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Posts Tagged ‘New Jersey’

Following their recent assessment of the best and worst countries, the Tax Foundation has published its annual State Business Tax Climate Index, which is an excellent gauge of which states welcome investment and job creation and which states are unfriendly to growth and prosperity.

Here’s the list of the best and worst states. Unsurprisingly, states with no income tax rank very high, as do states with flat taxes.

It’s also no surprise to see New Jersey in last place. The state has fallen dramatically, especially considering that it was like New Hampshire as recently as the 1960s, with no state income tax and no state sales tax.

And the bad scores for New York, California, and Connecticut also are to be expected. The Nutmeg State is an especially sad story. There was no state income tax 30 years ago. Once politicians got that additional source of revenue, however, Connecticut suffered a big economic decline.

Here’s a description of the methodology, along with the table showing how different factors are weighted.

…the Index is designed to show how well states structure their tax systems and provides a road map for improvement.The absence of a major tax is a common factor among many of the top 10 states. Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate income tax, the individual income tax, or the sales tax. …This does not mean, however, that a state cannot rank in the top 10 while still levying all the major taxes. Indiana and Utah, for example, levy all of the major tax types, but do so with low rates on broad bases.The states in the bottom 10 tend to have a number of afflictions in common: complex, nonneutral taxes with comparatively high rates. New Jersey, for example, is hampered by some of the highest property tax burdens in the country, has the second highest-rate corporate income tax in the country and a particularly aggressive treatment of international income, levies an inheritance tax, and maintains some of the nation’s worst-structured individual income taxes.

For those who want to delve into the details, here are all the states, along with their rankings for the five major variables.

If you want to know which states are making big moves, Georgia enjoyed the biggest one-year jump (from #36 to #32) and Kansas suffered the biggest one-year decline (from #27 to #34). Keep in mind that it’s easier to climb if you’re near the bottom and easier to fall if you’re near the top.

Looking over a longer period of time, the states with the biggest increases since 2014 are North Carolina (+19, from #34 to #15), Wisconsin (+12, from #38 to #26), Kentucky (+9, from #35 to #24), Nebraska (+8, from #36 to #28), Delaware (+7, from #18 to #11), and Rhode Island (+6, from #45 to #39).

The states with the biggest declines are Kansas (-9, from #25 to #34), Hawaii (-8, from #29 to #37), Massachusetts (-8, from #28 to #36), and Idaho (-6, from #15 to #21).

We’ll close with the report’s map, showing the rankings of all the states.

P.S. My one quibble with the Index is that there’s no variable to measure the burden of government spending, which would give a better picture of overall economic liberty. This means that states that finance large public sectors with energy severance taxes (which also aren’t included in the Index) wind up scoring higher than they deserve. As such, I would drop Wyoming and Alaska in the rankings and instead put South Dakota at #1 and Florida at #2.

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According to Freedom in the 50 States, which we reviewed a couple of days ago, New Jersey is in the bottom 10 and has been moving in the wrong direction.

This dismal ranking is not an anomaly. New Jersey also is in the bottom 10 of states according to Economic Freedom of North America, and the Garden State is dead last according the State Business Tax Climate Index and State Fiscal Condition.

In a perverse way, I admire New Jersey’s politicians. They’re not satisfied with the state’s low scores. They want to become even less competitive. If that’s even possible.

As I noted in the interview, the latest proposal for a “rain tax” isn’t necessarily objectionable if examined in isolation.

But in the context of New Jersey’s fiscal deterioration, it’s almost as if politicians are writing another passage in a very long suicide note for the state.

Consider what happened recently with the gas tax, as explained by the Wall Street Journal.

…a silver lining used to be the Garden State’s relatively low gasoline tax of 14.5 cents a gallon—second lowest in the U.S. No more, and therein lies a tale of why taxing the rich to finance government is an illusion. In October 2016, then-Gov. Chris Christie signed a bill raising the gas tax by 22.6 cents to 37.1 cents a gallon…the bill also included a clause that automatically raises the gas tax if it doesn’t produce the expected revenue each year. This is a self-fulfilling economic prophesy. A higher gas tax causes people to drive less, which in turn has meant that revenues have fallen short of the expected $2 billion target. So on Oct. 1 the gas tax will rise another 4.3 cents to 41.4 cents per gallon, which will be the ninth highest in the U.S. …This will be the state’s third tax increase in four months, following June’s increase in income and corporate tax rates. …The larger lesson is that sooner or later the middle class always gets the bill for bigger government. Higher income and corporate taxes drive the affluent out of the state, which means less revenue. That leaves the middle class to pay in higher sales, property and now gasoline taxes.

Needless to say, New Jersey’s taxaholic lawmakers want even more revenue.

Here are some excerpts from a report by Politico.

Gov. Phil Murphy said Wednesday he may propose new tax increases when he unveils his budget in March, saying he’s worried that the state has not done enough to achieve what he called “tax fairness.” …The governor…had sought some $1.7 billion in new taxes… Murphy was met with fierce resistance from fellow Democrats in the Legislature… Murphy ultimately agreed to…$1.6 billion in annual revenue. …Murphy, speaking at a church in Newark where he delivered a speech on his first-year accomplishments, said he needs to leave his options open as he starts to prepare a budget… “I would say everything is on the table. Period, full stop,” he added when pressed again about the idea of new tax increases.

If all this sound worrisome, that’s because it is.

But it gets even worse. As I warned at the end of the interview, the 2017 tax law restricts the ability of federal taxpayers to deduct taxes paid to state and local governments.

And that means the full burden of those taxes is now much more explicit, which means more and more taxpayers in high tax rates are going to “vote with their feet” and move to states with less onerous fiscal regimes.

In other words, New Jersey politicians are making their tax system worse at precisely the moment that the geese with the golden eggs have more incentive to fly away.

Insane.

P.S. Given this grim news, I’m surprised that fewer than 9 percent of people picked New Jersey to be the first state that will suffer fiscal collapse.

P.P.S. What’s really remarkable – albeit in a very sad and tragic sense – is that New Jersey in my lifetime used to be like New Hampshire, with no state income tax and no state sales tax.

P.P.P.S. There is a Jersey with good tax policy, but it’s far away from the American version.

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New Jersey is a fiscal disaster area.

It’s in last place in the Tax Foundation’s index that measures a state’s business tax climate.

It’s tied for last place in the Mercatus Center’s ranking of state fiscal conditions.

And it ranks in the bottom-10 in measures of state economic freedom and measures of unfunded liabilities for bureaucrat pensions.

All of this led me, last October, to warn that the state was suffering from fiscal decay.

Then, two months ago, James Freeman of the Wall Street Journal wrote about how New Jersey’s uncompetitive fiscal system was encouraging highly productive taxpayers to leave the state.

The Garden State already has the third largest overall tax burden and the country’s highest property tax collections per capita. Now that federal reform has limited the deduction for state and local taxes, the price of government is surging again among high-income earners in New Jersey and other blue states. Taxpayers are searching for the exits. …says Jeffrey Sica, founder of Circle Squared, an alternative investments firm. “We structure real estate deals for family offices and high-net-worth individuals and at a record pace those family offices and individuals are leaving the TriState for lower-tax states. Probably a dozen this year at least,”…In the decade ending in 2016, real economic growth in New Jersey clocked in at a compound annual percentage rate of 0.1, just slightly higher than John Blutarsky’s GPA and less than a tenth of the national average for economic growth. The Tax Foundation ranks New Jersey dead last among the 50 states for its business tax climate. …Steven Malanga calls Mr. Murphy’s plan “the U-Haul Budget” for the new incentives it gives New Jersey residents to flee.

You would think that New Jersey politicians would try to stop the bleeding, particularly given the impact of federal tax reform.

But that assumes logic, common sense, and a willingness to put the interests of people above the interests of government. Unfortunately, all of those traits are in short supply in the Garden State, so instead the politicians decided to throw gasoline on the fire with another big tax hike.

The Wall Street Journal opines today on the new agreement from Trenton.

Governor Phil Murphy and State Senate leader Steve Sweeney have been fighting over whether to raise tax rates on individuals or businesses, and over the weekend they decided to raise taxes on both. Messrs. Murphy and Sweeney agreed to raise the state’s income tax on residents making more than $5 million to 10.75% from 8.97% and the corporate rate on companies with more than $1 million in income to 11.5% from 9%. This will give New Jersey the fourth highest marginal income tax rate on individuals and the second highest corporate rate after Iowa.

New Jersey is pursuing class warfare, but the politicians don’t seem to realize that the geese with the golden eggs can fly away.

The two Democrats claim this will do no harm because about 0.04% of New Jersey taxpayers will get smacked. But those taxpayers account for 12.5% of state income-tax revenue and their investment income is highly mobile. The state treasurer said in 2016 that a mere 100 filers pay more than 5.5% of all state receipts. Billionaire David Tepper escaped from New Jersey for Florida in 2015, and other hedge fund managers could follow. Between 2012 and 2016 a net $11.9 billion of income left New Jersey, according to the IRS. The flight risk will increase with the new limit of $10,000 on deducting state and local taxes on federal tax returns. …About two-thirds of New Jersey’s $3.5 billion income outflow last year went to Florida, which doesn’t have an income tax. …The fair question is why any rational person or business that can move would stay in New Jersey.

That’s not merely a fair question, it’s a description of what’s already happening. And it’s going to accelerate – in New Jersey and other uncompetitive states – when additional soak-the-rich schemes are imposed (unless politicians figure out a way to put fences and guard towers at the border).

A few months ago, I conducted a poll on which state would be the first to suffer a fiscal collapse. For understandable reasons, Illinois was the easy “winner.” But I won’t be surprised if there are a bunch of new votes for New Jersey. Simply stated, the state is committing fiscal suicide.

P.S. What’s amazing (and depressing) is that New Jersey was like New Hampshire as recently as the 1960s, with no state sales tax and no state income tax.

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Better economic performance is the most important reason to adopt pro-growth reforms such as the Tax Cuts and Jobs Act of 2017.

Even small increases in economic growth – especially if sustained over time – can translate into meaningful improvements in living standards.

But there are several reasons why it won’t be easy to “prove” that last year’s tax reform boosted the economy.

And there are probably other factors to mention as well.

