Are New Jersey residents fleeing the state because of its high taxes? Not necessarily, according to a report issued Monday by Wall Street analysts Moody’s Investors Services.
Migration rates out of New Jersey have in fact fallen below pre-recession levels—along with those of California, Connecticut, Maryland and New York, which make up the states hardest hit by the 2017 $10,000 federal cap on state and local property tax deductions, according to the report.
The highest out-migration rates were registered in Alaska, Delaware and North Dakota, the report found, by no means the highest-taxed states.
“Job opportunities and demographic trends, more so than tax rates, influence relocation from one state to another,” Marcia Van Wagner, a Moody’s vice president-senior credit officer said in a prepared statement. “That said, the $10,000 SALT cap will be widely felt for the first time this tax season, and could spur some out-migration from high-tax states.”
The debate over what role taxes has played in residents staying or leaving New Jersey has fallen largely along party lines. Republicans and pro-business groups in the state argue the high cost of living has been prompting residents to leave New Jersey in droves.
Meanwhile, Democrats and liberal advocates argue that New Jersey has many assets, such as job opportunities in New York City and access to mass transit, that continue to make the state desirable.
But the report suggests that if wealthier residents – many of whom have property tax bills sometimes double the new cap – are slammed come the end of tax season this month, then the state will see a loss of “wealthier residents who take with them a disproportionate share of the tax base.”
“States that are slow-growing such as Connecticut and New Jersey will not be able to offset this with new jobs to attract new residents,” reads the report.
Last week, the nonpartisan Office of Legislative Services – the arm of the state Legislature which puts a price tag on any legislation – spelled out similar predictions that the SALT deduction cap, and by extension the state’s high taxes, would not drive residents out of the state at least in the near future.
“Some of the other behaviors that are predicted, such as out-migration, maybe you will expect to see those over the longer term, but we haven’t seen those in the data today,” David Drescher, a fiscal analyst for the OLS, said at an April 2 Senate budget hearing. “It may come to pass but we haven’t seen anything at this time.”
“Other states that have expressed concern about the SALT deduction, they’re not projected drop-off’s in their revenue,” Drescher added. “It may come to pass but we haven’t seen anything.”
A September report by the policy think tank New Jersey Policy Perspective unveiled a similar analysis: High taxes were not prompting millennials, 18 to 39 years old in the report, to leave New Jersey.
Any migration out of the state was largely stable since 2004, the report found, and was largely on par with population trends experienced by “comparable” states such as New York, Pennsylvania, Massachusetts and Connecticut.