Sunday, July 30, 2006

Will the last one out of Jersey please turn out the lights

From the Star Ledger:

Taxes driving people out of Jersey

Some see it as an exodus. Others call it a mass migration. But it's really a financial flight.

In interviews with dozens of New Jersey residents, financial advisers and estate planning attorneys, one thing becomes apparent: People are being taxed out of New Jersey.

"I've always felt there's a level of taxation where people say, 'Enough is enough,'" said Curtis Dubay, an economist with the Tax Foundation, a Washington, D.C., nonpartisan tax research group. "If any state has pushed the line, it's New Jersey."

According to the foundation's 2006 State Business Tax Climate Index, New Jersey has the third highest tax load in the nation. For 2007, it's probably going to be worse, Dubay said.

"I have little doubt that New Jersey will be the worst ranked state with regard to taxes," he said.

There's no question people are leaving. And, they have been for some time. Internal Revenue Service data shows each of New Jersey's 21 counties suffered a net population loss in 2004, the most recent year data is available. In that year, nearly 100,000 households left the state, taking with them $1 billion in personal income.

They're leaving for more tax-friendly states such as Florida, Nevada and Delaware, IRS data shows. Here are the stories of five families of different financial means who have either left, or might leave, New Jersey.

29 Comments:

Blogger grim said...

Also from the Star Ledger:

How two empty nesters can feather their nest

Olivia and Zack are about to become young empty nesters. Their two kids are just about out of the house, with college paid for. The couple aren't ready to quit work yet, but they're taking a big step towards retirement.

"We are looking to cash out of our New Jersey home this year, re locate out-of-state with the purchase of a home where we will eventually retire, and invest the balance of our home sale proceeds for retirement," says Zack, 45.

The Monmouth County couple, whose names have been changed, have set aside $50,514 in a 401(k), $61,082 in a SIMPLE IRA, $127,000 in a brokerage account, $10,000 in a certificate of deposit and $1,000 in checking.

The Star-Ledger asked Jack Oujo, a certified financial planner and certified public accountant in Wall Township, to help Olivia and Zack review their finances.

"Like so many couples in New Jersey, they are finding it very expensive to live here and want to move and start a new life," says Oujo. "Their No. 1 goal is to buy this new home and ultimately retire in their early 60s."

Their current home is valued at about $600,000, with about $275,000 in mortgages. They want their new home to cost about $350,000, and they hope to take a 15-year mort gage. Oujo says instead of taking on debt, they should pay cash for the home, and they can make up the tax benefit of the mortgage with tax benefits from retirement contributions.

7/30/2006 06:09:00 AM  
Anonymous Anonymous said...

I'd say this couple should get out of their house now and sell it for $500K. That would leave them with around $200K. $200K buys a nice house in NC or SC.

Just don't be the last ones to leave the party, Olivia and Zack.

JM

7/30/2006 06:30:00 AM  
Anonymous Anonymous said...

At the end of the day, I don't much buy "taxes are driving the exodus from NJ" arguement.

Total expenses, not taxes are what drive out most working people.

99 percent of those who leave because of taxes are retirees, and that makes sense. There may be some people who move to PA or Delaware to improve their tax situation, but I would bet even my 1 percent number is high.

The simple fact is, if you have a good job here, you stay. No job, or a bad job, you go.

NJ is expensive all kinds of ways, that's what moves people out.

Lindsey

7/30/2006 07:59:00 AM  
Blogger grim said...

The simple fact is, if you have a good job here, you stay. No job, or a bad job, you go.

Explore what happens on a macro level when this takes place.

By "bad job", I'm going to assume you mean lower wage job. So what happens when the cost of living rises faster than wages? Workers find themselves in a position where they are making lower than subsistence wages. So they leave.

The labor market in that wage range begins to tighten. Employers find it difficult to find workers so they need to raise wages to attract workers. Higher wages reduce profitability.

When it's expensive for workers, it's expensive for companies that employ workers here. When companies are pressured, they will leave too. God knows our state government doesn't have the funds to create programs that entice employers to stay in New Jersey.

grim

7/30/2006 08:12:00 AM  
Blogger Shailesh Gala said...

In today's Print, StarLeger has a listing of all NJ Towns along with their calculated Tax Pain Index. This index is calculated based on Property Tax, Home values & Average income. They then identified towns where the pain is most and least. It is a good list to see.

You can clearly see the not-so good towns leading the pain points (Rochelle, Plainfield, South Bound Brook) etc..., while good towns coming is what is the issue all about (Bedminster etc...).

After reading most of the articles, I came about one conclusion. Though everyone will say the problem, no one will support any solution. As most solution are supposedly Hot-potato from political front. I think the last item that will be considered is sharing services or anything to reduce costs.

I guess now I should concentrate on how to make that $200K a year so that I can afford starter house in NJ !!!

