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"Who needs a house out in Hackensack?" Billy Joel asks in his 1977 hit song "Movin' Out," about the largest city in New Jersey's largest county. Little did Joel know that many New Jerseyans would be asking the same question—and coming up with reasons of their own for movin' out of the Garden State.
There have been some terrific reports of late on the subject of moving. One is by United Van Lines, a company that knows lots about where Americans are moving to and from. And two more reports are by the American Legislative Exchange Council (ALEC), an organization that knows a whole lot about why.
But one man's story that's worth telling is emblematic of everything that went wrong in New Jersey over the past half-century. He was born in Jersey in 1932, a year after the George Washington Bridge was built, connecting his home state to the nation's largest city. It was a symbol of hope—and the future.
After college and service in the Air Force, he did what young people did back then: He got married, got a job, had kids—four by the age of 30—and saved for a house.
He purchased his first and only home for $32,000 in 1961 in northern New Jersey. A history teacher and basketball coach, he worked night and summer jobs to support his family. Two decades later, he became the schools superintendent in the town that gave him his first job.
It was a beautiful place to raise a family. A half-hour drive east and they were in New York City to watch a Knicks game or a Broadway play. An hour drive south and they were enjoying a day, or a week, at the Jersey Shore.
He lived a great middle-class life. Rising college costs, health care costs, taxes and public pension costs had not yet put the squeeze on working-class New Jersey families. With some part-time work on the kids' part, modest student loans and some help from Mom and Dad, college was within reach of most families in town. Two of his sons got law degrees, one an MBA, and his daughter skipped college to become a songwriter.
A decade ago, his wife of 56 years died. Retired and living on a pension, he was alone. Most of his friends had died, and the kids he'd raised, except for one, had left Jersey years ago. Two would tell you they fled.
He called one day to let his kids know he was selling his house and moving. He didn't say why. But they knew why. We knew why. I say we because the man in the story is my father: He's 90 and enjoying life in another state.
As he was preparing to move, he gave me a quick tax-history lesson. New Jersey, he told me, once dabbled with a state sales tax in 1935, but it was unpopular and quickly repealed. It would be 1976 before the state would enact another one. New Jersey, my dad quipped, had managed to live without an income tax since 1787, the year it was granted statehood.
We laughed, but as we dug deeper, the laughing ended. I stumbled on a New York Times story about a tax fight back in 1976. It described the bill's passage as a "historic struggle" that faced "decades of resistance." The vote was 22-18 in the state Senate, with one Republican joining 21 Democrats. The new tax rate: 2 percent. It rose to 8 percent when he moved. Today, it's close to 11 percent for top earners.
Then came the toll history of the George Washington Bridge, which was 50 cents when he was a kid. It stayed that way for a long time, he recalled. A quick Google search and we discovered it took nearly 40 years before the toll was increased, doubling to $1 in 1971. It took only five years for the next hike, in 1976. Then another in 1983, 1987 and 1991—when the toll reached $4. Then came increases in 2001, 2008, 2011 and 2012. There've been two hikes since my dad fled Jersey. The toll is now $16.
Then came the cruelest tax. He couldn't recall the property taxes on the home he purchased for $32,000, it was so insignificant. The number he couldn't forget was his last property tax bill, which exceeded $12,000.
If you'd told my dad in 1961 that three years of property tax bills would one day exceed the original cost of his home, or that his monthly property tax bill would be nearly eight times higher than his original monthly mortgage payment, he'd have written you off as crazy. But that happened. The home my father owned free and clear was neither free nor clear. And his landlord—the municipality and the county government—had an appetite for taxing and spending.
Worried that future tax increases would eat up his retirement savings, my 81-year-old dad, who had spent his life in New Jersey, wanted out. And he wanted out because its leaders treated residents like an ATM, passing tax increases and saddling the state with public pension obligations that priced him out of his own home.
He isn't alone. Last year, the Garden State had the distinction of losing more residents as a percentage of its overall population than any other state in America, according to United Van Lines' National Movers Study. New Jersey topped that study the past four years too, with Illinois, Connecticut, New York and California not far behind.
