers: How do we stop the Exodus?” It shows that based on U.S Census data, approximately 2 million New Jersey residents moved out of the state from 2005-2014 and that based on IRS tax collections from 2004-2013, New Jersey lost $18 billion in net adjusted gross income, including $3 billion in 2013 alone.

The net loss of $18 billion in AGI due to outmigration resulted in the loss of $11.4 billion in economic output, $8.4 billion in household spending, $4 billion in labor income, and 75,000 jobs. This is the impact the net loss of adjusted gross income had on the New Jersey economy -- income that was lost to New Jersey during those years and therefore did not flow through the economy.

The net income loss is indisputable, as is the fact that the 2 million people who left contributed to this loss. While 1.4 million people moved into the state during this time from other parts of the country and nearly 600,000 moved here from abroad, it is important to understand that the outmigration and in-migration numbers are not nearly as important as the loss of income and the economic impact that loss of income had on the state’s economy.

Critics of our report, those whose theology often overtakes common sense and the challenges faced by average New Jersey residents, ignore this basic economic fact. They will also say that $18 billion in lost income is no big deal. Of course it’s a big deal. Try telling the people who lost the opportunity to hold one of those 75,000 jobs that the loss of this income doesn’t matter.

These same critics will also suggest that no direct correlation can be drawn between outmigration and New Jersey’s taxes and cost of living. To even suggest this ignores the central truth of life in New Jersey.

It is no secret that we are among the highest, if not the highest cost-of-living state and are at the top of nearly every tax ranking as most expensive -- an 8.97 percent state income tax, 7 percent sales tax, and 9 percent corporate-income tax, as well as having among the highest property taxes in the nation.

Students attending our New Jersey state colleges and universities pay the fourth-highest in-state tuition in the country, and the cost of rent makes it difficult for businesses to expand here and for retirees and millennials to live here.

In fact, our report shows that since 2007, people age 18 to 34 represent the largest group leaving the state.

It didn’t surprise me when United Van Lines, the nation’s largest household goods mover, announced New Jersey led the nation in outmigration last year with 67 percent of its New Jersey moves being outbound, compared with only 33 percent inbound.

It has been a commonly held belief that people are leaving New Jersey for warmer climates like Florida and North Carolina. However, our research found the No. 1 and No. 2 destinations for outmigrating New Jersey residents are Pennsylvania and New York, where they can stay near their families while being afforded the more favorable tax climate.

As expensive as it is to live here, it’s even more expensive to grow old and die here. New Jersey taxes retirees on their pension income and is one of only two states with both an estate and inheritance tax. Retired New Jersey homeowners are routinely advised by their accountants, as part of their fiduciary responsibility, to move out of New Jersey into tax-friendlier states. Anyone who doubts this statement should ask their accountant or lawyer about the advice they provide their clients who are contemplating or are already in retirement.

It is long past time that we address the cost of living in New Jersey and begin true reforms that will make New Jersey more affordable for all our residents, those just beginning their adulthood and careers, those in midcareer, and those nearing or in retirement.

In the short term, relief on the estate and inheritance taxes, and increasing the threshold for taxing pension income, will make New Jersey more competitive with those states that residents are flocking to. Focusing attention on college affordability and the overall cost of living will give our millennials a better chance to keep New Jersey their home.

After all, when we spend upward of $19,000 per-pupil, per-year on average through their K-12 years, shouldn’t we want to see a return on that investment by keeping those students here to be a productive part of our workforce? And wouldn’t we all want to see a New Jersey where college graduates earning beginning wages can actually afford to live here on their own? Or a New Jersey where grandparents don’t have to move away from their children and grandchildren to lower-tax states because it’s too expensive to stay here?

Outmigration and its economic impact are real. It is clear from the interactions that I have had with our member companies and with residents from across New Jersey that people have reached their breaking point. Anyone who does not believe our high taxes and high cost of living play a pivotal role in driving people from the state needs to have a reality check. Just talk to your neighbors, colleagues, parents, or even your own children, if they are millennials, like my own.

Those who ignore the empirical and anecdotal data simply have a different agenda.

Michele Siekerka is the president and CEO of the New Jersey Business & Industry Association, which represents 20,000 mostly small businesses across the state.

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