7/30/2006 09:53:00 AM  
Anonymous UnRealtor said...

View the "tax trauma" for your town:

http://www.nj.com/news/propertytaxes/

7/30/2006 10:19:00 AM  
Blogger Richie said...

Their current home is valued at about $600,000, with about $275,000 in mortgages. They want their new home to cost about $350,000, and they hope to take a 15-year mortgage. Oujo says instead of taking on debt, they should pay cash for the home, and they can make up the tax benefit of the mortgage with tax benefits from retirement contributions.

For some reason this doesn't make sense to me. They say their house is 'valued' at $600k in the 2006 market. That means 5 years ago, it was approximately what? $300k? They have $275k in mortgages.

They only paid $25k in principal?

Or am I looking at this wrong?

-Richie

7/30/2006 10:22:00 AM  
Anonymous Anonymous said...

Here's an article that discusses the well-being of Boomers.

http://tinyurl.com/j6r4l

How does no prospect of an inheritance impact NJ Boomers? Do New Jersey residents, Aged 45-60, come out better than other Americans on prospects for an inheritance? If so, why? If not, then how will NJ Boomers make it financially for LONG duration of their lives? Will most of their homes be sold or reverse-mortgaged over the next 20 years?

Pat

7/30/2006 11:44:00 AM  
Anonymous UnRealtor said...

After reading the whole article, the question for those saving a bunch of cash while renting is not "Does it make sense to buy a house?" but instead, "Does it make sense to buy a house in NJ?"

Life is short. The guy who moved to Colorado has the right idea. He can retire 10 years earlier by not getting killed with NJ property taxes.

I've also looked in other states. There are many opportunities out there -- imagine buying the last house you'll ever need (i.e., not a "starter house") for $350K.

We live in a huge, fabulous country. Broaden your horizons a bit, don't be afraid to take a look at other areas of the country.

7/30/2006 11:54:00 AM  
Anonymous Anonymous said...

I agree it's total expenses.
It wasn't only the real estate taxes that pushed me out of NJ but the same yearly salary for the past ten years in the construction field, you have to love open borders, along with the insurances, driving expenses, the never ending coin toss on the Parkway and Turnpike and driving at five MPH for miles at a time and dealing with the antisocial attitude of your fellow citizens.
Put it altogether and you realize it's time to go, sold the house a year ago, retired and moved south. Reminds me of what NJ used to be like forty years ago, interestingly I haven't heard a car horn since I've been here.

7/30/2006 12:05:00 PM  
Blogger chicagofinance said...

This comment has been removed by a blog administrator.

7/30/2006 12:05:00 PM  
Blogger chicagofinance said...

They only paid $25k in principal?
Or am I looking at this wrong?
-Richie
7/30/2006 11:22:19 AM

Oh no Richie, you ARE spot on...

Somehow this financial planner doesn't think that the balance was simply amortized down from the original principle amount.

45 and all their kids out of college? Wow, talk about kids having kids. I wonder if they "outsourced" their child care too? You know, because you know people go nuts having to take care of a 1-year old. Nothing like closing another M&A deal.

7/30/2006 01:05:43 PM

7/30/2006 12:07:00 PM  
Anonymous Anonymous said...

You guys missed the "s" on the word mortgages in that article.

How do you think they paid for college?

Their income is not that high.

Pat

7/30/2006 12:09:00 PM  
Blogger chicagofinance said...

grim said...
When it's expensive for workers, it's expensive for companies that employ workers here. When companies are pressured, they will leave too. God knows our state government doesn't have the funds to create programs that entice employers to stay in New Jersey.
grim
7/30/2006 09:12:12 AM

Long term trend for NJ.......cost structure of an elite part of the country, yet absolutely no allure or opportunity for the next generation of business leaders.

Who is under 30 and intends to come to NJ to put roots down and lead the NJ business economy of the 2015-2020 and beyond?

Who is going to buy the McMansions?

Answer: nobody

7/30/2006 12:15:00 PM  
Anonymous Stan said...

I'm seriously considering leaving New Jersey in the next year. I've been renting in Hoboken for the last few years.

My wife and I are planning on starting a family soon and I can't see doing in in New York or New Jersey. The urban life is just too expensive when you consider a child and school costs. The typical NJ suburban two-hour commuting lifestyle has zero appeal to me.

We'll take a wage hit moving out of state (maybe to S. Cal) but the extra hours per day to spend with our family and the much lower cost of acceptable housing will be worth it.

7/30/2006 12:34:00 PM  
Anonymous Anonymous said...

The simple fact is, if you have a good job here, you stay. No job, or a bad job, you go.

I have a good job. However, if you are just getting started, a good job isn’t enough. While high property taxes are a big headache for people who are established and have owned a home for a while, they are prohibitive for those of us just getting started. How is anyone supposed to tack $1,000 per month in property taxes on to of a mortgage for a $500k starter home? Why put myself through this when I can get a comparable job in another state and actually live like someone who has a good job.

