Flee New Jersey, Raise Your Standard of Living
For the benefit of others considering joining the “exodus of businesses, high net worth individuals and working families” from New Jersey (“Jon Corzine Florio,” Review & Outlook, July 1), allow us to personally illustrate the economics.
In 2004 my wife and I (she’s a physician, I’m a management consultant) became two of the 60,000 net departures from New Jersey when we moved to Colorado. Since then our incomes have remained about the same and we live in a home worth 20% more. In contrast, our state income tax rate is 35% less, our property tax burden is 87% less (that’s not a typo!), and because these changes reduce our AMT, our federal income tax rate is 37% lessâand this is all in comparison to pre-Corzine tax rates. In short, we keep more of what we earn and enjoy a higher standard of living. Right now, New Jersey needs higher taxes like the Delaware River needs more water.
Donald D. Gallo
Golden, Colo.
Golden, Colorado – that’s Coors country! I drove through there once. You can’t believe the size of the brewery unless you’ve seen it.
BostonShepherd, I think the argument that our taxes are too high is based in relation to other places like Colorado or North Carolina or where ever. I think that people will move to other places for reasons like taxes, and taxes definitely affect the cost of living in a state. I think that’s absolutely true. But it’s not altogether clear that Massachusetts can compete with other states in terms of taxes. I’ve been to Colorado and it has a lot of wide open space that’s getting rapidly developed. Last summer, I sat on top of Castle Rock, a butte between Denver and Colorado, and saw Douglas County below me, the fastest growing county in the country. Massachusetts simply doesn’t have that supply of open land for suburban growth to spill out into. Nor, I think, do we want to have a growth-inflow based economy, as attractive as it sometimes seems.
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Now, I do think that politicians do need to look at taxes and their affect on the population and small business growth seriously. But I think that we need to view taxes not as a sort of race to the bottom competition with other states, but as a balance between its effect on the economy with the value that government revenue gives us. Ironically, I think that Deval Patrick, the only candidate in the race who isn’t advocating for an income tax rollback, is also the only candidate who seems to have this view of the bigger picture of taxes and services.
I just returned from Wisconsin where I still experience reverse sticker shock. People are leaving places like the East because of cost of living not necessarily taxes (though that does play a role). It is possible in the great state of Wisconsin to buy a BRAND NEW, 3 bedroom, 1.5 bath home on an acre or so of land for $130,000. Now this is in the “metro” area of central WI. It is possible to get it for less in all sorts of places and in areas near Madison and Milwaukee for slightly more. My parents live in a subdivision of new homes, the oldest being about 10 years old…they have no fewer than 6 neighbors from the East. All people in their early thirties, late twenties who sold their extremely small 1-2 bedroom condos for over $200k and bought mansions out in WI with money to spare. We cannot compete with that. We elminate all taxes and give each person $1,000 and still not compete because we don’t have the land. Milk costs $1.75 a gallon there. EVERYTHING is cheaper. Shep keeps putting up posts like this and I really can’t ever figure out his point. All he wants is a some more loose change in his pocket via lower taxes. He really isn’t interested in making Mass better. People who push lower taxes aren’t interested in anything more than their own well being.
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What Mass does offer that Wi never will is “ed and meds” and that is why we should focus on what differentiates us and makes living here worthwhile. We also offer a landscape and geography that no one else can. Each state is different and it should sell those difference. A race to the bottom in terms of taxes leaves only the richest well off.
Wages are lower in places like Colorado & Wisconsin. Let’s not be too quick to copy those states.
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Massachusetts has a great quality of life, and part of that reason is that the people of Massachusetts were, historically, ahead of the curve on getting government to invest in public education, transportation, health, etc. The problem we’ve had lately is that our investment has not been watched carefully by the people who are supposed to watch it.
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Deval is the candidate who understands how important our public investments are, and he can restore the public trust in watching over how our money is spent.
Cost of living is cheap in Florida–because life is cheap.
Somehow I suspect not a lot of basketball fans on BMG, but indulge an NBA analogy: whenever a team does well, fans say “Why can’t we be like that?”
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For the past 10 years, the NBA has been dominated by the Spurs and Lakers-now-Heat, each with incredible 7 footer (Tim Duncan and Shaq).
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Therefore, a sucky team like the Celts would then say “Geez, we need a great 7 footer, too.” Problem: there weren’t any. So instead, the Celts got 7 footers who got PAID like Duncan and Shaq, but on the court, they totally sucked – first Vin Baker, then Raef Lafrentz.
