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garden state blues
Super-rich Flee New Jersey

One billionaire at a time, New Jersey’s tax base is slipping away. The Christian Science Monitor reports:

Billionaire David Tepper is moving from New Jersey to Florida this year — and so is his tax contribution to New Jersey, which is so large the move threatens his former home’s state budget.

… New Jersey’s struggling state budget projections rely on income taxes for 40 percent of revenue, Bloomberg reported. To support this, the state levies the third-highest tax burden in the country, with a marginal income tax rate of almost 9 percent for top earners and an array of estate and inheritance taxes.

We keep hearing that raising taxes won’t harm state economies, but surveys show that people in high-tax states are more likely to want to head for the exits than people in low-tax states. Moreover, the superrich are more mobile than other people. It’s possible that places like Silicon Valley, Hollywood and Manhattan have more leeway to raise taxes and still hold on to their plutocrats, but are the Garden State’s amenities so world-class that billionaires will line up to pay more for the privilege of living there?

The answer to struggling states’ woes isn’t to hike taxes, kill jobs and drive taxpayers away, and it isn’t to slash services to the bone, either. The answer is to make government more efficient: to move from 19th century bureaucratic structures to 21st century digital government, to rationalize pensions and to experiment with innovative forms of service delivery that can do for other government offices what charter schools have done in public education—provide a better, more individualized set of services at a lower cost. But this will require bold and creative thinking, and so far neither party has shown itself to be up to the task.

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  • Andrew Allison

    Providing a better, more individualized set of services at a lower cost means getting rid of tens of thousands of largely useless public employees — good luck with that!

    • DiogenesDespairs

      In NJ’s case – I live in NJ – it also requires breaking the power of the municipal and teachers’ unions. In NJ, the Democratic Party has solid control of the legislature, and the unions have solid control of the Democratic Party through their lavish political spending.

      Then there’s also endemic corruption at all levels – but that’s another story.

  • Kevin
    • f1b0nacc1

      I see we both read Instapundit (grin)

  • Jacksonian_Libertarian

    “The answer is to make government more efficient”

    The Government Monopoly has only one source of change and “potential” improvement, which I call the “New Broom Sweeps Clean Effect”. Only when someone new gets put in charge, and has the drive to make the changes to improve things, and can overcome the hate of any kind of change from subordinates, do things “potentially” improve in a Monopoly. Otherwise all Monopolies including the Government Monopoly suffer from the same disease, the lack of the “Feedback of Competition”. It is the “Feedback of Competition” that provides both the Information and Motivation which forces continuous improvements in Quality, Service, and Price in free markets.

    I say “potentially” because without the information from the “Feedback of Competition”, knowing what is really an improvement is a shot in the dark. Take for example “New Coke”; on paper it looked great, but it was just an expensive disaster that damaged Coke’s brand and cost a fortune. And this was from the Coca-Cola Co. which is only a limited Monopoly due to size and Branding, not a full Monopoly like the Government which would have just gone forward “New Coke” never knowing it was total crap.

    This leads us to the only way that the Government Monopoly can be made more efficient. It must be limited to only those tasks that only a central Government can perform (Defense, Justice, Foreign Relations), and anything that can be done by the private sector, must be done by the private sector. The best rule of thumb here is to use the “Rahn Curve” which shows that an economy’s greatest growth occurs when the “Burden of Government” does not exceed 15% of GDP.

    The Einstein Strategy:

    There is an urban legend that sometime in the 50’s; Albert Einstein was walking the campus quad with some of his science geek groupies, when one of wags present asked “What is the most Powerful Force in the Universe?” too which Albert Einstein, who was intimately familiar with how an atomic bomb goes super critical, instantly replied “Compounding Growth”.

    The rule of 72: describes how long it takes to double something when compounding growth is involved. If the growth rate is 1% per year, then 72/1%= 72 years to double. At a 2% rate 72/2%= 36 years, and at a 10% growth rate 72/10%= 7.2 years for doubling.

    This is the “Most Powerful Force in the Universe”. And the fact that the Burden of the Government Monopoly has grown so large that the economy can’t grow more than about 1%-2% per year, means that children born today will be lucky to see a doubling occur over their entire working lives. It also explains why America rose from a poor agricultural colony to the sole superpower in only a couple of centuries. By this I mean for most of America’s history, the burden of the Government Monopoly was limited by the US Constitution to a fraction of what it has become today. And the American growth rates were maximized, which gained America the “Most Powerful Force in the Universe” compounding growth.

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