7/30/2006 03:22:00 PM  
Anonymous Anonymous said...

Basically, people are leaving states controlled by the tax raising democratic party and moving to the republican controlled states.

Eventually, the problem is solved as democrats have nobody to tax.

Dems are owned by trial lawyers and unions.

7/30/2006 03:32:00 PM  
Anonymous Anonymous said...

Who is under 30 and intends to come to NJ to put roots down and lead the NJ business economy of the 2015-2020 and beyond?

My company is currently undergoing a merger. As a result, various lines of business will reshuffled among the offices in different parts of the country, including NJ (although, no surprise, NJ will have a net loss of jobs). In talking with people in the other company, some people have already quit rather than move to North NJ. Other have indicated they will quit if asked to move here

7/30/2006 03:37:00 PM  
Anonymous Anonymous said...

P.S.

I found a horse's head in my bed this morning. Stuffed it and had it for Sunday dinner.

7/30/2006 03:40:00 PM  
Anonymous Anonymous said...

Oh..wrong thread.

Pat

7/30/2006 03:46:00 PM  
Blogger Richie said...

The simple fact is, if you have a good job here, you stay. No job, or a bad job, you go.

I think many people are tied down to more then a job.. Family and friends usually keep people in a certain area.. I do have some family that left (years ago), but a large portion of my family is in the area..

If I was single, with a small family, I'd be living elsewhere. But for now, I'll stick to the Garden(less) State...

-Richie

7/30/2006 04:48:00 PM  
Anonymous Anonymous said...

Socialism has never worked. Why NJ is still experimenting with it??

7/30/2006 04:54:00 PM  
Anonymous Anonymous said...

Yee thats funny about the horse head, cause I do know what you are talking about, perhaps you are peeling away at the layers.

If you have a dead horse head in your bed, then look out for what happens next....you may find it under your bed.

I found mine under a motel room's bed one night in Vegas at a casino off the strip, and believe me, it made me shit.

When and if this happens to you like it did me, the next question is...do you call the police?

Ahh yes....it becomes no longer funny...but very serious.

Someone on this blog knows what I mean.

SAS

7/30/2006 06:30:00 PM  
Anonymous Anonymous said...

Richie's point about family and friends is definitely one of the things that doesn't usually come out early, but it is there for lots of people.

Grim, yes, by bad job I meant low pay, and I think there will be a lot of industries here that have to figure out how to make it here paying employees more than they're used to.

Those companies are, of course, limited to those that exist by either serving the other residents of the state or get a great benefit from our geographic location.

As much as people like to bad mouth NJ, the state has a lot going for it, from a people friendly coast line to relatively decent weather that gives people a little of everything.

As crowded as the state is, if you make smart choices, it can work very well for you.

Lindsey

7/30/2006 09:00:00 PM  
Blogger chicagofinance said...

Lindsey:

I really have to disagree with you. I think there are wide swaths of NJ that are utterly useless, and effectively landlocked even though, as the crow flies, the distance is not that far.

While I would describe NJ's weather on the whole as a relatively temperate zone, if you are west of the Watchung/Ramapo/Central Mountain ridge [west of I-287] the amount of rain/snow that gets dumped there is more than just slightly annoying. If you got hit by Floyd, you know what I mean.

If you can drive to the Hudson or Delaware River, or the Ocean within 30 minutes, then the difference is substantial. If you can commute to a job in less than 30 mintues the same. If you can park your car on Friday evening and not have to use it again until Monday morning the same.

JMHO

7/30/2006 10:22:00 PM  
Blogger lindsey said...

Chicagofinance:

What you describe is pretty much what I was thinking of when I wrote that my last post.

I have lived in Monmouth County pretty much my whole life and my current home is about 10 minutes from the beach.

New Jersey has gotten as crowded as it is because of its location. North Jersey has become very dense and plenty of people have voted with their feet, but there are still people who are OK with it or places that still work for them.

I've always been a coastal dweller and I never have figured out what makes people locate further inland, other than following their job.

7/31/2006 03:23:00 PM  
Blogger chicagofinance said...

Lindsey

I started working in Red Bank about 3 years ago, and I was surprised how comfortable this area is. It is far superior to the bulk of NJ. I never though I would have such an opinion, but there is no doubt about it.

7/31/2006 04:22:00 PM  
Blogger chicagofinance said...

also - didn't know this either, but the weather is better in Monmouth/Ocean - warmer in the winter/less snow; cooler in the summer from the ocean [less so in August]

7/31/2006 04:25:00 PM  
Blogger jackoujo said...

In reply to Richie, the "mortgages" included
a second mortgage.

I would like to clear up
any confusion you may have.

What somebody has in a mortgage
balance does not equate to a
purchase price at all. Dont forget
they made a down payment too.

7/31/2006 04:44:00 PM  

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