The takeaway is that the nation will enjoy good results from the 2017 tax changes, but I fully expect that the class-warfare crowd will claim that any good news is for reasons other than tax reform. And if there isn’t good news, they’ll assert this is evidence against “supply-side economics” and totally ignore the harmful effect of offsetting policies such as Trump’s protectionism.

That being said, some of the benefits of tax reform are already evident and difficult to dispute.

Let’s start by looking at what’s happening Down Under, largely driven by American tax reform.

The Australian government announced Monday that the Senate will vote in June on cutting corporate tax rates after an opinion poll suggested the contentious reform had popular public support. …Prime Minister Malcolm Turnbull’s conservative coalition wants to cut the corporate tax rate by 5 percent to 25 percent by 2026-27… Cormann said the need to reduce the tax burden on businesses had become more pressing for future Australian jobs and investment since the 2016 election because the United States had reduced its top corporate tax rate from 35 percent to 21 percent. “Putting businesses in Australia at an ongoing competitive disadvantage deliberately by imposing higher taxes in Australia … puts Australian workers at an oncoming disadvantage and that is clearly the point that more and more Australians are starting to fully appreciate,” Cormann told reporters. Cormann was referring to a poll published in The Australian newspaper on Monday that showed 63 percent of respondents supported company tax cuts.

Wow.

What’s remarkable is not that Australian lawmakers are moving to lower their corporate rate. The government, after all, has known for quite some time that this reform was necessary to boost wages and improve competitiveness.

The amazing takeaway from this article is that ordinary people understand and support the need to engage in tax competition and other nations feel compelled to also cut business tax burdens.

All last year, I kept arguing that this was one of the main reasons to support Trump’s proposal for a lower corporate rate. And now we’re seeing the benefits materializing.

Now let’s look at a positive domestic effect of tax reform, with a feel-good story from New Jersey. It appears that the avarice-driven governor may not get his huge proposed tax hike, even though Democrats dominate the state legislature.

Why? Because the state and local tax deduction has been curtailed, which means the federal government is no longer aiding and abetting bad fiscal policy.

New Jersey’s new Democratic governor is finding that, even with his party in full control of Trenton, raising taxes in one of the country’s highest-taxed states is no day at the beach. Gov. Phil Murphy…has proposed a $37.4 billion budget. He wants to raise $1.7 billion in new taxes and other revenue… But some of his fellow Democrats, who control the state legislature, have balked at the governor’s proposals to raise the state’s sales tax and impose a millionaires tax. State Senate President Steve Sweeney has been particularly vocal. …Mr. Sweeney previously voted for a millionaire’s tax, but said he changed his mind after the federal tax law was passed in December. The law capped previously unlimited annual state and local tax deductions at $10,000 for individual and married filers, and Mr. Sweeney said he is concerned an additional millionaire’s tax could drive people out of the state. “I think that people that have the ability to leave are leaving,” he said.

Of course they’re leaving. New Jersey taxes a lot and it’s the understatement of the century to point out that there’s not a correspondingly high level of quality services from government.

So why not move to Florida or Texas, where you’ll pay much less and government actually works better?

The bottom line is that tax-motivated migration already was occurring and it’s going to become even more important now that federal tax reform is no longer providing a huge de facto subsidy to high-tax states. And that’s going to have a positive effect. New Jersey is just an early example.

This doesn’t mean states won’t ever again impose bad policy. New Jersey probably will adopt some sort of tax hike before the dust settles. But it won’t be as bad as Governor Murphy wanted.

We also may see Illinois undo its flat tax after this November’s election, which would mean the elimination of the only decent feature of the state’s tax system. But I also don’t doubt that there will be some Democrats in the Illinois capital who warn (at least privately) that such a change will hasten the state’s collapse.

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A couple of decades can make a huge difference in the political and economic life of a jurisdiction.

And here’s something especially amazing from a bit more than five decades in the past. New Jersey used to have no state income tax and no state sales tax.

Yes, your eyes are not deceiving you. The basket case of New Jersey used to be a mid-Atlantic version of New Hampshire. But once the sales tax was imposed in 1966 and the income tax was imposed in 1976, it’s been all downhill ever since.

An article in the City Journal helps to explain the state’s fiscal decay.

Brendan Byrne, a Democratic former governor of the Garden State, …told mayors that the state would need a “large revenue package”… The heart of the package would be a new statewide income tax, which went into permanent effect in 1977. Byrne promised that the additional money would help relieve the high property-tax burden on New Jersey’s citizens… Four decades later, the plan has failed. …politicians and special interests don’t see new streams of tax revenue as a means to replace or eliminate an existing stream, but rather as a way of adding to the public coffers. (For those who entertain fantasies of a value-added tax replacing the federal income tax, take heed.) New Jersey’s income tax started with a top rate of about 2.5 percent; it’s now around 9 percent.

Needless to say, nothing politicians promised has happened.

Property taxes haven’t been reduced. They’ve gone up. The government schools haven’t improved. Instead, the test scores in the state are embarrassing. And debt hasn’t gone down. Red ink instead has skyrocketed.

And what’s amazing – and depressing – is that New Jersey politicians continue to make a bad situation worse. Here are some excerpts from a Bloomberg report.

New Jersey Governor Phil Murphy proposed taxing online-room booking, ride-sharing, marijuana, e-cigarettes and Internet transactions along with raising taxes on millionaires and retail sales to fund a record $37.4 billion budget that would boost spending on schools, pensions and mass transit. …Murphy, a Democrat…has promised additional spending on underfunded schools and transportation in a credit-battered state with an estimated $8.7 billion structural deficit for the fiscal year that starts July 1. …Murphy said Tuesday in his budget address to lawmakers. “A millionaire’s tax is the right thing to do –- and now is the time to do it.” …The budget…would…restore the state’s sales tax to 7 percent from 6.625 percent… Murphy’s proposal would almost triple the direct state subsidy for New Jersey Transit, which has been plagued by safety and financial issues.

More taxes, more spending, followed by even more taxes and more spending.

I wonder if Greek taxpayers would want to tell their counterparts in New Jersey how that story ends.

Assuming, of course, there are any taxpayers left in the Garden State. There’s already been a big exodus of productive people who are tired of being treated like fatted calves.

And don’t forget that New Jersey taxpayers no longer have unlimited ability to deduct their state and local taxes on their federal tax return. So these tax hikes will hurt much more than past increases.

In any event, taxpayers better escape before the die.

Though I know one guy who won’t be leaving.

P.S. Anybody want to guess whether New Jersey collapses before California, Illinois, or Connecticut? They’re all in the process of committing slow-motion suicide.

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States such as Illinois, California, New York, Connecticut, and New Jersey have very serious structural problems because of high tax burdens and unsustainable spending levels (often associated with excessive pay and benefits for bureaucrats).

I frequently write about those big issues, but I also like to periodically share examples of other bone-headed policies at the state level. These are not the types of policies that threaten bankruptcy, but they illustrate why it’s not a good idea to give power to politicians and bureaucrats.

Here are some new examples.

We have a column in Forbes about the dangerous plague of unlicensed and unregulated (gasp!) cakes in New Jersey.

At first, she sold her baked goods to support her son’s school fundraisers. …Soon Heather started receiving requests from family, friends, sports fundraisers, and even a wedding venue. …With this business, Heather hoped she could pay for her son’s college education and one day open her own brick-and-mortar cake pop shop. Unfortunately, her dreams were dashed thanks to a law that exists only in New Jersey. Unlike 49 other states, selling baked goods made at home is illegal in the Garden State. Baking and selling just one cake, cookie or muffin risks fines as high as $1,000. When Heather learned she had to shut down her cake pop sideline, the news was “crushing,” she said.

As is so often the case when governments are suppressing liberty, “health and safety” is the excuse.

New Jersey’s main justification for the ban is to protect the public’s health and safety—a claim that’s belied by the fact that nearly every other state has a “cottage food” law on the books, which legalizes the sale of homemade cakes, cookies, jams and other food deemed “not potentially hazardous.” …In order to sell cake pops, cookies or other shelf-stable treats in New Jersey, Heather must either build a licensed “retail food establishment” separate from her home kitchen or she can rent a commercial kitchen, which can easily cost $35 an hour.

Fortunately, the Institute for Justice is fighting to overturn the law.

Heather and two other home bakers joined with the Institute for Justice and filed a lawsuit against the state earlier this month. …A similar IJ lawsuit has already defeated a pastry prohibition in Wisconsin. Over the summer, a Wisconsin judge struck down the state’s ban on selling home-baked goods because there was “no real or substantial connection” between the law and public safety. …In his ruling, Lafayette Circuit Court Judge Duane Jorgenson noted that the ban protected established businesses from greater competition, which is why groups like the Wisconsin Bakers Association heavily backed the law. …Those rulings followed a 2015 IJ court victory on behalf of home bakers in Minnesota, which galvanized the state to expand its cottage food laws. Now the state boasts over 3,000 cottage food producers.

Notice, by the way, that protecting an established interest group was the real purpose of the law. In other words, the law was basically similar to schemes for occupational licensing.

This next item is so strange that I wonder whether it is somehow fake. But I also suspect it’s too bizarre to be fake. In any event, I wonder about the reason for this government-mandated notice?!? And if you find a (gasp!) vending machine without the notice, what purpose is served by calling the number? And do the bureaucrats expect people to memorize the number in case they stumble upon a rogue vending machine?!?

Oh, and how long before some people figure out how to remove the notice and then call the government in hopes of getting the “cash reward”?

If anybody knows the answer to any of these questions, feel free to share your thoughts. In the meantime, I’ll simply assume that the notice presumably isn’t as pointless and stupid at this pedestrian sign and definitely not as creepy and malevolent as this “public service” notice.

Next, we have a story from ABC News about taxpayer-funded generosity to pets in Michigan.

A dog in western Michigan has been approved for unemployment benefits — and he’d be bringing in a cool $360 a week. Michael Haddock, of Saugatuck, Michigan, says he received a letter on Saturday from the State of Michigan Unemployment Insurance Agency (UIA) addressed to Michael Ryder, according to Grand Rapids ABC affiliate WZZM. Michael is his name. Ryder is his dog’s name. …Haddock says the employer listed on the letter was a restaurant chain in Metro Detroit. After receiving the letter, Haddock contacted the restaurant chain and the state unemployment office. …The Michigan UIA announced Tuesday it was creating a special investigative unit to handle the recent increase in fake unemployment claims. The agency attributes many of the claims to recent data breaches. Haddock isn’t sure how scammers got his dog’s name.

