Sunlight Policy Center of New Jersey Releases Comprehensive Report on the Economic Consequences of New Jersey’s Huge Debts and High Taxes.
“Beware the Downward Spiral: The Economic Consequences of New Jersey’s Special-Interest-Dominated Status Quo” Provides the First In-Depth Understanding of the Facts and Causes as to Why People Are Leaving the State
Red Bank, New Jersey – October 1, 2019: The Sunlight Policy Center (SPCNJ) released today a first-of-its-kind comprehensive report detailing the root causes of New Jersey’s underperforming economy and the out-migration of businesses, wealth and people that threatens the state’s future.
New Jersey has one of the most inhospitable business climates in the nation for both small and large businesses. Business leader Warren Buffet has stated that due to the enormous unfunded liabilities and the increased taxes that will be required to fund them, he would not want to locate a business in a state like New Jersey. Former state Democratic Party chairman Tom Byrne has also voiced concern about the overhang of future tax increases and warned of a “downward spiral,” whereby out-migration leads to reduced economic growth and tax revenues, which then leads to more out-migration.
The result is that people are leaving New Jersey. New Jersey Business and Industry Association (NJBIA) studies show that since 2005 New Jersey has lost a net of over 680,000 people and over $25 billion in adjusted gross income. Most ominously, NJBIA determined that since 2007 New Jersey has lost a net of 205,000 millennials – the worst of any state. This is our state’s economic future walking out the door.
“New Jersey’s out-migration problem is the proverbial “canary in a coal mine.” It’s a warning that businesses and people see better opportunities and quality of life in other states. Our economy and job market underperform both the nation and our neighboring states at the same time that our cost of living is higher,” stated Sunlight Policy Center’s Founder and President Mike Lilley. “SPCNJ hopes to shine a line on this worrisome trend and begin a needed discourse to try to reverse it before it’s too late.”
Outlined in the report:
The Causes of Our Heavily Indebted, High-Tax Status Quo:
Special-Interest Domination. New Jersey’s enormous unfunded liabilities and high taxes exist for a reason: they serve the needs of the powerful special interests that dominate New Jersey’s political system. As detailed in previous SPCNJ reports, the most powerful of these is the New Jersey Education Association (NJEA). Decades ago, the NJEA constructed a system whereby tens of millions (now $129 million) of property tax dollars flowed directly into its coffers annually. The NJEA has since used these tax dollars to become the most powerful political force in the state.
Pensions and Benefits. With its unmatched political clout, the NJEA played the lead role in the structuring and then underfunding New Jersey’s largest public pension fund, the TPAF, which greatly influenced New Jersey’s overall public pension system. The TPAF is 26 percent funded and could run out of money by 2029, which would be a fiscal disaster for the state. The NJEA also gained “platinum-plus”-level health benefits for its members and retirees at little or no cost to them. The NJEA has consistently fought needed reforms to place the pension system on firmer footing or reduce the cost to taxpayers of the healthcare plans.
Taxes. The NJEA has also played the lead role in pushing for higher taxes. At the local level, the NJEA and its affiliates have bargained for ever-increasing education spending and very expensive health plans, which have resulted in the highest property taxes in the nation. Once high and rising property taxes became a political liability, the NJEA pushed for increased state-level taxes to mitigate the pressure on local property taxes. The NJEA was the driving force behind the initiation of the first state sales and income taxes, and has been behind every state-level tax increase since.
The Consequences of Our Heavily Indebted, High-Tax Status Quo:
Underperforming Economy. Due to its high taxes and cost of living, New Jersey’s economy has underperformed the national economy and those of New York and Pennsylvania. Over the past twenty years, New Jersey’s personal income, state GDP and job growth trail both the rest of the country and its neighboring states.
Tax Revenue Shortfall. Accordingly, New Jersey’s tax-revenue growth is among the worst in the nation, leaving the state with the worst structural budget deficit of any state and ill-prepared to meet the looming burden of the increasing costs of its retiree liabilities. Moreover, with one of the smallest “rainy day” funds in America, New Jersey is perpetually one recession away from a fiscal crisis.
Out-Migration. An underperforming economy coupled with high taxes and cost of living create a recipe for out-migration. Multiple studies show that New Jersey is losing businesses, wealth and people to other states. Most ominously, New Jersey is losing millennials who represent the future of the state.
Downward Spiral. An underperforming economy and high taxes – as well as the threat of future tax increases to pay for New Jersey’s enormous debts – will continue to drive out-migration from the state. This will further reduce economic growth and tax revenues, which then will lead to even higher taxes and a weaker economy, which then starts the cycle over again. This is the downward spiral Byrne refers to.
It is time we begin educating ourselves on the facts.
It’s time these facts came to light. Read the Full Report.