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Other teams built around THEIR “natural” strengths: the Suns became super-quick under Steve Nash; the Pistons developed a defensive, blue-collar identity with 5 guys sharing the load.
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You are what you are. You got to play the hand you’re dealt. Insert additional banality here.
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Yes, MA should lower its taxes, because we waste tons and tons and tons of dough. I agree with Shep there.
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However, I agree with the commenters that a modest decrease in tax load will NOT much change MA’s economic development strategy: housing prices in particular will be huge as far as they eye can see.
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MA’s competitive advantage is “eds and meds.” That’s the hand we’ve been dealt. The most plausible revenue growth strategy is to do what it takes to get biotech firms to build their MANUFACTURING here, not just their R&D.
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Shep, not sure if you’re a Jack Welch fan, but he always said “If you can’t be #1 or #2, get out of that business.” We can’t be #1 in cost of living. We can be #1 in eds and meds.
This is a “because” that doesn’t work for me. If we’re wasting money, let’s stop! Taxe rates have nothing to do with it. Let’s use the money to fund the needs of UMass or some other worthwhile public enterprise.
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May I remind posters of the “reality-based” persuasion that the phrase “tax burden” is a right-wing frame that has no place in a discussion like this. Taxes are not a burden, but the vehicle we use to fund the things we choose to have our government do. Let’s figure out what we want those things to be and how much they’re worth to us, and that tells us how much revenue we need. All this talk about what taxe rates “should” or should not be is time wasted in not addressing the problems which confront us, imho.
When something shows up on the expense side of the ledger, it is a burden. My mortgage payment is a burden, and so are taxes. IMO, so long as self-styled “progressives” view taxes as income, rather than an expense (as everyone who votes does), they will remain the minority party, and a potentially marginal one at that.
This is all progressive thinking in a vacuum. Sure, states with lower taxes, fewer regulations and lower costs of living grow more and attract jobs.
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Iâm not advocating âa race to the bottomâ by slashing taxes to Mississippi levels, but we need to compete other states, not head-to-head, but in value. There are markets for $12,000 Toyotas, and $75,000 Mercedes.
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Massachusetts is becoming a $30,000 Chevy. Weâre losing our competitiveness. In an economic world measured on relative value, weâre slipping badly. Our net population loss reflects this.
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Eds and meds are NOT “the hand we’ve been dealt,” it’s what we ended up with because of 2 or three decades of politically progressive political and economic thinking and it’s attendant legislation and regulation.
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Harvard and MIT aren’t moving, but their graduates certainly do.
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And donât be so certain about meds sticking around either. 20 years ago, I recall 128 and 495 being cheek-by-jowl with computer hardware and software companies. We were one of 2 epicenters of high-tech. Now we’re not. I know the industry changed a lot, but one would think weâd have retained the people talent and when the industry revived, so should have high-tech employment here. Instead, how many jobs are we down from the industryâs peak? 50,000? 100,000? They must have gone somewhere.
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So, how long before most of the private sector pharmaceutical talent drains off to Research Triangle, or Austin, or some other region of the country?
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We have the 6th highest combined tax burden in the US â 33.4%. This is the ratio of local, state and federal taxes divided by our income (all per capita.) New Hampshire is 41st. FL is 21st, NC is 28nd , and TX 34th. Even CA beats us: 9th.
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Taxes matter. A lot.
but you really haven’t made a point. Where is your proof that there is a direct correlation between high taxes and being a “good state?” I don’t see it. You point out our tax burden regularly yet there are states with higher burdens doing better. How does that work in your argument’s favor? Doesn’t it contradict much of what you are saying? Also, what is your suggestion. If taxes matter a lot then it would make logical sense that a state with zero tax rate would be the best wouldn’t it? My point is that singling out taxes as the magic bullet is just lazy. There are so many factors that are not connected to taxes. Like I said, a gallon of milk and loaf of bread are a lot cheaper in Wisconsin, where by the way the sales tax is higher. How do we compete with that? Insurance is cheaper in Wisconsin. Do our taxes have anything to do with that? Day care is cheaper. EVERYTHING is cheaper. Do you see the pattern? You tax argument is woefully short sighted. You speak of a progressive vacuum perhaps you need to step out of the conservative bubble and put your thinking cap on because the one hit wonders that the conservatives offer up like “low taxes” are worn out.
Where are your brillant ideas, Andy? Raising taxes?
