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.
The outsize dent one change of address can make sheds light not only on how much money America's wealthiest citizens can move, but also on how much the "1 percent" contributes to a functioning government.
Mr. Tepper, a highly successful hedge-fund manager, registered to vote in Florida last October, according to Bloomberg. He listed a condominium in Florida as his new residential address and moved his business, Appaloosa Management, to the Sunshine State. And the New Jersey legislature took notice.
"We may be facing an unusual degree of income-tax forecast risk," testified Frank Haines, a budget officer with New Jersey's Office of Legislative Services, before a Senate committee Tuesday.
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.
The Sunshine State, on the other hand, has one of the country's lowest tax burdens: it taxes neither personal income nor investments, and its corporate tax is 5.5 percent, all of which tempted Tepper to move south.
New Jersey's current predicament highlights both the stark income difference between America's rich and poor and the subtle side effects of trying to solve it through taxation. As The Christian Science Monitor's Olivia Lowenberg wrote in March:
While the gulf between the middle- and lower-class wages has held stable since 2000, the gap between the very wealthy and everyone else is expanding. While inflation-adjusted wages did grow in 2015, not every segment of the population felt the benefits. Wages for men in the top 90th and 95th percentiles of earners increased by 6.2 percent and 9.9 percent, respectively, even as wages stagnated or even dropped off for men in the bottom 60 percent of earners. Wages increased about 2.6 percent for median earners.
New Jersey Gov. Chris Christie (R) has been working with — and sometimes against — the state's legislature on ideas to solve both the economic stagnation of America's middle class and the state budget. During his run for president, he blamed the federal government for increasing income inequality by stagnating growth.
"The Fed's easy money policies and the president's anti-growth policies have made the rich even richer and made our middle class work longer and harder for less pay and less promise for the future," Governor Christie told New Hampshire voters.
Tepper's flight to the Sunshine State — and the New Jersey legislature's resulting woes — highlight both the economic puzzle and the perils of resolving it through increasing taxes.
"The tax burden doesn’t stick out — what really sticks out is the inadequacy of their pre-tax income. That's what's hurting middle-class families," Economic Policy Institute senior economist Elise Gould told the Monitor last month.
"I don’t think, as a share of people’s budget, that [tax cuts are] where the relief should come. We think about middle-class families that are struggling to pay for housing, childcare," she said. "We need to really think about increasing their wages."