I’m clearly behind the times. I have some cats that need to sign up for handouts!

On a more serious note, I confess that I’m not aware of the degree to which unemployment benefits are fraudulent. Hopefully it’s not as bad as the EITC, though I’m confident that problem is bigger than politicians and bureaucrats would ever admit.

And why would folks in the government even care? After all, it’s our money they’re squandering rather than their own. And Milton Friedman educated us on what that means.

From the perspective of good public policy, though, the real problem with such benefits (as personalized here and here) is that they lure people into extended periods of joblessness.

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When companies want to boost sales, they sometimes tinker with products and then advertise them as “new and improved.”

In the case of governments, though, I suspect “new” is not “improved.”

The British territory of Jersey, for instance, has a very good tax system. It has a low-rate flat tax and it overtly brags about how its system is much better than the one imposed by London.

In the United States, by contrast, the state of New Jersey has a well-deserved reputation for bad fiscal policy. To be blunt, it’s not a good place to live and it’s even a bad place to die.

And it’s about to get worse. A column in the Wall Street Journal warns that New Jersey is poised to take a big step in the wrong direction. The authors start by observing that the state is already in bad shape.

…painless solutions to New Jersey’s fiscal challenges don’t exist. …a massive structural deficit lurks… New Jersey’s property taxes, already the highest in the nation, are being driven up further by the state’s pension burden and escalating health-care costs for government workers.

In other words, interest groups (especially overpaid bureaucrats) control the political process and they are pressuring politicians to divert even more money from the state’s beleaguered private sector.

…politicians seem to think New Jersey can tax its way to budgetary stability. At a debate this week in Newark, the Democratic gubernatorial nominee, Phil Murphy, pledged to spend more on education and to “fully fund our pension obligations.” …But just taxing more would risk making New Jersey’s fiscal woes even worse. …New Jersey is grasping at the same straws. During the current fiscal year, the state’s pension contribution is $2.5 billion, only about half the amount actuarially recommended. The so-called millionaire’s tax, a proposal Gov. Chris Christie has vetoed several times since taking office in 2010, will no doubt make a comeback if Mr. Murphy is elected. Yet it would bring in only an estimated $600 million a year.

The column warns that New Jersey may wind up repeating Connecticut’s mistakes.

Going down that path, however, is a recipe for a loss of high-value taxpayers and businesses.

Let’s look at a remarkable story from the New York Times. Published last year, it offers a very tangible example of how the state’s budgetary status will further deteriorate if big tax hikes drive away more successful taxpayers.

One man can move out of New Jersey and put the entire state budget at risk. Other states are facing similar situations…during a routine review of New Jersey’s finances, one could sense the alarm. The state’s wealthiest resident had reportedly “shifted his personal and business domicile to another state,” Frank W. Haines III, New Jersey’s legislative budget and finance officer, told a State Senate committee. If the news were true, New Jersey would lose so much in tax revenue that “we may be facing an unusual degree of income tax forecast risk,” Mr. Haines said.

Here are some of the details.

…hedge-fund billionaire David Tepper…declared himself a resident of Florida after living for over 20 years in New Jersey. He later moved the official headquarters of his hedge fund, Appaloosa Management, to Miami. New Jersey won’t say exactly how much Mr. Tepper paid in taxes. …Tax experts say his move to Florida could cost New Jersey — which has a top tax rate of 8.97 percent — hundreds of millions of dollars in lost payments. …several New Jersey lawmakers cited his relocation as proof that the state’s tax rates, up from 6.37 percent in 1996, are chasing away the rich. Florida has no personal income tax.

By the way, Tepper isn’t alone. Billions of dollars of wealth have already left New Jersey because of bad tax policy. Yet politicians in Trenton blindly want to make the state even less attractive.

At the risk of asking an obvious question, how can they not realize that this will accelerate the migration of high-value taxpayers to states with better policy?

New Jersey isn’t alone in committing slow-motion suicide. I already mentioned Connecticut and you can add states such as California and Illinois to the list.

What’s remarkable is that these states are punishing the very taxpayers that are critical to state finances.

…states with the highest tax rates on the rich are growing increasingly dependent on a smaller group of superearners for tax revenue. In New York, California, Connecticut, Maryland and New Jersey, the top 1 percent pay a third or more of total income taxes. Now a handful of billionaires or even a single individual like Mr. Tepper can have a noticeable impact on state revenues and budgets. …Some academic research shows that high taxes are chasing the rich to lower-tax states, and anecdotes of tax-fleeing billionaires abound. …In California, 5,745 taxpayers earning $5 million or more generated more than $10 billion of income taxes in 2013, or about 19 percent of the state’s total, according to state officials. “Any state that depends on income taxes is going to get sick whenever one of these guys gets a cold,” Mr. Sullivan said.

The federal government does the same thing, of course, but it has more leeway to impose bad policy because it’s more challenging to move out of the country than to move across state borders.

New Jersey, however, can’t set up guard towers and barbed wire fences at the border, so it will feel the effect of bad policy at a faster rate.

P.S. I used to think that Governor Christie might be the Ronald Reagan of New Jersey. I was naive. Yes, he did have some success in vetoing legislation that would have exacerbated fiscal problems in the Garden State, but he was unable to change the state’s bad fiscal trajectory.

P.P.S. Remarkably, New Jersey was like New Hampshire back in the 1960s, with no income tax and no sales tax. What a tragic story of fiscal decline!

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I recently wrote about gun control, noting how there’s less murder in demographically similar U.S. states than there is in matching Canadian provinces.

This is one of the reasons why I’m optimistic about protecting the Second Amendment. The empirical evidence is so strong that law-abiding people are safer in well-armed societies.

But let’s see how the rest of the world is faring on this issue.

Let’s start with a story from Switzerland, a nation that has a very strong tradition of gun rights.

Switzerland is becoming safer. Police recently flagged up that crime rates fell by 7% in 2015, reaching a seven-year low. In 2014, homicide was actually at its lowest level in 30 years. …A survey by swissinfo.ch shows gun permit applications were up almost everywhere in Switzerland in 2015.

Hmmm…, more guns and less crime. The person who slapped the headline on the story seems to think it’s a mystery why that relationship exists.

But anybody capable of passing my IQ test for criminals and liberals understands that the title should be changed to “Lower crime because Swiss have more guns” or something like that.

The article also includes a section on Switzerland’s gun culture.

Switzerland has one of the highest gun ownership rates in the world because of its militia army. The defence ministry estimates that some two million guns are in private hands in a population of 8.3 million. An estimated 750,000 of those guns have been recorded in a local register. Under the militia system soldiers keep their army-issue weapons at home. Voters in recent years have rejected tighter gun controls. In 2011, voters rejected a proposal to restrict access to guns by banning the purchase of automatic weapons and introducing a licensing system for the use of firearms.

Ah, those sensible Swiss voters. Not only are they against tax hikes and regulatory intervention, but they also reject licensing and support the right to purchase automatic weapons.

Now let’s travel Down Under and see what happens when a government takes the wrong approach to guns.

Hillary Clinton says “Australia is a good example”… The man Clinton wants to succeed, Barack Obama, noted, “Australia … imposed very severe, tough gun laws.  And they haven’t had a mass shooting since.” …Maybe it’s time to tell the president and his likely successor that the policies they so admire have been largely flouted… Clinton and Obama tout a 1996 “gun buyback” that was actually a compensated confiscation of self-loading rifles, self-loading shotguns, and pump-action shotguns in response to the Port Arthur mass shooting. The seizure took around 650,000 firearms out of civilian hands and tightened the rules on legal acquisition and ownership of weapons going forward. …What the law couldn’t do—what prohibitions can never accomplish—was eliminate demand for what was forbidden. …The Sporting Shooters’ Association of Australia estimates compliance with the “buyback” at 19 percent. Other researchers agree. In a white paper on the results of gun control efforts around the world, Franz Csaszar, a professor of criminology at the University of Vienna, Austria, gives examples of large-scale non-compliance with the ban. He points out, “In Australia it is estimated that only about 20% of all banned self-loading rifles have been given up to the authorities.”

There is one group benefiting from the attempted gun ban. Criminal gangs are big winners.

“Australians may be more at risk from gun crime than ever before with the country’s underground market for firearms ballooning in the past decade,” the report added. “[T]he national ban on semi-automatic weapons following the Port Arthur massacre had spawned criminal demand for handguns.” …Once you enable organized crime, there are no boundaries. Australia’s criminal gangs supply not just pistols, but weapons up to and including rocket launchers—some of which may have ended up in terrorist hands. …like American bootleggers who supplemented smuggled booze with bathtub gin, Australia’s organized criminal outfits have learned the joy of DIY production. …Australia will have to live with the rise in organized crime for years to come.

Such a disappointment that Australia, which is a role model on some issues, is so anti-civil rights when it comes to guns.

Now let’s travel to France, where there are at least one person doesn’t think it’s a good idea to let terrorists be the only ones with guns.

The leader of the rock band playing the Bataclan in Paris the night ISIS terrorists killed 90 in the concert hall three months ago ripped French gun control laws and urged “everybody” to get a gun. “I can’t let the bad guys win,” said Jesse Hughes of Eagles of Death Metal. …Speaking in a sometimes tearful interview to iTele, Hughes added, “Did your French gun control stop a single fu—– person from dying at the Bataclan? And if anyone can answer yes, I’d like to hear it, because I don’t think so.”

Amen. It’s downright bizarre that European politicians think it’s a good idea for citizens to be disarmed while crazies get to stock up on weapons.

Now let’s turn to America, where New Jersey (again) is a national embarrassment.

A New Jersey actor faces 10 years in prison for firing a prop pellet gun while filming an independent film. Carlo Goias, who uses the stage name Carlo Bellario, was charged with firing the fake gun without a state gun permit as part of the Garden State’s insanely strict gun laws. In New Jersey, all guns require a state permit, even non-lethal airsoft guns like the one Goias was using. …just seeing Goias pretending to fire from a car window prompted neighborhood residents to call the police. “I pretended to shoot out the window; they were going to dub in the sound later,” Goias told the Associated Press. “We get back, and within a couple of minutes we’re surrounded by cop cars.” …being sent away for 10 years over a fake gun is a reminder of just how absurd New Jersey’s gun laws still are.

