One person’s move from New Jersey to Florida for tax reasons had New Jersey leader’s “freaking out” this month, according to the Associated Press. It should have Illinois’ leaders freaking out, too, along with anybody concerned about inequality, which should be all of us.
That individual was hedge fund manager David Tepper. Florida has no income tax and Tepper was paying 9% in New Jersey. He is estimated to be worth over $10 billion and his departure to Florida will cost New Jersey about $100 million annually, though the exact number is hard to know. “We may be facing an unusual degree of income-tax forecast risk,” this year, said a budget official there, citing Tepper’s planned move as prime cause for concern.
Where the story gets interesting is the interplay with inequality, and Fortune had a particularly thoughtfularticle on that. “New Jersey’s tax problem is just a more extreme version of what many state and local governments will have to contend with as growing income inequality slows economic growth and shrinks tax bases,” wrote Fortune. Citing a report from Standard & Poor’s, they said state tax revenue has become more volatile as progressive tax states have come to rely more heavily on capital gains from top earners. Further, the pace of revenue growth is declining and disparity in income is contributing to lower tax revenue growth by weakening the rate of overall economic expansion. They conclude: