Making New Jersey Competitive Again: Putting the Garden State back on the road to growth

7/29/2019 Making New Jersey Competitive Again: Putting the Garden State back on the road to growth

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MAKING NEW JERSEYCOMPETITIVE AGAIN

Putting the Garden Stateback on the road to growth


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Ranked 44th out of all 50

states in private sector job

growth last year?

Has lagged behind 46 other

states in terms of economicgrowth for the last decade?

Lost almost 170,000 private

sector jobs during that same

period?

Has one of the highest

property tax rates in

America and some of

the highest income and

corporate tax rates as well?

DID YOU KNOW THATNEW JERSEY...?

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New Jerseyans are on the move.

For decades, United Van Linesone of Americas oldest

and largest moving companieshas tracked state-by-statemigration.

New Jersey has been what they call an outbound state since1997. That means that for the past sixteen years, more peoplehave been moving out of New Jersey than moving in, taking

theirhumanandnancialcapitalwiththem.

According to United Van Lines, for every one customerthey help to move into New Jersey, almost two are headingout at the same time. In fact, New Jersey is listed as the #1outbound state for two of the past three years.

NJ: THAT WAS THEN,THIS IS NOW

Remember when we had prouder accomplishments to boastabout?

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WHAT WENT

WRONG?New Jersey earned its nickname, the Garden State, thanks to

a climate and soil that made it one of Americas agriculturalsweet spots.

At the same time, its proximity to the Atlantic Ocean and majornortheastern cities like New York, Philadelphia, and Bostonalong with its numerous harbors and iron minesmade New

Jersey a major center of the Industrial Revolution.

Thomas Edison developed over 1,000 patented inventions athis Menlo Park lab. Princeton University in Mercer County haslong been one of the most prestigious colleges in the world.

Famous Fortune 500 companies like Campbells Soup chose toset up their headquarters in New Jersey, with our capital cityboasting, Trenton MakesThe World Takes.

Few states have been blessed with this kind of geographical

and industrial diversity, and for over two hundred years, New

Jersey made the most of it, enjoying high levels of prosperity.

That is, until fairly recently.

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Take just one example:

In 2012, the Mayor of Nutley, New Jersey was stunned tolearn that his towns biggest employer, Hoffmann-La Roche,

was closing down its plant and moving most of its operationsoverseas.

The loss of 1,000 jobs was especially shocking because,as Mayor Petracco noted, Nutley had been home to thepharmaceuticals giant since the early 1900s.

Those 1,000 jobs are just the beginning. Small businessesrelied on those workers for their livelihoods. From restaurants,

to dry cleaners, to the local mom and pop shops, the loss ofthese workers will be felt by everyone in the community.

However, the story of Hoffmann-La Roche has been repeatedagain and again in New Jerseys recent past, when shakeups

atothermajorpharmaceuticalcompanies,PzerandMerck,left thousands without work, or forced them to relocate out ofstate.

In fact, in almost every major sector, long time New Jerseyemployers are padlocking their doors,leavingcitizens

unemployed, putting smaller local businesses in jeopardy and

placing increased pressure on the states shrinking tax base.

Why is this happening now?

Lets look at four universally acknowledged measurements of

economic growth and well-beingGDP, population growth,jobs and wages, and tax ratesand see how New Jersey stacksup.

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GDPA states gross domestic product, or GDP,represents the total market value of all thegoods and services it produces.

Believe it or not, Americas GDP actuallyincreased16.78% from 2000 to 2011, whichwas hardly a boom decade in economicterms.

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In contrast, NewJerseys economygrew at less than halfthat rate during thesame period, placingus 47th out of 50states in terms of realGDP growth.

216.8%vs.

8.2%

r

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POPULATIONGROWTH

From the gold rush to the Great Migration, America was built bymen and women willing to uproot their families and build betterlives in unfamiliar, far away places.

Whatever the reason for the initial boom, a states populationonly remains stable when it fosters a healthy business climate

thats friendly to entrepreneurs, workers, and their families.

However, even places like New Jersey, blessed with abundant

resources, great locations and talented, educated populations,cant resist the temptation to sabotage their success through

government tax-and-spend policies and over-regulation.Its telling that, between 2000 and 2011, New Jerseyspopulation only grew by half the national average.

As we noted earlier, more people are now leaving New Jerseythan moving in.

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TAX RATESPrior to 1963, New Jersey had no sales or personal income tax,and the states level of prosperity and standard of living washigh.

Today, however, our state has some of the highest taxesstateand local, corporate, individual, and property taxesin the

whole country. For example, in 2009, New Jersey residents paidthe highest property taxes in America.