Speaking of gun control, here’s radio shock jock Howard Stern making mostly sensible comments on the right to keep and bear arms.

It’s a bit disappointing that he supports a national gun registry, but I assume that’s because he doesn’t realize that the left supports registration primarily as a predicate for gun confiscation.

But he atones for that error by mocking leftists who have personal (and well-armed) security guards. Gee, I wonder if we might have an example of such a person.

And it’s also good that Howard mentions that most cops support gun rights, something that we see in the polling data.

P.S. Click here and here for some good gun control humor.

P.P.S. And click here for some entertaining videos mocking gun control.

P.P.P.S. Even some leftists have seen the light on gun rights, as you can see here, here, and here.

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Federalism is a great idea, and not just because America’s Founders wanted a small and limited central government.

It’s also a good idea because states are laboratories that teach us about the benefits of good policy and the costs of bad policy.

And when we specifically look at New Jersey, we can learn a lot about the negative consequences of excessive taxation.

Lesson Number 1: Don’t adopt new taxes.

Just fifty years ago, New Jersey was like New Hampshire with no income tax and no sales tax. It was a fast-growing and prosperous refuge for people escaping high tax burdens in New York and elsewhere.

But then a state sales tax was adopted in 1966, followed by the enactment of a state income tax in 1976. Not surprisingly, politicians used those revenue sources to finance an orgy of new spending, to such an extent that New Jersey is now in last place in a ranking of state fiscal conditions.

And ever since new taxes were adopted, politicians have routinely and repeatedly increased the rates, diverting ever-greater amounts of money from the state’s private sector.

The net result, as demonstrated by the Tax Foundation’s State Business Tax Climate Index, is that New Jersey now has the worst tax system in the entire nation.

A very high income tax burden is a major reason why New Jersey is so uncompetitive.

After thriving for centuries with no state income tax, it only took state politicians a few decades to create a very punitive system with the fifth-highest rate in the nation. Once again, the Tax Foundation has the data.

No wonder so many investors, entrepreneurs, and business owners are escaping New Jersey.

And this is exactly what’s been happening, with very negative effects on New Jersey’s economy. Here’s some of what I shared back in 2010.

More than $70 billion in wealth left New Jersey between 2004 and 2008 as affluent residents moved elsewhere, according to a report…Conducted by the Center on Wealth and Philanthropy at Boston College… The exodus of wealth, then, local experts and economists concluded, was a reaction to a series of changes in the state’s tax structure — including increases in the income, sales, property and “millionaire” taxes. “This study makes it crystal clear that New Jersey’s tax policies are resulting in a significant decline in the state’s wealth,” said Dennis Bone, chairman of the New Jersey Chamber of Commerce and president of Verizon New Jersey. …the report reinforces findings from a similar study he conducted in 2007 with fellow Rutgers professor Joseph Seneca, which found a sharp acceleration in residents leaving the state. That report, which focused on income rather than wealth, found the state lost nearly $8 billion in gross income in 2005.

Wow, that’s the Atlantic version of California.

By the way, politicians often impose taxes or increase tax rates using the excuse that they will lower other taxes.

And it hasn’t been uncommon for New Jersey politicians to tell voters that tax hikes will enable lower property taxes.

Yet if you look at this data from the Tax Foundation, the Garden State has the highest property tax burden in the nation.

The only “good news” is that New Jersey’s 6.97 percent state sales tax is only the 24th-highest in the United States.

Yet when you consider that there was no state sales tax until 1966, that’s hardly a sign of fiscal restraint.

Lesson Number 2: Get rid of taxes that are especially destructive.

New Jersey is one of only two states that impose both an inheritance tax and a death tax. The death tax is particularly pernicious since very successful taxpayers obviously have considerable ability to migrate to states with better policy.

But here’s where we might have a bit of good news. New Jersey may be about to eliminate its death tax.

A state Senate committee on Monday passed…bipartisan proposals to eliminate the estate tax… Proponents of the tax changes say people are leaving New Jersey to avoid its low thresholds on taxing inherited wealth and retirement income. More than 2 million people left New Jersey between 2005 and 2014, costing the state $18 billion in net adjusted income and $11.4 billion in economic activity, according to the New Jersey Business and Industry Association, which blames high taxes for the exodus. …State Sen. Steve Oroho (R-Sussex) said he expects the money New Jersey reaps from people who stay here will pay for the lost tax revenue. The bill (S1728) was approved 9-0 with four abstentions.

This is amazing evidence of the liberalizing impact of tax competition. New Jersey’s state legislature is dominated by leftists, yet even they realize that they won’t get any loot if their intended victims can move across states lines (a lesson that French politicians have a very hard time understanding).

Lesson Number 3: Politicians waste much of the revenue they collect.

Politicians generally like higher taxes because they can buy support and votes by redistributing other people’s money (though some leftists like higher taxes solely for reasons of spite).

So it’s also important to look at what’s happening on the spending side of the budget. And it turns out that New Jersey wastes a lot of money.

I’ve already written about state bureaucrats being grossly overpaid (see here and here for some jaw-dropping examples).

But now let’s look at New Jersey’s “rate of return” or “efficiency” on transportation spending. This great video from Reason tells you everything you need to know.

And one of the reasons I shared this video is because New Jersey politicians want to boost the gas tax so they can spend even more money. Indeed, they may even hold the death tax hostage to get what they want.

Democrats have said they hope to leverage these tax cuts into a deal with Gov. Chris Christie to raise the gas tax.

I rhetorically asked back in 2010 whether Chris Christie could save New Jersey. We now know the answer is no, but maybe he can partially redeem himself by winning the death tax fight without surrendering on the gas tax.

P.S. Another formerly low-tax state, Connecticut, decided to copy New Jersey and the results are similarly dismal. Let’s hope other states, especially Alaska and Washington, are paying attention.

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I’ve periodically cited the great 19th-century French economist, Frederic Bastiat, for his very wise words about the importance of looking at both the seen and the unseen when analyzing public policy.

Those that fail to consider secondary or indirect effects of government, such as Paul Krugman, are guilty of the “broken window” fallacy.

There are several examples we can cite.

A sloppy person, for instance, will think a higher minimum wage is good because workers will have more income. But a thoughtful analyst will think of the unintended consequence of lost jobs for low-skilled workers.

An unthinking person will conclude that government spending is good for growth because the recipients of redistribution have money to spend. But a wiser analyst will understand that such outlays divert money from the economy’s productive sector.

A careless person will applaud when government “creates” jobs. Sober-minded analysts, though, will wonder about the private jobs destroyed by such policies.

It’s time, though, to give some attention to another important contribution from Bastiat.

He also deserves credit for the pithy and accurate observation about government basically being a racket or a scam.

And what’s really amazing is that he reached that conclusion in the mid-1800s when the burden of government spending – even in France – was only about 10 percent of economic output. So Bastiat was largely limited to examples of corrupt regulatory arrangements and protectionist trade policy.

One can only imagine what he would think if he could see today’s bloated welfare states and the various ingenious ways politicians and interest groups have concocted to line their pockets with other people’s money!

Which brings us to today’s topic. We’re going to look at venal, corrupt, wasteful, incompetent, and bullying government at the federal, state, and local level in America.

We’ll start with the clowns in Washington, DC.

Remember when the unveiling of the Obamacare turned into a cluster-you-know-what of historic proportions?

Well, the Daily Caller reports that the IRS has just signed an Obamacare-related contract with an insider company that recently became famous for completely botching its previous Obamacare-related contract.

Seven months after federal officials fired CGI Federal for its botched work on Obamacare website Healthcare.gov, the IRS awarded the same company a $4.5 million IT contract for its new Obamacare tax program. …IRS officials signed a new contract with CGI to provide “critical functions” and “management support” for its Obamacare tax program, according to the Federal Procurement Data System, a federal government procurement database. The IRS contract is worth $4.46 million, according to the FPDS data.

Just one more piece of evidence that Washington is a town where failure gets rewarded.

And CGI is an expert on failure.

A joint Senate Finance and Judiciary Committee staff report in June 2014 found that Turning Point Global Solutions, hired by HHS to review CGI’s performance on Healthcare.gov, reported they found 21,000 lines of defective software code inserted by CGI. Scott Amey, the general counsel for the non-profit Project on Government Oversight, which reviews government contracting, examined the IRS contract with CGI. “CGI was the poster child for government failure,” he told The Daily Caller. “I am shocked that the IRS has turned around and is using them for Obamacare IT work.” Washington was not the only city that has been fed up with CGI on healthcare. Last year, CGI was fired by the liberal states of Vermont and Massachusetts for failing to deliver on their Obamacare websites. The Obamacare health website in Massachusetts never worked, despite the state paying $170 million to CGI.

For a company like this to stay in business, you have to wonder how many bribes, pay-offs, and campaign contributions are involved.

Now let’s look at an example of state government in action.

Kim Strassel of the Wall Street Journal has a column about a blatantly corrupt deal between slip-and-fall lawyers and the second most powerful Democrat in the Empire State.

New York Assembly Speaker Sheldon Silver was last week arrested and accused by the feds of an elaborate kickback scheme. …Mr. Silver is alleged to have pocketed more than $5 million in a set-up in which he directed state funds to the clinic of an asbestos doctor, who in turn provided him with patients who could be turned into jackpot plaintiffs. Weitz & Luxenberg, a class-action titan, paid Mr. Silver huge referral fees for these names, off which the firm stands to make many millions. …when the Silver headlines broke, Weitz & Luxenberg founder Perry Weitz said he was “shocked”… The firm quickly put the Albany politician on “leave.”

A logical person might ask “on leave” from what? After all, he didn’t do anything.

But he did do something, even if it was corrupt and sleazy.

…here’s the revealing bit. Queried by prosecutors as to what exactly the firm did hire Mr. Silver to do—since he performed no legal work—Weitz & Luxenberg admitted that he was brought on “because of his official position and stature.” In other words, this was transactional. Weitz & Luxenberg gave Mr. Silver a plum job, and Mr. Silver looked out for the firm—namely by blocking any Albany bills that might interfere with its business model.

