Co-authors: Chris Young and Peter Dobbs

Over the past many years, New Jersey has received much media fanfare concerning the number of citizens and corporations fleeing the garden state. Some media outlets have suggested the departure has something to do with baby boomers exiting for warmer climates. In contrast, other articles indicate that the state has too high of taxes. In this article, we do not ascertain the reasons for the exits but rather address the factual aspects. We discuss the number of households that have left the state versus how many households have entered. We also address the value of New Jersey’s taxable income exited versus the taxable income that has entered the state.

As you will see from the data, clearly, we have a problem!  So, let us dig in for a few minutes.   

Lets begin by first analyzing the total amount of taxable income leaving New Jersey. This outflow of taxable income is referred to as “Total Outflow-US and Foreign AGI” below. AGI is the amount of adjusted gross income (aka: taxable income) that a person or company makes. Additionally, we see “Total Inflow-US and Foreign AGI”. The difference between the total outflow and the total inflow is the net loss of taxable income in the state. In Graph 1, below, we show that outflow exceeds the inflow, signaling a decreasing tax base for the state. Also, notice the trend over time, represented by the linear blue and green lines. It becomes noticeable from the graph that from 2012-2018, the value of AGI leaving the state exceeds the value of AGI entering the state, and this unfortunate trend is accelerating.

The net loss in AGI from 2012 to 2018 is roughly $19.1 Billion USD. Also, this $19.1 Billion represents lost spending money that could have supported local businesses throughout COVID. According to an annual study completed by United Van Lines, the mass exodus from New Jersey has been extremely popular. Since 2013 New Jersey has been one of the states with the largest number of outbound household movers. In 2020, for every three households that moved into the state, seven left the state. It is important to note that since 2013 approximately 30% of New Jersey of outbound households left for retirement reasons. Also, in 2020 according to United Van Lines, 49% of outbound movers earned an income of at least $150,000, while only 37% who entered had incomes higher than $150,000. The majority of households exiting the state tend to be middle to older populations, represented by people older than forty-five (45).

In graph 2, below, we provide a view showing where many New Jersey taxpayers are heading. Notice that there is a net outflow of taxable AGI going to Florida, Pennsylvania, California, Virginia, North Carolina, Texas, and Maryland. Also, notice that New York is the only state (of all 50 states) where New Jersey has a net inflow. This is most likely due to city dwellers leaving the city for lower taxes and better family life quality.

Besides California, the other six states' most common attribute is a cheaper cost of living and lower taxes. Two of the most common reasons people move from New Jersey to these other states are retirement and job opportunities. Also, according to WalletHub, New Jersey has the most considerable annual state and local median taxes on a household in the country.

The tangible takeaway from the data included here is simply – New Jersey has, and will most likely continue to see its citizens' exit. This exit is not just in households, but also high-income earners. Should this trend continue, New Jersey will most likely see a rise in taxes, further exacerbating the problem pushing people out of the state. What is the answer to this exit?  We will post answers to these questions in later posts.

Bye for now!