Its true that New Jerseys neighbors have high taxes, too.However, the Garden State is the only one with high taxes in all

four categories.

Between 2000 and 2010, the ten states with the lowest taxesexperienced:

135% faster personal income growth

445% more new jobs

152% faster overall economic growth

299% faster population growth

New Jerseys growth, on the other hand, did not keep pace withits peers over the same time period, and shows few signs ofreversal any time soon.

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SOURCE: TAX FOUNDATION

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TAX RATES

High taxes are frequently cited by former New Jersey residentswhen asked why they moved out of state.

We are seeing a lot of people of retirement age moving toDelaware because it is close to their families in New Jersey andthey can take advantage of property taxes going from $8,000

to $12,000 a year down to $1,200, said the president of aBurlington Township transportation company.

A retired New Jersey Coast Guard captain who relocated toFlorida told the Courier-Post

1that he paid $9,000 in property

taxes back in Gloucester Township, but now pays only $3,000.

Businessman Steve Wisely moved his business to Coloradoearlier this year.

I just wanted to get out of the state of New Jersey, heexplained, because taxes are a big thing.

With our current tax rates, this migration pattern out of NewJersey will continue, draining whats left of the states already

shrinking tax base and leaving fewer customers for any localbusinesses that manage to keep their doors open.

1. Comegno, Carol. EXODUS: Residents are leaving New Jersey at a higher ratethan any other state, study says. Courier-Post10 Feb. 2013. Web. 10 Feb. 2013.

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TAX RATESPer capita property taxes in New Jersey are high, the highestin the nation, in fact, but when we look at actual property tax

payments, it gets even worse.

In terms of the median tax payment for owner-occupied

housing,wendthatthe typical New Jersey homeowner pays

3.4 times more in property taxes each year than the typicalhomeowner in America.

NewJerseyistaxingfartoomanyofitscitizensoutofthe

American Dream, but people arent simply taking it lying down

anymore.Theyrevotingwiththeirfeet,eeingtostateswith

lower property tax burdens.

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2009 (most recent data available) 2$1,917

vs.

$6,579

r2009 DATA (LATEST AVAILABLE)

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2009 (most recent data available)


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TAX RATESAND FREE

LUNCHESEconomist Milton Friedman often noted that there is no suchthing as a free lunch.

Indeed,whenitcomestounemploymentinsurancebenets,

someone has to pay for the 73 weeks of checks unemployed

people in New Jersey receive.

In this case, New Jersey job creators are paying more in taxesto fund payments, for 18 more weeks than the national average,to those who arent working.

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The state and local tax burden in New Jersey, at 12.4% and

climbing, is nearly a third higher than the national average of9.5%.

Relative to the tax burdens in other states, New Jersey has beenamong a handful of high tax states since 1977 (the earliest yearfor which the Tax Foundation has available data). But over the

past decade, New Jerseys state and local tax burden has risen

dramatically,whilethenationalaveragestayedat.

Today, New Jerseys state and local tax burden is the secondhighest in the United States, and while many states are busyenacting tax relief to gain a competitive advantage in the

competition for jobs and capital, New Jersey is now a true hightax outlier.

Its good to be known for something, but being known as thathigh tax state is not a good way to attract talent, jobs, orinvestment.

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Werefrom thegovernment,and werehere to helpyou.While those four factorsGDP,population growth, jobs & unions,and tax ratesplay a vital role in any

regions economic health, the fact is,government interference almost alwayshas a negative impact.

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GOVERNMENTSPENDING

Lasting prosperity is fueled by two vital ingredients: the rule oflaw and private property.

When people are free to make decisions about their ownprivate property while enjoying safe, secure lives under a fair,consistent set of rules, prosperity results.

Contrary to popular belief, government does not driveprosperity.

True,governmentsprovidepoliceservicesandreprotection

(which help maintain that all-important rule of law), but

remember: every dollar a government spends is one that cannotbe freely spent by an individual or a business.

When governments deviate from their necessary functions, theymisallocate resources and destroy jobs the free market wouldotherwise create.

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From 1960 to today, New Jerseys state government spendingincreased by 1,221%,adjustedforination.Atthesametime,

state government debt increased by 804%.

Hasnt our population increased during that time? Yes, but only

by 45%.

In other words, government spending has grown 27 timesmore than the populationitself, and as weve already pointed

out, New Jerseys population is shrinking. Why isnt spendingslowing down, too?

New Jersey state and local government spending was $102.6billion in 2010 alone, with combined debts of $98 billion.

Thats $11,667 per resident to fund our state and localgovernmentspending,thefthhighestinthenation.