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Let’s recap my ideas. I can’t find my earlier post to give you a link, but here’s my previous short list of suggestions to promote housing production:
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Here are some other housing and construction related ideas not posted:
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Do these things and youâll increase housing production, drastically lower school construction costs, and create thousands of construction jobs.
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Do these things and today I could deliver to towns which wanted one a brand new middle- or high-school at 40% of what they’re paying for it now. I took a set of plans for a state-of-the-art high school from a NC school system and had them estimated in MA and NH. The actual project NC costs, excluding land but including all the other soft costs (fees, interest, etc.) were 50% less than the MA estimate so I’m being generous.
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Sure, labor is less in NC. But that’s only part of the cost difference. The rest is the RIDICULOUS impediments one encounters when building a school, all regulatory. This thanks to decades of progressive legislation, layer after layer. Romney tried to reform some of these things, and failed. Good luck to a Democrat.
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The same factors increase the cost of our housing 30% to 40%, before accounting for the very expensive land. The regs add these costs to every home and condo.
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These laws increase the costs for every private and public real estate project. In the school construction area alone, the saving could be $250 million annually. Maybe $500 million. That’s not including every municipal sidewalk, handicap ramp, parking garage, and, yes, the Big Dig.
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Annually we’re talking about hundreds and hundreds of millions of dollars pissed away because of your cherished public sector, a public sector which, by the way, increases the cost of milk 50% over the price a Wisconsin producer could deliver to stores in MA.
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And you wonder about our high cost of living. Damn those high-cost-of-living fairies!
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Of course I harp on taxes. It’s one of the only tangible actions a governor can take. Correcting the rest of the mess is going to decades. If ever.
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We can’t even get rid of 1930’s dairy price supports.
it’s housing costs.
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That’s the thing we need to work on. More housing development for people with middle-class incomes (instead of luxury condos), and people will move back here for the culture, the schools, the quality of life.
Even if we push hard to build middle class housing, what’s a plausible best case? Massive new building might yield, what, a 10% drop in prices on top of whatever shakeout happens now from the rising interest rates?
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People leave MA and find a 50% discount on housing prices in other areas.
Brilliant! Can you give us some ideas?
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See mine above.
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Well, Novartis just moved here. Bristol Meyers just announced in Devens. Genzyme is building in Waltham, Allston, and Framingham. Bayer is building in Walpole. The trend is the opposite of what you suggest.
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It’s not just MIT, Harvard; it’s Mass General, Brigham, Beth Israel, et al., plus the VC world. We’re going to keep the R&D. The challenge is getting the manufacturing, too. That’s what gets moved to NC and even CA – but not b/c of taxes, because of land costs and zoning ease.
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2. I followed your link.
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a. MA is NUMBER 28 of 50 states – middle of the pack – in “state and local tax burden.”
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b. The number you cite – #6 – is only if you ADD IN FEDERAL TAXES. That’s because have many high income earners.
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c. It seems disingenuous to focus on the latter. We obviously can’t change the federal amounts with state politics. So let’s say you became Gov and slashed state income taxes to 4% from 5.3%. Our “state and local rank” would fall from 28 to perhaps 35, but we’d barely budge on the state-local-federal list, perhaps from #6 to #10.
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How would that generate many new jobs? It just seems wildly implausible that you’d have more than marginal effect.
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3. The question is: what policy would create more jobs in MA?
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Your view: cut state taxes. Turn your $30,000 Chevy into a $28,000 Chevy.
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My view: focus on our only expanding industry where we can play ball. We’ll still have the $30,000 Chevys – jobs at Raytheon and Gillette which will rust – but we’ll also have at least some new $40,000 BMWs.
(1) Novartis’s move — 400 people — is a success. Bristol Meyers less so as they already had an operation there and were contemplating consolidation elsewhere. It’s a distribution facility by the way … not a research facility. Can’t speak to Genzyme. Can you cite details? I know they have a large facility in Boston/Cambridge, how much more are they expanding. Bayer is a success too, although it’s an investment in an existing manufacturing facility, adding only 70 jobs. Still good news.
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Don’t get me wrong, these are wins. But they are not enough.
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(2) You’re looking at the wrong table…the 7th place cite was state and local property taxes.
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But getting back to your income tax burden complaint. OF COURSE one looks at the combined fed+state+local number because it’s all relative to income. That’s what the tax burden number means. So not only do our higher salaries and wages here have to pay for the higher cost of living, it’s taxed at a higher rate! If the differential is high enough, you actually end up with less disposable income despite the higher gross.
