The departure of one New Jersey resident to Florida has gotten so much attention that lawmakers are calling for changing the state’s tax structure, and a key legislative forecaster is raising concerns over revenue uncertainty.
The spotlight turned to hedge fund manager David Tepper this week, when legislative budget forecaster Frank Haines cited the billionaire’s move to Florida as a potential factor in how much income tax revenue the state brings in. Income tax revenues make up the biggest share of cash in state coffers, and a shift in projections of as little as 1 percent amounts to about $100 million, forecasters say.
It’s unclear how much effect Tepper’s departure could have, because his tax returns haven’t been made public and it’s unknown how much taxes affected his move. Tepper didn’t return messages seeking comment.
But his move has caught the attention of the usually headline-shy legislative budget office.
“If a very wealthy individual – potentially a significant taxpayer to the state – relocates and relocates not only as we’ve been reading about it but really relocates for tax purposes … beyond our reach, then that’s something to be aware of,” said Haines, the legislative and budget finance officer.
Tepper’s move spurred Assembly Republican Leader Jon Bramnick to call for an overhaul of the state’s tax system.
“New Jersey can’t afford to keep losing taxpayers and businesses,” Bramnick said.
New Jersey has the lowest estate exemption level in the country at $675,000, affecting about 3,500 residents in 2014. New Jersey is one of only two states to levy both an estate and inheritance tax, and has a top income tax rate of 8.97 percent.
New Jersey’s high tax burden – the state also has the highest property taxes in the country – is regular fodder for Democratic and Republican officials. The prospects for lowering rates are uncertain, with Republican Gov. Chris Christie and the Democrat-led Legislature locked in a debate over how to rescue Atlantic City, and fiercely divided over tax policy. Christie has twice vetoed Democratic proposals to raise taxes on the wealthiest residents.
But Tepper’s departure also comes as Christie pushes for ending the estate tax and as the state Senate advances a plan to phase it out.
It also comes amid a debate over how big a role the state’s tax structure plays in people leaving, with Republicans arguing it’s a major factor and many Democrats saying it’s a blip.
New Jersey’s annual Statistics of Income survey, compiled by the treasury, shows the number of tax filers with income over $1 million has gone up by an average of about 6.3 percent from 1997 to 2012, the most recent year for which data is available, while the number of filers with income below $50,000 has fallen by an average of 2.14 percent over the same time period.
Tepper, whom Forbes valued in 2015 at $10.4 billion and ranked that year as New Jersey’s richest resident, moved his residence and firm Appaloosa Management from New Jersey to Florida, where there is no income or estate tax. The news was first reported by Bloomberg.