So workers, consumers, and businesses get screwed by a malfunctioning tort system, while insider lawyers and politicians get rich. Isn’t government wonderful!

Just one example among many of how state governments are a scam. Perhaps now folks will understand why I’m not very sympathetic to the notion of letting them take more of our money.

Last but not least, let’s look at a great moment in local government.

As we see from a report in USA Today, a village in New Jersey is dealing with the scourge of…gasp…unlicensed snow removal!

Matt Molinari and Eric Schnepf, both 18, also learned a valuable lesson about one of the costs of doing business: government regulations. The two friends were canvasing a neighborhood near this borough’s border with Bridgewater early Monday evening, handing out fliers promoting their service, when they were pulled over by police and told to stop. …Bound Brook, like many municipalities in the state and country, has a law against unlicensed solicitors and peddlers. … anyone selling goods and services door to door must apply for a license that can cost as much as $450 for permission that is valid for only 180 days. …Similar bans around the country have put the kibosh on other capitalist rites of passage, such as lemonade stands and selling Girl Scouts cookies.

Though, to be fair, it doesn’t seem like the cops were being complete jerks.

Despite the rule, however, Police Chief Michael Jannone said the two young businessmen were not arrested or issued a ticket, and that the police’s concern was about them being outside during dangerous conditions, not that they were unlicensed. “We don’t make the laws but we have to uphold them,” he said Tuesday after reading some of the online comments about the incident. “This was a state of emergency. Nobody was supposed to be out on the road.”

But the bottom line is that it says something bad about our society that we have rules that hinder teenagers from hustling for some money after a snowstorm.

Just like these other examples of local government in action also don’t reflect well on our nation.

Let’s close with my attempt to re-state Bastiat’s wise words. Here’s my “First Theorem of Government.”

And if you think what I wrote, or what Bastiat wrote, is too cynical, then I invite you to check out how politicians are bureaucrats are squandering money on Medicare, the Veterans Administration, the Agriculture Department, Medicaid, the Patent and Trademark Office, the so-called Consumer Financial Protection Bureau, the National Institutes of Health, Food Stamps, , the Government Services Administration, unemployment insurance, the Pentagon

Well, you get the idea.

Which is why this poster is a painfully accurate summary of government.

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I like to think that I occasionally put together interesting and persuasive charts on fiscal policy.

For instance, I think it’s virtually impossible to make a credible argument for tax hikes after looking at my chart showing how easy it is to balance the budget with modest spending restraint.

But I’ll freely confess that no chart of mine can compare to this powerful image created by my Cato colleague, Andrew Coulson, which shows how spending and staffing for the government school monopoly have exploded while enrollment and performance have been stagnant.

As far as I’m concerned, no honest person can look at his chart and defend the current system.

But some folks may need some more evidence about the failure of government schools, so let’s look at stories from both ends of America.

We’ll start on the east coast. Writing for the Daily Caller, Eric Owens reports that bureaucrats in a New Jersey town are being handsomely rewarded for not educating students.

Only 19 students in the public school system in Paterson, N.J. who have taken the SAT scored high enough to be considered college ready, local Fox affiliate WWOR-TV reports. At the same time, 66 employees in the Paterson school district each soak taxpayers for salaries of at least $125,000 per year, the Paterson Press reports. …Paterson is no tiny town. It is, in fact, the third-largest city in New Jersey. The population is roughly 146,000 people. …The city boasts some 50 public schools altogether. There are over 24,000 total students in all grades.

But the folks in Paterson can be proud of their government schools. After all, they’re doing much better than Camden.

In December 2013, Camden’s then-new superintendent of public schools announced that only three — THREE! — students in the entire district who took the SAT during the 2011-12 academic year scored high enough to qualify as college-ready.

Last but not least, the story notes that the school district has concocted a clever strategy to avoid any more embarrassing stories.

You’re probably wondering whether this means school choice? Rigorous standards? Better discipline?

Nope, nope, and nope. Remember, we’re dealing with government bureaucracy.

Back in Paterson, school officials say they have cleverly dealt with their nearly complete failure to prepare students for college entrance exams by no longer using the SAT to assess student achievement.

I actually hope this is a joke, though there’s no indication in the story to suggest the reporter is being satirical.

So we have bureaucrats getting vastly overpaid in exchange for not educating kids.

Now let’s travel to the west coast, where Los Angeles schools also have overpaid officials who do a crummy job of educating students, but they have figured out very novel ways of squandering tax dollars.

As Robby Soave reports in Reason, the LA school district first tried a failed scheme to give every student an iPad, which led to predictable fraud and misuse with no accompanying educational benefit. Now they want to double down on failure with a new proposal that gives various schools the option of which bit of high-tech gadgetry to mis-utilize.

Who could be against choice? That’s the argument Los Angeles school district administrators are now employing to push their latest round of expensive technology upgrades. Schools will be given the choice to receive Chromebooks instead of iPads—and some schools will get laptops, the most expensive option of all.  …The idea is to eventually place such a device in the hands of every child in the district.

Needless to say, there’s no strategy for avoiding the mistakes that plagued the earlier scheme.

The problem administrators encountered when rolling out the iPad plan, however, was that kids kept losing or breaking the devices. What happens then? Do parents pay, or does the district? Do kids get a replacement? Teachers also struggled mightily to incorporate the technology into their lesson plans, and concerns about kids using iPads for unsanctioned purposes caused headaches. The initial iPad deal unravelled after allegations of an improper relationship between then District Superintendent John Deasy, Apple, and curriculum company Pearson.

The reporter is understandably skeptical about what will happen next.

I have little reason to believe that the individual schools will be more responsible stewards of the taxpayer’s money than the district was. Indeed, 21 schools decided to go with an even more expensive option: laptops. Steve Lopez of the LA Times argued persuasively in October that the iPad fiasco was a costly diversion from the district’s real problems. Schools can’t even find the money for math textbooks, but administrators want to force unneeded technology on them and impose computerized tests. The district should prioritize basic instruction before deciding to purchase thousands of fancy gadgets.

Gee, it’s almost enough to make you think that government schools don’t work very well and that we should instead allow parents to have real choice over how to best educate their children.

P.S. You won’t be surprised to learn that Obama’s silly common core proposal appears to be driving some of these bad results.

P.P.S. Though remember that Bush’s no-bureaucrat-left-behind scheme was also a flop.

P.P.P.S. School choice doesn’t automatically mean every child will be an educational success, but evidence from SwedenChile, and the Netherlands shows good results after breaking up state-run education monopolies.

And there’s growing evidence that it also works in the limited cases where it exists in the United States.

P.P.P.P.S. Or we can just stick with the status quo, which involves spending more money, per student, than any other nation while getting dismal results.

P.P.P.P.P.S. This is a depressing post, so let’s close with a bit of humor showing the evolution of math lessons in government schools.

P.P.P.P.P.P.S. If you want some unintentional humor, the New York Times thinks that education spending has been reduced.

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Back in the 1980s and 1990s, there was a widespread consensus that high tax rates were economically misguided. Many Democrats, for instance, supported the 1986 Tax Reform Act that lowered the top tax rate from 50 percent to 28 percent (albeit offset by increased double taxation and more punitive depreciation rules).

And even in the 1990s, many on the left at least paid lip service to the notion that lower tax rates were better for prosperity than higher tax rates. Perhaps that’s because the overwhelming evidence of lower tax rates on the rich leading to higher revenue was fresh in their minds.

The modern left, however, seems completely fixated on class-warfare tax policy. Some of them want higher tax rates even if the government doesn’t collect more revenue!

I’ve already shared a bunch of data and evidence on the importance of low tax rates.

A review of the academic evidence by the Tax Foundation found overwhelming support for the notion that lower tax rates are good for growth.

An economist from Cornell found lower tax rates boost GDP.

Other economists found lower tax rates boost job creation, savings, and output.

Even economists at the Paris-based OECD have determined that high tax rates undermine economic performance.

Today, we’re going to augment this list with some fresh and powerful evidence.

Lots of new evidence. So grab a cup of coffee.

The New York Times, for instance, is noticing that high taxes drive away productive people. At least in France.

Here are some excerpts from a remarkable story.

A year earlier, Mr. Santacruz, who has two degrees in finance, was living in Paris near the Place de la Madeleine, working in a boutique finance firm. He had taken that job after his attempt to start a business in Marseille foundered under a pile of government regulations and a seemingly endless parade of taxes. The episode left him wary of starting any new projects in France. Yet he still hungered to be his own boss. He decided that he would try again. Just not in his own country.

What pushed him over the edge? Taxes, taxes, and more taxes.

…he returned to France to work with a friend’s father to open dental clinics in Marseille. “But the French administration turned it into a herculean effort,” he said. A one-month wait for a license turned into three months, then six. They tried simplifying the corporate structure but were stymied by regulatory hurdles. Hiring was delayed, partly because of social taxes that companies pay on salaries. In France, the share of nonwage costs for employers to fund unemployment benefits, education, health care and pensions is more than 33 percent. In Britain, it is around 20 percent. “Every week, more tax letters would come,” Mr. Santacruz recalled.

Monsieur Santacruz has lots of company.

…France has been losing talented citizens to other countries for decades, but the current exodus of entrepreneurs and young people is happening at a moment when France can ill afford it. The nation has had low-to-stagnant economic growth for the last five years and a generally climbing unemployment rate — now about 11 percent — and analysts warn that it risks sliding into economic sclerosis. …This month, the Chamber of Commerce and Industry of Paris, which represents 800,000 businesses, published a report saying that French executives were more worried than ever that “unemployment and moroseness are pushing young people to leave” the country, bleeding France of energetic workers. As the Pew Research Center put it last year, “no European country is becoming more dispirited and disillusioned faster than France.”

But it’s not just young entrepreneurs. It’s also those who already have achieved some level of success.