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Rhode Island understands this. They recently reduced their top marginal rate from 9.9% to 5.5%. Why? “Our high tax rates make us uncompetitive,” says Democratic House Speaker William Murphy. “Business leaders with incomes of more than $250,000 look at Massachusetts and see a 5.3% income tax, Connecticut with a 5% tax, and Rhode Island with a 9.9% tax. They make a choice on where to move and create jobs, and that difference in tax rates is a big factor in where they go.”
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Tax cuts don’t create jobs. But differential tax rates matter. Specific types of taxes matter, too. High income taxes discourage high earners from entrepreneuring, working and staying here. Want jobs? Keep these people here.
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Rhode Island Democrats get it. Why don’t you?
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(3) Goldstein, you should hear yourself: “focus on our only expanding industry where we can play ball.” That’s it? Just one area of opportunity? That’s a disgraceful attitude. Please don’t enter politics.
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You stated our successes in biotech. I applaud those. We added maybe 700 jobs from your citations. Yet Fidelity moves 900 jobs to Rhode Island, to their new campus there. Those 900 jobs occupy around 200,000 or 250,000 square feet of space. Their campus has a 1,000,000 sf build out. I’d be worried.
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It’s all about competitiveness. If MA, because of income, property, sales and business taxes, doesn’t remain competitive in attracting labor, fewer biotech jobs will be created or relocated here. And it isn’t just other states that compete for biotech either. We have to worry about jobs going offshore, too.
But you avoided every single issue I raised. Perhaps they are too inconvenient for you? You cannot answer this fundamental question: if it is all about taxes why don’t you propose zero taxes? Based on your logic that state or states that have no taxes would get all the business. That isn’t the case tough. Also, there are states with higher tax rates than us that are “doing better.” How do you explain this?
why don’t you propose a 100% tax?
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Nobody (here, at least) suggested abolishing the income tax (a position that garnered a surprising amount of support just a few years ago. Shepherd just wrote that the tax burden here is relatively high, and that, all other things being equal, it ought not be shocking that business gravitate to places where that is not the case.
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You have pointed out that all other things are not equal, due to our marvelous and well-maintained infrastructure (ha!), and out plentitude of private universities that stimulate development of new technologies, such as the pharmaceutical and biotech industries you cite.
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The problem is that we have had great new technologies centered in Massachusetts before–see “Miracle Mile, Rte 128, circa 1986– that have, in a very short period of time, evaporated like a puddle on a hot day. Why do you suppose that happened?
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We have great people! isn’t a good regional economic strategy if the best and brightest of those people choose to live and work elsewhere.
It’s based on per capita taxes even though we all know that our salaries are higher in Massachusetts than in Texas or Mississippi. That’s why the percentage tables are a better description of how much take-home money we’re getting.
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Of course, if you wanted a tax burden chart that made sense, you’d need to combine several numbers for each state:
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1) find per capita income
2) subtract standard cost of living per capita
3) Take that number and divide into the tax burden per capita.
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If our taxes end up being a smaller percentage of discretionary income than other states, then the tax burden isn’t bad. If it’s higher, we’d have to figure out whether our tax burden would be changed substantially by actually changing our taxes or whether that tax burden is actually created by the lack of discretionary income due to high costs of housing, perishable goods, and utilities.
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Without crunching the numbers, I’m still betting that any realistic tax burden that we have is a combination of high salaries and high standard of living. But simply saying that we pay $X per person in taxes and stating that this proves a high tax burden is fundamentally misunderstanding what tax burden is. If the argument is that we should be using intellectually flawed numbers aimed at the numerically illiterate, I suppose this makes sense. But honestly, I’ve seen several comments and posts from you now that talk about MA’s tax burden without saying what needs to be cut and how that would substantially change MA’s tax burden and attractiveness. Our state tax rates are pretty average from a national standpoint and our state and local taxes per capita look lower than almost every other state at a similar income level.
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Simply lowering the tax rates isn’t going to change much in MA. Our problem is more fundamental: prices are over-inflated for the employees that we’re trying to keep. Though I’m not a huge Greenspan fan, his usually-vigilant stance against inflation was important in steering the economy on a national level. Because the state lacks that level of control over money supply and prices, it’s going to be tougher to bring those prices back under control without causing an economy-crippling deflation. I like lower taxes as much, if not more, than the average person, but I’m honestly not sure what lower taxes bring to the table without focused economic and zoning policies to make Massachusetts affordable because the taxes aren’t the problem or the solution.
