When Democratic governors were raising taxes and fees between 2004 and 2008, New Jerseyans took $70 billion of their wealth to other states, Gov. Chris Christie said recently at Princeton University.
Christie made that argument during his May 20 speech about the fiscal climate facing New Jersey. When government continues to increase the cost of living and residents subsequently can’t plan their own budgets, "that’s when folks decide just to get up and leave," he said.
The governor went on to say that "between 2004 and 2008, at the height of these tax increases and tax expansions and fee expansions in the state government under Jim McGreevey, Dick Codey and Jon Corzine, $70 billion of wealth left the state of New Jersey.
"That’s departed wealth, not diminished wealth because of the financial crisis. Departed wealth and departed predominantly to four states – Florida, North Carolina, Virginia and Pennsylvania," Christie continued. "What do all four of those states have in common? They all have lower taxes than New Jersey. All of them."
PolitiFact New Jersey dug into Christie’s argument that tax hikes led to that migration of wealth, but first, let’s look at the source of the governor’s numbers.
The $70 billion figure comes from a January 2010 report on migrating households by a research center at Boston College. From 2004 to 2008, about $117 billion of wealth came into New Jersey and about $187 billion left the state, causing a net reduction of about $70 billion. So that number is right.
Christie is slightly off when it comes to the top four destination states of that departed wealth, according to the report.
Based on the percentage of departing households, the top four states were Pennsylvania, Florida, New York and North Carolina. Based on the percentage of wealth, the top four states were Florida, New York, Pennsylvania and California. Between those two measures, the governor is leaving out New York and California.
Christie, however, is right that New Jersey’s tax burden exceeds other states. New Jersey ranked the highest among states as of 2009 for the percentage of per-capita income spent on state and local taxes, according to the Washington, DC-based Tax Foundation, a pro-business research group.
And from 2004 to 2008, New Jersey’s state-local tax burden increased every year.
Now, here’s the tougher question -- did New Jersey’s tax increases really chase away that $70 billion of wealth?
We asked Christie spokesman Kevin Roberts in two emails to provide evidence, but he never did.
"The Governor’s remarks concerning the study and his argument made concerning the impact of tax policies speak for themselves," Roberts wrote to us.
The Boston College study provides a mix of reasons for migration, based on federal data. Based on that analysis, family- and job-related matters topped the reasons for leaving New Jersey from 2004 to 2008.
PolitiFact New Jersey also reached out to three experts and consulted four other studies on migration, and a varied picture emerged of the impact of higher taxes.
A 2007 report from the Edward J. Bloustein School of Planning and Public Policy at Rutgers University said high taxes were among the reasons driving people from New Jersey. According to a 2008 report out of Princeton University, New Jerseyans move to states with lower property taxes and lower costs of living.
"Our conclusion is that migration out of New Jersey is based on the very high cost of housing in the state (of which property taxes are an element)," Stanford University professor Cristobal Young, one of the authors of that 2008 report, wrote in an email. "Retirement-based migration is also important, as shown by the large flows of people to Florida."
Those studies support the argument that high taxes contribute to migration, but other research suggests the impact has been minimal. A recent study -- by Young and a Princeton graduate student -- reached that conclusion in regard to a 2004 tax increase on high income earners.
Joel Slemrod, an economics professor at the University of Michigan, who also found a minimal effect of taxes on migration in his own study, said the financial environment is just one aspect of many that people consider in where to live. Another factor is the quality of services in a given location, Slemrod said.
"You have to look at both sides of the government ledger," Slemrod said.
According to University of Massachusetts, Amherst professor Jeffrey Thompson, higher taxes don’t push people out of a state, because of the value placed on the services and the small nature of the tax increases when compared with moving costs.
But higher taxes also can keep people from moving into a state, Thompson said. If states use the additional tax revenue to create jobs and reduce crime, they can overcome the unattractiveness of the higher taxes, Thompson said.
Going back to Christie’s statement, let’s review:
The governor blamed Democratic tax hikes for chasing away $70 billion of wealth from 2004 to 2008. Christie was not completely accurate about the destination states for the departed wealth, leaving out New York and California.
Several experts agree higher taxes play a role in migration, but the governor’s spokesman couldn’t provide any specific evidence of that, and some research has found the impact to be minimal. The Boston College study -- the basis for Christie’s $70 billion figure -- also listed family- and job-related reasons as the main factors chasing people from New Jersey.
We rate Christie’s statement Barely True.
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Editor's note: This statement was rated Barely True when it was published. On July 27, 2011, we changed the name for the rating to Mostly False.