Some wealthy businesspeople have also been packing their bags. While entrepreneurs fret about the difficulties of getting a business off the ground, those who have succeeded in doing so say that society stigmatizes financial success. …Hand-wringing articles in French newspapers — including a three-page spread in Le Monde, have examined the implications of “les exilés.” …around 1.6 million of France’s 63 million citizens live outside the country. That is not a huge share, but it is up 60 percent from 2000, according to the Ministry of Foreign Affairs. Thousands are heading to Hong Kong, Mexico City, New York, Shanghai and other cities. About 50,000 French nationals live in Silicon Valley alone. But for the most part, they have fled across the English Channel, just a two-hour Eurostar ride from Paris. Around 350,000 French nationals are now rooted in Britain, about the same population as Nice, France’s fifth-largest city. …Diane Segalen, an executive recruiter for many of France’s biggest companies who recently moved most of her practice, Segalen & Associés, to London from Paris, says the competitiveness gap is easy to see just by reading the newspapers. “In Britain, you read about all the deals going on here,” Ms. Segalen said. “In the French papers, you read about taxes, more taxes, economic problems and the state’s involvement in everything.”

Let’s now check out another story, this time from the pages of the UK-based Daily Mail. We have some more news from France, where another successful French entrepreneur is escaping Monsieur Hollande’s 75 percent tax rate.

François-Henri Pinault, France’s third richest man, is relocating his family to London.  Pinault, the chief executive of Kering, a luxury goods group, has an estimated fortune of £9 billion.  The capital has recently become a popular destination for wealthy French, who are seeking to avoid a 75 per cent supertax introduced by increasingly unpopular Socialist President François Hollande. …It has been claimed that London has become the sixth largest ‘French city’ in the world, with more than 300,000 French people living there.

But it’s not just England. Other high-income French citizens, such as Gerard Depardieu and Bernard Arnault, are escaping to Belgium (which is an absurdly statist nation, but at least doesn’t impose a capital gains tax).

But let’s get back to the story. The billionaire’s actress wife, perhaps having learned from all the opprobrium heaped on Phil Mickelson when he said he might leave California after voters foolishly voted for a class-warfare tax hike, is pretending that taxes are not a motivating factor.

But despite the recent exodus of millionaires from France, Ms Hayek insisted that her family were moving to London for career reasons and not for tax purposes.  …Speaking about the move in an interview with The Times Magazine, the actress said: ‘I want to clarify, it’s not for tax purposes. We are still paying taxes here in France.  ‘We think that London has a lot more to offer than just a better tax situation.

And if you believe that, I have a bridge in Brooklyn that I’m willing to sell for a very good price.

Speaking of New York bridges, let’s go to the other side of Manhattan and cross into New Jersey.

It seems that class-warfare tax policy isn’t working any better in the Garden State than it is in France.

Here are some passages from a story in the Washington Free Beacon.

New Jersey’s high taxes may be costing the state billions of dollars a year in lost revenue as high-earning residents flee, according to a recent study. The study, Exodus on the Parkway, was completed by Regent Atlantic last year… The study shows the state has been steadily losing high-net-worth residents since 2004, when Democratic Gov. Jim McGreevey signed the millionaire’s tax into law. The law raised the state income tax 41 percent on those earning $500,000 or more a year. “The inception of this tax, coupled with New Jersey’s already high property and estate taxes, leaves no mystery about why the term ‘tax migration’ has become a buzzword among state residents and financial, legal, and political professionals,” the study, conducted by Regent states. …tax hikes are driving residents to states with lower tax rates: In 2010 alone, New Jersey lost taxable income of $5.5 billion because residents changed their state of domicile.

No wonder people are moving. New Jersey is one of the most over-taxed jurisdictions in America – and it has a dismal long-run outlook.

And when they move, they take lots of money with them.

“The sad reality is our residents are suffering because politicians talk a good game, but no one is willing to step up to the plate,” Americans for Prosperity New Jersey state director Daryn Iwicki said. The “oppressive tax climate is driving people out.” …One certified public accountant quoted in the study said he lost 95 percent of his high net worth clients. Other tax attorneys report similar results. …Michael Grohman, a tax attorney with Duane Morris, LLP, claimed his wealthy clients are “leaving [New Jersey] as fast as they can.” …If the current trend is not reversed, the consequences could be dire. “Essentially, we’ll find ourselves much like the city of Detroit, broke and without jobs,” Iwicki said.

By the way, make sure you don’t die in New Jersey.

The one bit of good news, for what it’s worth, is that Governor Christie is trying to keep matters from moving further in the wrong direction.

Here’s another interesting bit of evidence. The Wall Street Journal asked the folks at Allied Van Lines where wealthy people are moving. Here’s some of the report on that research.

Spread Sheet asked Allied to determine where wealthy households were moving, based on heavy-weight, high-value moves. According to the data, Texas saw the largest influx of well-heeled households moving into the state last year, consistent with move trends overall. South Carolina and Florida also posted net gains. On the flip side, Illinois and Pennsylvania saw more high-value households move out of state than in, according to the data. California saw the biggest net loss of heavy-weight moves. Last year, California had a net loss of 49,259 people to other states, according to the U.S. Census. …Texas had the highest net gain in terms of domestic migration—113,528 more people moved into the state than out last year, census data show. Job opportunities are home-buyers’ top reason for relocating to Texas, according to a Redfin survey last month of 1,909 customers and website users.

The upshot is that Texas has thumped California, which echoes what I’ve been saying for years.

One can only imagine what will happen over the next few years given the punitive impact of the higher tax rate imposed on the “rich” by spiteful California voters.

If I haven’t totally exhausted your interest in this topic, let’s close by reviewing some of the research included in John Hood’s recent article in Reason.

Over the past three decades, America’s state and local governments have experienced a large and underappreciated divergence. …Some political scientists call it the Big Sort. …Think of it as a vast natural experiment in economic policy. Because states have a lot otherwise in common-cultural values, economic integration, the institutions and actions of the federal government-testing the effects of different economic policies within America can be easier than testing them across countries. …And scholars have been studying the results. …t present our database contains 528 articles published between 1992 and 2013. On balance, their findings offer strong empirical support for the idea that limited government is good for economic progress.

And what do these studies say?

Of the 112 academic studies we found on overall state or local tax burdens, for example, 72 of them-64 percent-showed a negative association with economic performance. Only two studies linked higher overall tax burdens with stronger growth, while the rest yielded mixed or statistically insignificant findings. …There was a negative association between economic growth and higher personal income taxes in 67 percent of the studies. The proportion rose to 74 percent for higher marginal tax rates or tax code progressivity, and 69 percent for higher business or corporate taxes.

Here are some of the specific findings in the academic research.

James Hines of the University of Michigan found that “state taxes significantly influence the pattern of foreign direct investment in the U.S.” A 1 percent change in the tax rate was associated with an 8 percent change in the share of manufacturing investment from taxed investors. Another study, published in Public Finance Review in 2004, zeroed in on counties that lie along state borders. …Studying 30 years of data, the authors concluded that states that raised their income tax rates more than their neighbors had significantly slower growth rates in per-capita income. …economists Brian Goff, Alex Lebedinsky, and Stephen Lile of Western Kentucky University grouped pairs of states together based on common characteristics of geography and culture. …Writing in the April 2011 issue of Contemporary Economic Policy, the authors found “strong support for the idea that lower tax burdens tend to lead to higher levels of economic growth.”

By the way, even though this post is about tax policy, I can’t resist sharing some of Hood’s analysis of the impact of government spending.

Of the 43 studies testing the relationship between total state or local spending and economic growth, only five concluded that it was positive. Sixteen studies found that higher state spending was associated with weaker economic growth; the other 22 were inconclusive. …a few Keynesian bitter-enders insist that transfer programs such as Medicaid boost the economy via multiplier effects… Nearly three-quarters of the relevant studies found that welfare, health care subsidies, and other transfer spending are bad for economic growth.

And as I’ve repeatedly noted, it’s important to have good policy in all regards. And Hood shares some important data showing that laissez-faire states out-perform their neighbors.

…economists Lauren Heller and Frank Stephenson of Berry College used the Fraser Institute’s Economic Freedom of North America index to explore state economic growth from 1981 to 2009. They found that if a state adopted fiscal and regulatory policies sufficient to improve its economic freedom score by one point, it could expect unemployment to drop by 1.3 percentage points and labor-force participation to rise by 1.9 percentage points by the end of the period studied.

If you’ve made it this far, you deserve a reward. We have some amusing cartoons on class-warfare tax policy here, here, here, here, here, here, and here.

And here’s a funny bit from Penn and Teller on class warfare.

P.S. Higher tax rates also encourage corruption.

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If you’re a libertarian, you generally don’t act and think like other people. Most folks, when they heard about Governor Christie’s bridge-closing scandal, focused on the potential political ramifications.

But not me. My immediate reaction was to think that the problem could have been avoided if the bridge and its various entry points were privately owned. Sort of like the Ambassador Bridge between Canada and Michigan, which is the busiest border crossing in North America. Or the Progreso International Bridge, a major transportation link between Mexico and Texas.

If the George Washington Bridge also had private owners, they would want to maximize the flow of traffic, not arbitrarily close lanes for petty political purposes. So while others may speculate about Chris Christie and the 2016 presidential race, I daydreamed about how privatized bridges would improve transportation (just as I couldn’t stop myself from pontificating about private fire departments when sharing some libertarian humor).

All that being said, I’m digressing before I even get started. The purpose of today’s column is to focus on the real scandal in New Jersey.

New research from the Mercatus Center looks at cash solvency, budget solvency, long-run solvency, and service-level solvency to show which states are fiscally responsible and which states face serious long-run problems.

And while Chris Christie may have taken a few steps to rein in excessive compensation for state bureaucrats (causing me to become giddy with infatuation), he still has a long way to go because the Garden State is in last place in this comprehensive new ranking of fiscal responsibility.

And that means New Jersey is even behind fiscal hell holes such as California, New York, and Illinois.

Here are the key takeaways from the study, which ranks all 50 states.

This paper contributes to that stream of research by applying models of fiscal condition to create indices measuring cash, budget, long-run, and service-level solvency as well as overall fiscal condition at the state level. It also discusses the relative strengths and weaknesses of each solvency index and provides a ranking — based on these indices and using fiscal year 2012 data — of the 50 US states. …Table 9…shows the state rankings based on fiscal condition with all four dimensions taken into account. …the states at the bottom are there due to years of poor financial management decisions, bad economic conditions, or a combination of both. New Jersey and Illinois face similar problems of tax revenues that have not kept up with expenditures, use of budget practices that only appeared to balance their annual budgets, and significant debt levels as a result of decades of using bonds without being able to pay for them. In addition, both states have underfunded their pension systems, resulting in   billions in unfunded liabilities.

