Bloomberg News came out with a report titled “SALT Cap Confounds Doomsayers as Fears of Exodus Prove Overblown.” The main take-away is that in NJ, as well as in other high-tax states like CA, CT and NY, the capping of state and local tax deductions (SALT) at $10,000 has not led to the feared exodus of wealth to low-tax states. Put simply, the rate of wealth out-migration has not worsened since the SALT cap. Sunlight would add “yet.”
Sunlight makes two observations:
- The Bloomberg study is based on 2018 data, and the SALT cap was passed in 2017. So the title of the article is based on one year’s worth of responses. But moving from NJ to, say, FL or TX is obviously a big and serious undertaking. It’s premature to judge the long-term impact of the SALT cap on only one year’s worth of data, especially since the pandemic occurred after 2018 and it remains to be seen what impact that will have on interstate migration. In addition, the impact of Gov. Murphy’s hiking taxes on millionaires last year also remains to be seen.
- NJ is still losing wealth every year, as are all the high-tax states studied. The Bloomberg graph shows that NJ has seen about 1% more income flow out than flow in every year since 2012. Meanwhile, the 9 zero-income-tax states like FL, TX and WA are gaining over 1% from income flows, with FL gaining close to 3%. As our friend, State Aid Guy, has calculated, this is because in NJ’s case in-migrants’ incomes are only 72.9% of out-migrants’ incomes. In other words, even if NJ’s overall population is relatively stable, wealthier people are leaving NJ and being replaced by less-wealthy people.
The implications of this flight of wealth are clearly lost on Gov. Murphy, who saw fit to raise taxes even more on the wealthy (to a top rate of 10.75%). Murphy raised taxes at the urging of his public-union, special-interest pals, who always want more tax revenues to fund more government spending on them.
Meanwhile, wealth continues to leave NJ, which over the long-term will drive our state down a downward spiral. If the wealthy leave, who is going to pay off NJ’s massive unfunded liabilities? Murphy will be long gone by then but regular NJ citizens will be stuck with the consequences of his actions.
NJ: run by and for the special interests.