High Taxes and Cost of Living Erase NJ Teachers’ Wage Premium Over Other States

The National Education Association (NEA) — the national parent organization of the NJEA — claims that teachers in states with collective bargaining like New Jersey have substantially higher salaries than states that do not permit collective bargaining.  But the NEA’s ranking doesn’t reflect the real world of taxes and cost of living, which is the world that all teachers live in.  According to the NEA, New Jersey teachers ($81,102, ranked #7) earned a whopping 46% more than Tennessee teachers ($55,369, 44th).  But in the real world, where taxes and cost of living must be taken into account, New Jersey teachers actually earned 4% less than Tennessee teachers.

NEA published its annual “Ranking of the States 2023,” and the key takeaway for New Jersey teachers was that they had the 7th-highest salaries in the nation at $81,102 (per NorthJersey.com).  Overall, the NEA claimed that: “Teachers earn 26% more on average in states with collective bargaining.”  The NEA’s underlying message: teachers unions are good for teachers because they are paid a lot more, especially in a top-ranked state like New Jersey.

But it’s a highly misleading message that does not account for the real world of taxes and the cost of living that real teachers confront. In New Jersey, teachers’ lofty nominal salaries are eroded by some of the highest tax rates in the nation and a very high cost of living.  When these are taken into consideration, the large nominal pay premium disappears.

A comparison between Tennessee and New Jersey proves the point.  According to the NEA, in New Jersey, a state with collective bargaining, teachers earned $81,102, and in Tennessee, a state without collective bargaining, they earned $55,369.  That’s a huge 46% nominal premium for New Jersey teachers.  (Single-filer federal tax rates from the IRS; state tax rates from Tax Foundation for New Jersey and Tennessee).  But the real world intrudes:

TAXES:

• New Jersey: A teacher earning $81,102 would pay $13,048 in federal income taxes, $2,942 in state income taxes, $11,439 in property taxes (median house value of $513,000) and $1,193 in sales tax (per capita sales tax collection per Tax Foundation).  That’s $28,622 in total taxes, so the teacher’s after-tax income would be $52,480.  Overall, a New Jersey teacher’s tax burden is about 35% of salary. 
• Tennessee: A teacher earning $55,369 would pay $7,387 in federal income taxes, $0 in state income taxes, $2,541 in property taxes (median house value of $379,400), and $1,709 in sales taxes, for a total of $11,637.  The teacher’s after-tax income would be $43,732.  Overall, a Tennessee teacher’s tax burden is about 21% of salary.

COST OF LIVING:

• The St. Louis Fed provides a handy calculator to compare the cost of living in different states, which calculates that an after-tax income of $43,732 in Tennessee equates to an after-tax income of $54,617 in New Jersey.  All told, New Jersey’s cost of living is about 25% higher than Tennessee’s. 

AFTER-TAX, COST-OF-LIVING ADJUSTED SALARY:

• Adjusting for taxes and cost of living, the average teacher in Tennessee would earn the equivalent of $54,617 in New Jersey compared to $52,480 for the New Jersey teacher.  That means the average New Jersey teacher actually earns $2,137 less than the average Tennessee teacher, or a 4% deficit.

We recognize that this analysis does not include health benefits or pensions, but that is not the case that the NEA is making with its rankings.  It claims that union members have a large salary premium.  We have shown that NEA’s methodology and messaging do not account for the real world.

At Sunlight, we know that New Jersey teachers have internalized the NEA’s message that they make a lot more than teachers in non-collective-barganing states.  We read these sorts of comments often on our Facebook page.  We understand that the NJEA and NEA want desperately to justify the combined $1,246 in annual dues that they extract from teachers’ paychecks every year, but artificially inflating how much they earn does New Jersey teachers a disservice. Looking at the real world that New Jersey teachers actually live in, one could argue that they are underpaid.

The other salient point is that states with collective bargaining laws also tend to be “blue” states, with powerful government unions, big government, high taxes, and high cost of living.  As a Federal Reserve Bank of St. Louis study concluded: “States where teachers earn higher wages also happen to be states with higher [cost of livings].”  Just like New Jersey.  

Don’t be fooled, New Jersey teachers.  Your expensive union doesn’t benefit you nearly as much as they claim — and might even be hurting you.