Now let’s take a look at the main chart from the study, showing the ranking for all 50 states.

And I want to focus on the bottom 10, which are a rogue’s gallery of big-government basket cases. New Jersey, as already noted, is in last place, but the next-worst state is Connecticut, which has become a fiscal mess ever since making the horrible mistake of adopting an income tax more than two decades ago.

Mercatus State Fiscal Ranking

Illinois is in 48th place, which is not surprising since the state is infamous for tax-and-spend fiscal policy. Massachusetts is number 47, making it the fourth-worst state…just as it is the fourth-worst state in the Tax Freedom Day rankings.

California is number 46, and I was surprised (given Jerry Brown’s attempts to drive successful people from the state) to read in the study that its fiscal condition actually has gotten better in recent years. And no rating of fiscal irresponsibility is complete without New York, which is in 45th place.

Indeed, you’ll notice that there’s a good bit of overlap between the states at the bottom of the Mercatus study and the “death spiral” states that I shared last year. No wonder taxpayers are fleeing these oppressive jurisdictions.

Likewise, you’ll see that there’s also overlap between the highest-ranking states and the states that have avoided the mistake of imposing an income tax.

And since we’re on the topic of top-ranked states, it is worth noting that five of the top 10 don’t have an income tax, but we should issue a caveat. Both Alaska and Wyoming have a lot of natural resources, so politicians in those states have lots of revenue to spend. Indeed, too much if we believe these numbers showing state debt in Alaska.

And the same is true for North Dakota, which makes the mistake of maintaining an income tax while also collecting a flood of severance tax revenue.

P.S. If you want to further explore state fiscal performance, here are four additional rankings.

P.P.S. I have a confession to make. I’m currently on vacation in Nevis with the PotL. Nevis 3Sounds like an idyllic (albeit very temporary) lifestyle, particularly since it’s cold back in Washington. But every night has been a battle because I can’t figure out how to operate the bloody thermostat. It’s automatically set for 64 degrees, which is far too cold for my tastes, but I don’t know how to change the temperature. It’s a digital device and when I move the temperature up or down, the word “set” starts blinking on the screen, but with no indication of how to actually implement that command. Nevis TempSo I have to get up in the middle of the night and turn the device to “on” or “off” depending on whether I’m too cold or too hot. You may be asking yourself why I don’t inquire with the hotel staff, but that’s not an option. A friend on the island arranged for me to rent a private condo, so there’s nobody I can contact. Sort of reminds me of the time in Slovakia when I couldn’t figure out how to operate a shower, or the time in Switzerland when I was baffled by a toilet. And if I can’t figure out how to operate household fixtures, how on earth will I ever figure out how to shrink the size and scope of the federal government.

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Look, up in the sky! It’s a bird, it’s a plane…no it’s Super Bureaucrat!

Actually, look to New Jersey, because you’re going to see a taxpayer ripoff that will get your blood boiling. Depending on your perspective, this may be worse that the toll collector on the New Jersey Turnpike who pocketed more than $300,000 in a single year.

Because today’s super bureaucrat isn’t getting overpaid for one job. He’s getting overpaid for six jobs!

Here are some excerpts from a local news report in New Jersey (h/t: Reason).

Patrick DeBlasio was hired Wednesday as Highlands’ chief financial officer — his sixth concurrent public job and ranking him among the highest-paid public employees in New Jersey. Highlands will pay DeBlasio a $40,000 annual salary on a part-time basis… DeBlasio will not have to work a minimum number of hours, said Administrator Tim Hill, or be required to go into the office.

Maybe one day I can get one of these $40,000 no-show jobs that don’t require any work. But I don’t know if I could juggle several of them, and this is what makes DeBlasio special.

DeBlasio has a full-time job as Carteret’s CFO and part-time gigs in Keansburg, North Plainfield and the Carteret School District, the report said. He is also currently Highland’s tax collector.

It’s rather convenient that he also serves as a tax collector since it takes a lot of money to finance all his government salaries.

In 2012, DeBlasio’s annual compensation totaled $244,606, more than Gov. Chris Christie or state Treasurer Andrew P. Sidamon-Eristoff, who earn $175,000 and $141,000, respectively.

As the old saying goes, nice work if you can get it.

Maybe it’s time to start a Bureaucrat Hall of Fame, sort of like our Moocher Hall of Fame. In addition to Mr. DeBlasio (and the toll collector mentioned above), charter members could include the following.

When you read these stories, it’s easy to understand why so many states are in fiscal trouble.

And it also makes sense that state and local bureaucrats are far less likely to quit their jobs than folks in the productive sector of the economy. After all, how many people leave positions when they’re being overpaid?

But don’t forget that federal bureaucrats enjoy an even bigger pay advantage over private sector workers. Indeed, my Cato colleague Chris Edwards reports that they get twice as much average compensation as the serfs in the productive sector of the economy who pay their bills.

This video has the unhappy details.

P.S. Super Bureaucrat joins a list of other “super heroes,” including Government Man, and also two caped crusaders inspired by President Obama. Thanks to Michael Ramirez, we have “Stupor Man.” And there’s also Super-President-Constitutional-Law-Professor.

P.P.S. Is there some hidden strand of DNA that causes people named de Blasio to be burdens to taxpayers?

P.P.P.S. Shifting gears, remember our story about ten days ago featuring the little kid who was suspended from school for firing an imaginary bow and arrow? Well, we have another example showing that government schools could be considered a form of child abuse.

A 5-year-old boy was reportedly suspended from school after making a gun gesture with his hand on the playground. His father, David Hendrix, was furious when he found out his son was issued a suspension for the gesture. “He was playing army on the playground,” Hendrix told WBTV.

Yet another argument for school choice.

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New Jersey gets abused by comedians as being some sort of dump, but there are some scenic parts of the state.

So it actually can be a nice place to live. That being said, it’s not a good place to die. Here’s a chart from the American Family Business Foundation that was featured in a recent Wall Street Journal editorial.

As you can see, New Jersey has the nation’s most punitive death tax. Most of the blame belongs to the 35 percent federal tax, but successful residents of the Garden State lose an additional 19 percent of their assets when they die. As the WSJ opined:

Here’s some free financial advice: Don’t die in New Jersey any time soon. If you have more than $675,000 to your name and you die in the Garden State, about 54% may go to the IRS and the tax collectors in Trenton. Better not take your last breath in Maryland either. The tax penalty for dying there is half of a lifetime’s savings. That’s the combined tab from the new federal estate tax rate of 35% and Maryland’s inheritance and death taxes. Maybe they should rename it the Not-So-Free State. …Family business owners, ranchers, farmers and wealthy retirees can avoid that tax by relocating to Arizona, Florida, Georgia, Idaho, South Carolina and other states that don’t impose inheritance taxes. There are plenty of attractive places to go. New research indicates that high state death taxes may be financially self-defeating. A 2011 study by the Ocean State Policy Research Institute, a think tank in Rhode Island, examined Census Bureau migration data and discovered that “from 1995 to 2007 Rhode Island collected $341.3 million from the estate tax while it lost $540 million in other taxes due to out-migration.” Not all of those people left because of taxes, but the study found evidence that “the most significant driver of out-migration is the estate tax.” After Florida eliminated its estate tax in 2004, there was a significant acceleration of exiles from Rhode Island to Florida.

At the risk of stating the obvious, the correct death tax rate is zero, as I’ve explained for USA Today. Indeed, I also cited evidence from Australia and the United States about how people will take extraordinary steps to avoid this wretched form of double taxation.

New Jersey has lots of problems. All of those problems will be easier to fix if successful people don’t leave the state. Sounds like another issue for Governor Christie to address.

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I’m not saying he’s the next Ronald Reagan. Some of his views on global warming/climate change are very troubling. And he’s apparently hopelessly bad on 2nd Amendment rights.

But I’m incredibly impressed at his ability to fight back against spoiled, pampered, over-compensated government bureaucrats. I wish other Republicans could think and talk on their feet like Christie. Watch and enjoy.

Correction – the original youtube video has been removed, but in the comments section, Adrian helpfully draw our attention to this link where you can still Christie in action.

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While I think of myself as being in favor of harsh punishment for criminals, I try to restrain this bloodthirsty impulse by remembering that many laws are unjust, all governments are incompetent, and prosecutors often place personal ambition above justice.

And the last point is why I worry about electing people like Rudy Giuliani to high office. There were several reasons why I wasn’t a big fan of the former New York City Mayor, but high on the list was his apparent disregard for the rights of the individual. And I suspect most people who served as prosecutors/district attorneys/U.S. attorneys/etc have a what-could-possibly-go-wrong attitude about proposals to expand the power of government.

With this in mind, I was happy to read that Governor Christie of New Jersey (a former U.S. attorney) has freed a man who was unjustly convicted and imprisoned for a gun offense. My happiness is tempered by the fact that he commuted the sentence of Brian Aitken rather than pardoning him, which is why the governor gets two cheers rather than three.

The important news, though, is that an injustice has been addressed and Aitken is now a free man. Here’s a blurb from a Fox News report.

A man given seven years in prison after being found with two guns he purchased legally in Colorado has had his sentence commuted, New Jersey Gov. Chris Christie announced Monday. The case of Brian Aitken, 27, had become a cause célèbre among gun-rights advocates. …Aitken had purchased the guns legally in Colorado, and he passed an FBI background check when he bought them, according to his father, Larry Aitken. Brian also contacted New Jersey State Police before moving back back to the Garden State to discuss how to properly transport his weapons. But despite those good-faith efforts, Larry Aitken said, Brian was convicted on weapons charges and sent to prison in August. Judge James Morley would not allow the argument in trial earlier this year and Christie later declined to reappoint the judge due to an unrelated case.

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When politicians and bureaucrats spend our money, they rarely demonstrate any concern about waste and fraud. Why be conscientious, after all, if you’re spending other people’s money – especially if your real goal is to buy votes and get campaign contributions by providing unearned wealth to well-connected insiders?