Why have so many people fled? Here's a headline from Bloomberg: "Living in NJ? You'll pay more in taxes over a lifetime than anywhere else, study says." Residents of the Garden State, the story noted, will pay $931,698 in lifetime taxes, well above the national average of $525,037.
Here's another recent headline, this one from the New York Post: "Majority of Garden Staters want to leave NJ." A recent Monmouth University poll found that a record 59 percent of New Jersey residents want to leave their state at some point. Property taxes were the top reason.
But why are blue-staters fleeing to red states? A recent report by ALEC—one of the preeminent experts in research on state public policy—ranked America's 50 governors, and the results tell a heck of a story. One that should be essential reading for any person—or business—thinking about moving from one state to another. Factors used in the ranking: gross state domestic product, unemployment rate, education performance, taxes, debt, spending, welfare dependency, union control and barriers to work.
Governors of red states dominated the top 15. In order from 1 to 15, they represented South Dakota (Kristi Noem-R), Utah (Spencer Cox-R), Florida (Ron DeSantis-R), Colorado (Jared Polis-D), Idaho (Brad Little-R), Tennessee (Bill Lee-R), New Hampshire (Chris Sununu-R), Arizona (Doug Ducey-R), Georgia (Brian Kemp-R), Texas (Greg Abbott-R), Nebraska (Pete Ricketts-R), Missouri (Mike Parson-R), Iowa (Kim Reynolds-R), North Dakota (Doug Burgum-R), and Oklahoma (Kevin Stitt-R).
An equally important report recently released by ALEC, "Unaccountable and Unaffordable," tracked the public pension obligations of each state. "Unfunded state pension liabilities total $8.28 trillion or just under $25,000 for every man, woman and child in the United States," the report began, citing the unprecedented nature of public pension indebtedness. Most of the damage, the report continued, was a result of a decrease in what's called the risk-free discount rate, which had been caused by the decrease in U.S. Treasury note yields.
The reason this matters to taxpayers, the report said, is simple. "State governments are obligated, often by contract and state constitutional law, to make these pension payments regardless of economic conditions. As these pension payments continue to grow, revenue that could have gone towards tax relief or essential services like public safety and education is spent paying off these liabilities instead."
The five states with the lowest unfunded liabilities per capita, according to the ALEC report, were Tennessee ($8,511), Indiana ($10,000), Nebraska ($13,370), Florida ($14,062) and Idaho ($15,918). The states with the highest unfunded
liabilities per capita included the usual suspects: California ($38,713), New Jersey
($39,849), Connecticut ($40,427) and Illinois ($41,656). Hawaii and Alaska also
fared miserably.
New Jersey's total risk-free unfunded liabilities are over $370 billion, New York has $508 billion, and California's is an astonishing $1.5 trillion, the report revealed. Good things to know when planning a move.
New Jersey has the further distinction of having some of the worst funding ratios (the ratio of assets to liabilities), one measurement of a pension plan's health, according to ALEC. It doesn't help matters that public pension retirees are also living longer than anyone could have anticipated.
How did this man-made economic crisis happen? "In New Jersey, the tax recipients are more organized than the taxpayers," a public pension reformer in New Jersey once said.
Former New Jersey Governor Chris Christie had this to say about the system he once tried to reform. "One state retiree, 49 years old, paid, over the course of his entire career, a total of $124,000 towards his retirement pension and health benefits," Christie said. "What will we pay him? $3.3 million in pension payments over his life and nearly $500,000 for health care benefits—a total of $3.8 million on a $120,000 investment."
That's not just bad math, numbers like that. It's bad faith that has led to such
public pension excesses. Thankfully, many states are engaged in constructive pension and tax reform and managing their economic affairs responsibly and capably. Thanks to the United Van Lines and ALEC reports, it's never been easier to separate the responsible and not so responsible state leaders.
The message is clear: If you care about your future, don't plan on moving anywhere without these reports. The taxes, debt and obligations you're about to inherit when you move to a new state matter.
