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By Erin O'Neill October 31, 2011

Conservative group claims Stephen Sweeney gave New Jersey the nation’s highest income tax rates, driving out jobs

A conservative organization’s ad campaign paints a group of New Jersey Democrats as President Barack Obama’s minions -- and state Senate President Stephen Sweeney is among them.

The New Jersey chapter of Americans for Prosperity launched last week a series of radio and television spots targeting incumbent legislators battling for re-election on Nov. 8. An ad criticizing Sweeney claims the South Jersey Democrat’s "Obama-style policies" are responsible for high unemployment in the state.

"How? Sweeney gave us the nation's highest income tax rates, driving out jobs. Sweeney backs cap and trade and raising electric rates, which will drive out more jobs. And Sweeney backs Obama’s job-destroying government health care plan and Obama's failed stimulus schemes," the ad says.

High taxes. Fewer jobs. We’ve heard -- and checked -- similar claims before, but never specifically on income tax rates.

So, did Sweeney give New Jersey the nation's highest income tax rate, driving jobs out of state?

Sweeney took office as a state Senator in 2002. Since then, New Jersey has never had the the highest income tax rate in the nation.

The state Legislature increased the top income tax rate in 2004 and 2009. Sweeney voted for both measures, but he’s just one vote among many and the governor signed both bills.

In 2004, New Jersey’s top income tax rate went from 6.37 percent on those making more than $75,000 to 8.97 percent on those making more than $500,000 with the so-called "millionaires’ tax." Several other states, including California, Montana and Vermont, all had higher income tax rates that year, according to data from the Tax Foundation, a business-backed group that studies tax policy.

In 2009, the state’s top income tax rate increased to 10.75 percent on incomes over $1 million.  Even then, Hawaii and Oregon had slightly larger top income tax rates of 11 percent.

The tax expired in 2010. Sweeney became the state Senate president the same year. He has tried twice since then to reinstate the "millionaires’ tax," but Gov. Chris Christie vetoed both measures.

Steve Lonegan, director of the New Jersey chapter of Americans for Prosperity, argued that all taxes, whether they are sales taxes or property taxes, "conspire to be a tax of everyone’s income."

But the ad clearly says New Jersey has the "nation's highest income tax rate," while showing a photo of a New Jersey residential income tax form. So, on that point, the ad is wrong.

But are New Jersey’s income tax rates responsible for job loss?

Lonegan referred to a Tax Foundation study that ranked New Jersey as the worst in the nation for state and local tax burdens. And according to the tax research group, the Garden State ranks number one in that category.

But when it comes to the destruction of jobs, taxes may be one factor, but they aren’t the only factor.

"Everything matters," said Mark Robyn, an economist with the Tax Foundation. "But taxes also matter."

Ronald Alt, senior research associate with the Federation of Tax Administrators, said the argument that increasing the top income tax rates discourages people from taking risks and starting businesses "really overstates the effect of the tax rates. There are a lot of other factors that come into play."

Those factors, according to Alt, include: the level of education in the state, how close the business is to its market and suppliers, who the business is selling to and the overall cost of doing business in the state.

Our ruling

The New Jersey chapter of Americans for Prosperity launched an ad campaign targeting Democratic incumbents running for re-election. One television spot said, "Sweeney gave us the nation's highest income tax rates, driving out jobs."

During Sweeney’s tenure the top income tax rate in New Jersey increased twice. Neither of those tax hikes bumped New Jersey into the top spot in the nation for income taxes  -- and you can’t solely blame Sweeney for either increase. And the ad’s larger point that high incomes tax rates decreased jobs is overstated.

We rate this statement False.

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Our Sources

American for Prosperity New Jersey’s YouTube Channel, Steve Sweeney's Obama-Style Policies, Oct. 24, 2011

American for Prosperity New Jersey’s, Americans for Prosperity Launches Media Blitz Across New Jersey to Educate Citizens on High Tax, Big Spending Records of Trenton Lawmakers, Oct. 25, 2011

Tax Foundation, Major Components of the State Business Tax Climate Index, FY 2011, Oct. 26, 2010

Tax Foundation, State Individual Income Tax Rates, 2000-2011, March 3, 2011

New Jersey Legislature, Assembly Bill 4102, passed June 25, 2009

New Jersey Legislature, Assembly Bill 100, passed June 21, 2004

Interview with Ronald Alt, senior research associate with Federation of Tax Administrators, Oct. 28, 2011

Email interview with Chris Donnelly, spokesman for state Sen. Stephen Sweeney, Oct. 28, 2011

Council on State Taxation, Competitiveness of state and local business taxes on new investment, April 2011

Interview with Steve Lonegan, New Jersey director of Americans for Prosperity, Oct. 28, 2011

The Star-Ledger, N.J. Democrats may not override 'millionaires tax' veto, but could profit politically in 2011 elections, June 20, 2010

The Star-Ledger, N.J. Democrats announce proposed budget, including millionaires' tax, increased aid for schools, seniors, June 23, 2011

Interview with Mark Robyn, economist with the Tax Foundation, Oct. 28, 2011

Tax Foundation, New Jersey, accessed Oct. 28, 2011

The Star-Ledger, N.J. 'millionaire tax' would neither drive rich residents out of state, nor raise tax revenue, April 17, 2011

National Tax Journal, Millionaire Migration and State Taxation of Top Incomes:Evidence From a Natural Experiment, June 2011

New Jersey Legislature, Senator Stephen Sweeney, accessed Oct. 28, 2011

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Conservative group claims Stephen Sweeney gave New Jersey the nation’s highest income tax rates, driving out jobs

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