Your number (2), standard cost of living, is a tough nut to crack. Should we be considering the self sufficiency standard? I would be willing to crunch the numbers for you if I knew the correct numbers to crunch. I can fake it by using the above link as a benchmark for MA and then ‘correcting’ it for the other states with a cost-of-living index table (like this one).
I totally agree that any measure that’s supposed to measure housing, utilities, and other living expenses is always problematic. I would prefer a self-sufficiency standard as a basis for minimum wage, but I think that living expenses on a practical basis might fall below that standard. But I do think the self-sufficiency standard is far superior to the federal poverty standard.
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The approach you mention sounds good to me and would be a more honest look at what our taxes might be. They might be 1st in the nation or last, but it’s hard to tell between the political issues of taxes and the nickname of “Taxachusetts.”
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Personally, I feel like the local/state tax burden here is comparable to when I lived in Tennessee. Tennessee has lower taxes overall, but the income is lower and the majority of taxes come from the 9.25% sales tax, which is much more regressive than Massachusetts’ tax structure.
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2. You’re one of the most interesting posters on this site, but you also have a tendency to dismiss anyone who disagrees with you by either ignoring or mischaracterizing their point.
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For example, when someone suggested that modest tax cut proposals won’t create many jobs, you rhetorically suggest “Why not tax rates of 100%”? Well, the same could easily be applied to your view: why not cut tax rates to 0% and have no government income and infinite jobs?
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3. You misunderstood or mischaracterized my point on biotech. I wrote that there is just one area where MA has a *natural competitive advantage” and is “expanding.” That’s biotech. Name another sector that fits both criteria.
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We don’t, by contrast, have much of a natural competitive advantage for backoffice financial work, as in Fidelity. Nor is financial services in MA expanding.
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Biotech is the only area where the wind is at our backs – the only question is whether MA will have small gains or big gains in jobs. Fight for the other jobs, yes, but those fights will only reduce our losses.
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I used the word “focus.” That doesn’t mean “exclude everything else.” It means that we have limited funds and political capital; a Biotech Czar in the Gov’s office, for example, would generate more jobs than a “Jobs Czar.”
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The biotech lobbyists think that we could generate 100,000 new MA jobs. Let’s temper their enthusiasm by halving it: 50,000 new jobs if we play our cards right. Or maybe 10,000 with status quo.
Here’s the picture of ‘Total Democratic control’ in NJ:
NJ State Senate 22(D) to 18(R) {pretty close call here}
NJ State General Assembly 49(D) to 31(R) {this looks better}
They’re just scared incumbents that don’t want to lose their jobs. They are worried if they vote to increase the regressive sales tax rate, it might be held against them in the next election.
(link to the NJ roster)
And isn’t it nice that the Colorado couple’s income has ‘remained about the same’. That doesn’t smell like reality to me.
Education? Because Massachusetts is first in Math and English.
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Where does it rate on safety? Last time I looked, there were no gangs running around the streets and my house (cross my fingers) has never been broken into.
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What about something as mundane as happiness? Massachusetts has the lowest divorce rates, sounds pretty happy to me.
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My point: You’ve got to spend money to make money and cutting taxes to have low taxes pretty much only makes sense to married couples who don’t want children.
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We’re about to gaurantee healthcare for all, we have excellent educational systems and our quality of life is pretty damn good. Are there problems to solve? Sure, but cutting taxes isn’t going to fix them.
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PS: Massachusetts is actually around the middle in total state taxes around the country. While our property taxes are high, our income tax is in the middle and our sales tax is low.
I have to call Shepard on his dishonesty and circumventing tactics. It doesn’t sound good to say Massachusetts is in the middle in terms of state income taxes, so he adds in federal taxes! You know, the thing Massachusetts can’t control at the state level! Then Massachusetts ranks high… but that means because we earn more than most other states. Well, um… Boston Shepard Guy… doesn’t that refute just about everything you’ve writtin in your entire blog? Because that means we make vast quanities more than most of the rest of the country, which accounts for our higher federal tax burdens.
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So, to recap: BostonShep is a Lying Liar who is abusing statistics with all his mental prowess, but I highly doubt many people have bought it. Why? Because we all know the truth: Massachusetts is around the middle when it comes to state taxes… and isn’t that a good position to be in? Not far left or right? Methinks so.
i’m not familiar with that term.
Lies and the Lying Liars Who Tell Them.
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I never actually read the book, but I love the phrase “lying liars.” I get hard-ons for alliteration.