“Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” — Supreme Court Justice Learned Hand (1934)
The New York Times recently ran a cover story about how billionaire hedge fund manager David Tepper moved out of New Jersey after paying millions of dollars in state income taxes. After 20 years, he had witnessed the state gradually increase its state income tax from 2% to 6% to today’s 9%. In fact, up until 1976, New Jersey had no state income tax. In that fatal year — the 200th anniversary of the Declaration of Independence — then Gov. Brendan Byrne, a Democrat, convinced the legislature to impose a “temporary” 2% income tax so that property taxes could be reduced.
Guess what? The property taxes were never reduced, the income tax was made permanent and now the rate is up to 9%.
David Tepper said enough is enough.
He moved his residence and his whole business operation to Miami, Florida, where there is no state income tax.
Many other wealthy taxpayers are doing the same. Supply side economist Art Laffer moved from California (with an 11% tax rate) to tax-free Tennessee. Money manager and Forbes columnist Ken Fisher moved from California to income-tax-free Washington state.
But it’s not just the super wealthy who can take advantage of the move to states with no income tax. Middle-class and upper-middle-class taxpayers also can benefit by moving to Nevada, Washington state, Wyoming, Tennessee, Texas, New Hampshire or Florida (all tax-free states).
Even Georgia is considering eliminating its income tax. The more the merrier.
Unfortunately, New Jersey has no plans of cutting its top tax rate, since it affects only a few good taxpayers. Of course, the legislators are smarting with the loss of $300 million or more after Tepper left. Will the legislators reconsider their tax policies to avoid driving the wealthy out of the state? I am not counting on it happening. Neither should you or the taxpayers of New Jersey.