And those residents lose up to 42% of their earnings to federaland state income taxes each year, while New Jersey businesses

lose up to 44%.

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GROWTH

SINCE1960O

POPULATIONvs.

GOVERNMENT SPENDINGx27

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UNFUNDEDLIABILITIESNearlyoneoutofeveryveNewJerseyresidentsworksforthe

government. Thats one of the largest public-sector workforcesin America.

We hear a lot from politicians about job creation, but not alljobs are created equal. Unlike private sector jobs, governmentjobs are funded by taxes.

That means that every new government job represents moneythat could have been saved, spent, or invested in the privatesector, fueling free enterprises engine of prosperity.

Worse, New Jerseys massive workforce and out-of-controlspending has led to tremendous levels of debt that the state

cannot afford. Sadly, the debt level dont tell the full storyeither.

According to the Mercatus Center at George Mason University,New Jersey has promised its retirees billions in retirementbenets,buthasfailedtofundthosepromises.NewJerseysunfunded pension liabilities total $52 billion, but thats not thewhole story. The true value of the unfunded liabilities is really$187 billion, when proper valuation techniques are used. If weaddinthevalueofotherpromises,likehealthcarebenets,thenumber skyrockets to $254 billion.

Thats more than $59,000 per household in New Jersey.

Our states teachers, public safety workers, and civil servantsdeservedecentsalariesandbenets.Theharshtruthis,however, that theyve been promised unrealistic retirementpackages.

NewJerseysprivate-sectoremployeesarenancingpublicsector pensions and health plans that are far more generousthan their own.

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OFFICIALLY REPORTEDUNFUNDED LIABILITIES

$52 BILLIONTRUE TOTAL

$254 BILLIONr

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2012 DATA


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EDUCATIONIN NEW JERSEYIn the decade ending in 2009, enrollment in New Jerseys

elementary and secondary schools increased 8.3%

However, education spending went up 37.5%totaling $25.6

billion.

Thatmeansspendinggrewalmostvetimesfasterthanstudent

enrollment.

Does any parent in the Garden State honestly feel they are

getting their moneys worth?

One major cause of these runaway costs is the New Jersey

Education Associations legal monopoly on collectivebargaining, which ensures that not just teachers, but also thearmy of non-teaching staff and administrators, receive overly

generouspayandbenets.

However, their pay isnt tied to their performance, or more

importantly, our childrens.

Even worse: between 1992 and 2009, New Jerseys non-

teaching staff grew 40% faster than student enrollment growth.The startling growth of these highly paid non-teaching educratsin New Jersey public schools diverts resources away from our

states classrooms and prevents our children from reaching

their potential.

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Americas public school system, were told, promotes fairnessand equal opportunity.

In reality, however, students are trapped in failing schools

withnochancetoexcel,simplybecauseoftheirzipcode.The

poorest children are receiving the worst education. This is thecivil rights issue of this generation.

School choice, such as charter schools, would give parents morecontrol over how their educational dollars are spent. Increasedcompetition in the educational sector would ultimately raise

standards and increase achievement levels statewide.

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ENERGY

PRICESLike other states in the Northeast, New Jersey has some of thehighest energy prices in the country. Unfortunately, a large

part of these skyrocketing costs can be attributed to our stategovernment.

Instead of allowing the free enterprise system to drive pricesdowntoamutuallybenecialrateforbuyersandsellers,our

state government has meddled in the energy market, spending

millions of taxpayer dollars on expensive green energyprojects and burdening energy companies with uncompetitiveregulations.

Forexample,NewJerseyauthorizeda$100millionsubsidy

for an offshore wind project in 2010. The U.S. Environmental

Protection Agency reports that wind power is ve times moreexpensive than natural gas. In fact, according to the federalgovernments own Energy Information Administration (EIA),

offshore wind ranks as the second most expensive method ofgenerating electricity in the world.

NEW JERSEYHAS SOME OF THE

HIGHESTENERGY PRICES

IN THE COUNTRY.27

Inotherwords,betweenincreasingourstatesdecitandtheaveragecitizenselectricitybill,thetruecostofthatsingle

subsidy is far more than $100 million.

New Jersey is slated to waste $339 million on similar riskygreen energy boondoggles in 2013 alone. A review of a

proposal to implement NJs offshore wind scheme indicatedthat it would be the most expensive offshore wind power inthe world.

The state also requires utility companies to provide 22.5% oftheir electricity from renewable sources like wind and solar by

2021. These unrealistic demands will increase every consumersmonthly bills while funneling guaranteed cash to trendy,politically connected industries, regardless of their technologys

real-world performance.

New Jerseys green energy subsidies and regulations

substitute the judgments of consumers and business ownersfor those of bureaucrats, promoting expensive, unreliable, and

inefcientenergysourcesthatdriveuppricesandkilljobsandinvestments.

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MINIMUMWAGE

Since 2009, New Jerseys minimum wage has been $7.25, the

federalgovernmentsoorforthestates.

The trouble is, study after study proves that minimum wage

laws actually increase unemployment and push low-skilled

individuals out of the labor market.

According to one recent University of Chicago study, the 2009federal minimum wage increase alone resulted in the loss of

800,000 jobs.

This shouldnt be surprising. The more employers have to paytheir workers, the fewer workers they can afford to hire.

The minimum wage discourages employers from hiring low-skilled workers.

As a result, low-skilled individuals remain out of work, whileemployershireso-calledoverqualiedworkerswhoseskillset

can justify a minimum wage.

Over the past decade, New Jersey has had more than twice as

many unemployed teenagers than unemployed workers as awhole.

THE 2009 FEDERALMINIMUM WAGE INCREASERESULTED IN THE LOSS OF

800,000 JOBS.

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CORPORATEWELFARENewJerseysubsidizesfavoredbusinesseswithtaxbreaks,

governmentloans,andgrantstoincentivizeeconomicactivity.

New Jerseys Economic Development Authority lavishly spendstaxpayer dollars on these effortssubsidies that distort themarket by picking the winners and losers of private industry. To

cite just three examples, consider:

$102.4 million tax credit to Panasonic

for relocating its headquarters in

state $250 million to Prudential Insurance

for moving to a new building a few

blocks away

$261.4 million to the Atlantic City

Revel Casino

Such subsidies shift tax burdens onto other hard-working NewJersey businesses.

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Granted, it makes sense for businesses to seek relief from New

Jerseys burdensome tax climate. Our states 9% top corporate

tax rate is one of the highest in the nation.

Combined with the federal rate of 35%, our states corporate

tax drives many companies to take their business outside of the

Garden State.

Lowering the tax burden on New Jersey businesses across

the board would result in greater economic growth than

preferential subsidies.

Many of these subsidies come at a price; the government

dictating business decisions.

For example, Campbells Soup received a $42 million tax break

on the condition that it renovate its Camden headquarters and

add new jobs. After announcing that it had to shed 130 jobs

because of tough economic conditions, Campbells subsidy was

reduced to $34.2 million. The government warned the company

that it could not use the credits until they restored the job

losses and added even more workers.

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SOCIALSERVICES

This calendar shows the number of days a New Jersey residentwould have to work to pay his or her share of the cost ofgovernment.

It includes the explicit spending of the government and also thehidden costs of state, local, and federal regulation.

New Jersey residents would have to work until August5th every year to pay for the explicit and implicit costs of

government spending and regulation every year.

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2012

2JULY 15

vs.

AUGUST 5

r

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CONCLUSION...OR NEW BEGINNING?

New Jersey once led the nation in economic prosperity.

The Garden State was the best place in the country to build abusiness and raise a family.

As recent as the mid-1960s, New Jersey had no sales tax andno income tax, allowing our residents to save more of their ownmoney and invest in new businesses, home improvements, their

childrens future, or a better retirement.

We led the nation in economic growth in just about every

categoryidentiedinthisbooklet.

Today, however, New Jersey is burdened by high taxes, failedbusinesses, unemployment, and a bloated bureaucracy.

What happened?

New Jersey did not suffer from some natural cataclysm. Wewere not attacked by outside enemies. Our land did not shrink

and our rivers and lakes didnt dry up.

Our people are as smart and dynamic as ever.

So what went wrong?

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The answer is simple:

Burdensome taxes and regulations!

First they told us if we passed a 3% sales tax, that would solveour property tax problem. And then they raised it to 5%, then

6%, and today 7%.

Then they said if we passed an income tax, that would solve our

property tax crisis. Then they raised it again and again andagain.

These government policies just made things worse.

Fifty years of exploding government has made New Jersey themost heavily taxed state in the nation. Massive bureaucraciesstrangle businesses and threaten our property rights.

The states debt now exceeds $40 billion the third highest inthe nation, despite a massive revenue stream thanks to morenew taxes on top of all the old ones.

Thisdebtthreatensthenancialstabilityofthestateandits

property owners.

New Jerseys abundant resources, both natural and human, arejust waiting to be free again.

By embracing the economic policies that once created adynamic economy and attracted millions to New Jersey, our

state can once again lead the nation in prosperity.

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www.americansforprosperityfoundation.com/new-jersey

Making New Jersey Competitive Again: Putting the Garden State back on the road to growth

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