I’ve always been more concerned about the negative economic impact of government spending and the failure of Keynesian fiscal policy, but it’s also important to focus on waste and fraud. The average taxpayer may not want to get into the weeds of economic theory, but you don’t need an advanced degree to get upset about $27 light bulbs.

Fortunately, auditors caught this example of waste and fraud, but one can only imagine all the nonsense that’s slipping through the net. Here’s an excerpt from a Bloomberg story:

Contractors billed New Jersey $27 for light bulbs, and ran up tens of thousands of dollars in other “unreasonable costs” on a $119 million weatherization program funded with U.S. stimulus money, the state auditor said. …One contractor sought $27 for light bulbs, while another billed $1.50 for similar items, according to the report and Assistant Auditor Thomas Meseroll. Another vendor charged $75 for carbon-monoxide detectors that it had provided to a different program for $22, the report said. Eells also cited $32,700 in auditing fees when “no services had been performed” and $69,000 in construction costs that couldn’t be verified.

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This definitely belongs in the OMG category. Bureaucrats at the New Jersey Turnpike Authority are ripping off taxpayer is a spectacular fashion. Here are some stunning details.

Auditors say the New Jersey Turnpike Authority wasted $43 million on unneeded perks and bonuses.  In one case, an employee with a base salary of $73,469 earned $321,985 when all payouts and bonuses were included. The audit says that toll dollars From the New Jersey Turnpike and the Garden State Parkway were spent on items ranging from an employee bowling league to employee bonuses for working on birthdays and holidays. It took place as tolls were being increased. The biggest expense uncovered in the audit was $30 million in unjustified bonuses to employees and management in 2008 and 2009 without consideration of performance. One example was paying employees overtime for removing snow and working holidays and then giving additional “snow removal bonuses” and “holiday bonuses.” …Among the questionable legal expenses was a billing for $111,840 for a law firm’s weekly internal status meetings that were generally attended by 10 to 15 of the firm’s attorneys and two to three of its paralegals.

P.S. I’m getting rid of the “Part XLIII” part of the “Taxpayers vs Bureaucrats” series. In the beginning, I figured it was a good way of emphasizing the scope of the problem, but now it’s become a bit of a pain (especially since I started having to go online to figure out how to translate numbers into roman numerals).

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I wish GOPers in DC could make persuasive arguments like this. One has to wonder whether Governor Christie will be a player in 2012.

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My default assumption is that all politicians will do the wrong thing when they have to choose between defending freedom and appeasing special interests. Even the ones that spout good rhetoric often do the wrong thing, particularly after a couple of years in office (sort of like being assimilated by the Borg, for you Star Trek fans). So I did not hold out much hope that Chris Christie would have any positive impact on New Jersey. I’m glad to report that (at least so far) I was wrong. Here’s a excerpt from a National Review article about what he’s accomplished. The excerpt is long, but the details are important. And since I obviously had to summarize, you should read the entire article to more fully appreciate how Christie seems to be the real deal.
…on February 11, Christie addressed a special joint session of the state legislature, replacing the vague promises of the campaign trail with first principles, and elaborating the constraints under which he was determined to govern: “Our constitution requires a balanced budget. Our commitment requires us to begin the next fiscal year with a prudent opening balance. Our conscience and common sense require us to fix the problem in a way that does not raise taxes on the most overtaxed citizens in America. Our love for our children requires that we do not shove today’s problems under the rug only to be discovered again tomorrow. Our sense of decency must require that we stop using tricks that will make next year’s budget problem even worse.” And in an extraordinary move, he then declared a fiscal state of emergency, announcing that by executive order he would impound $2.2 billion in appropriations from a fiscal year that was already seven months gone. That figure represented virtually every dollar the state was not legally obligated to pay out for the remainder of the year. In Bagger’s words, it was “everything that wasn’t nailed down.” “By doing that so quickly and so dramatically, and by executive action, it really set the stage,” Bagger says. “It was just a very clear declaration that there’s a new reality.” There was much wailing and teeth-gnashing about the cuts among Democrats. Sweeney accused Christie of “pick[ing] someone else’s pocket,” and senate majority leader Barbara Buono went so far as to say the executive order had “declare[d] martial law” in New Jersey. This raised the stakes significantly for the FY 2011 budget battle, which was then only beginning. In the year to come, the state would face an $11 billion deficit that made the previous shortfall look like a gratuity. It was a big hole, and Christie needed Democratic votes to close it. But he had no intention of mollycoddling the other side. On March 16, the governor went back before a joint session of the legislature and introduced a $29.3 billion budget that doubled down on his most controversial measures, trimming fat — and muscle, and sinew — from virtually every department and every entitlement in the state. The budget did small things, like reducing overtime hours, shrinking the state’s fleet of official vehicles, replacing paper with digital filing, and consolidating government office space. It cut the pay and pension eligibility for members of a number of state boards and commissions, many of whose duties required them to do little more than attend once-monthly meetings. It saved $216 million by eliminating a number of wasteful programs, and another $50 million by privatizing others. But the budget did big things as well. It shrank the state’s major spending programs — including many that were, the governor admitted, not without merit — by reducing base appropriations and either scaling back or eliminating scheduled funding increases. It converted the state’s property-tax rebate system — long funded by borrowing, at interest, to cut checks to homeowners — with tax credits. It cut $466 million in local aid, against Trenton’s trend of corralling more and more municipal tax dollars for the purposes of redistribution, while pushing a constitutional amendment that would limit towns’ ability to raise property taxes in the future. And like Corzine before him, Christie deferred payments to the state’s pension program to secure $3.1 billion in savings, under the justification that it was imprudent to sink more money into a failing system. But unlike Corzine, Christie pushed through tough pension reforms that rolled back overgenerous payment increases, limited payouts for unused sick leave, and enrolled new workers into 401(k)s. He’d also signed a law requiring public employees to pay at least 1.5 percent of their salaries toward their health benefits, which would save the state and local governments hundreds of millions each year. But what caused the first and most strident wave of opposition to Christie’s agenda was his decision to slash funding for public education, by some $820 million. …A near-pristine version of Christie’s budget passed at 1:13 a.m. on June 29, less than 24 hours before the constitutional deadline. …But as significant as his early victories have been, Christie must now turn to pushing the structural reforms that will institutionalize his vision of leaner, meaner state government. …Even as he was fighting the budget battle, the governor was barnstorming the state to talk up perhaps the most significant of these reforms: his “Cap 2.5” initiative, which would constitutionally limit the ability of municipalities to raise property taxes. The cap is popular among residents, most of whom pay the preponderance of their non-federal tax liability in property taxes. …But Christie’s amendment is at the mercy of the Democratic legislature, whose assent is required for a popular referendum on it. …Christie has vowed not to give up the fight. Other battles loom wherein the governor’s chances for success are highly uncertain. He has promised yet more pension and compensation reforms, moves that could break his tenuous alliance with the reformist elements in the Democratic party and push his openly hostile relationship with labor beyond Thunderdome. …Senator Kean, who hopes to move from minority to majority leader, has confidence that Christie will continue to stick to his guns. “The governor has an internally strong constitution — that’s who Chris is — and he has an externally strong constitution in the constitution of the State of New Jersey,” Kean says. “I think he is absolutely the genuine article. That’s why we won’t ever go back to the status quo, at least not under Chris Christie’s governorship.”

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Chris Christie of New Jersey has done a remarkable job so far, but his biggest battles are still ahead of him. A key fight is whether the state will impose a cap on property taxes. As the Wall Street Journal opines, this reform has worked very well in Massachusetts and is critical to curtailiing the greed of government employee unions in the Garden State.
The Governor wants to cap annual property tax increases at 2.5%, on the model of the successful cap that Massachusetts imposed in 1980. Over the next 27 years, property taxes in the Bay State rose 22% compared to 68% nationwide and 102% in New Jersey. The cap is crucial to preventing local Garden State school districts, which are dominated by teachers unions, from raising taxes and thus defeating whatever spending restraint Mr. Christie can impose on Trenton. The unions know this, which is why they’ve spent some $7 million in TV ads portraying Mr. Christie as the scourge of police, firefighters and children. The Governor’s approval rating has held up well despite the onslaught, which may reflect that voters understand the state’s new fiscal reality. New Jersey’s property taxes and its overall state and local tax burden are the nation’s highest, and the state hasn’t created a single net new private job in a decade. Democrats who run the state legislature have counter-offered with a 2.9% cap, but with so many spending exceptions that it’s more fig leaf than cap. Their bill would allow lawmakers to raise property taxes above the cap to pay for pensions, health care and utility costs and, here’s the kicker, even in order to promote the health, safety or welfare of the municipality. …This showdown is worth watching because Mr. Christie has shown admirable political grit so far, and success in New Jersey would bolster the nerve of other reform governors. One temptation for Mr. Christie would be to settle for too little reform when his political capital is at its highest, which was Arnold Schwarzenegger’s original mistake in California. …Mr. Christie’s best reform opportunity is now, and taxpayers everywhere should hope he succeeds.

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I may as well confess that I have a man-crush on Governor Christie. It’s not nearly as bad as Andrew Sullivan’s fixation on Obama (and it certainly hasn’t involved me changing my views), but this video and the excerpt below are two examples of a politician actually doing the right thing and giving intelligent and coherent explanations to justify his actions. The video shows him taking on the teacher unions and the story is about his veto of a class-warfare tax bill.

Christie may wind up “growing in office” and becoming a squish, but so far he is the nation’s most impressive Republican politician. That’s normally damning with faint praise, but not in this case.

It took about two minutes from the time Senate President Steve Sweeney certified the passage of the millionaires tax package for Gov. Chris Christie to veto the bills at his desk. “While I have little doubt that the sponsors and supporters of this bill sincerely believe that the state can tax its way out of this financial crisis, I believe that this bill does nothing more than repeat the failed, irresponsible and unsustainable fiscal policies of the past,” wrote Christie in his veto statement. “Now is not the time for more of the same. Ultimately, another tax increase will punish the state’s struggling small businesses and set our economy further back from recovery.”

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He’s only been Governor for a couple of months, and we have seen other elected officials start strong and then get captured by the special interests, but it certainly appears that Governor Christie of New Jersey genuinely intends to rescue his state from becoming the Greece of America. Here’s an excerpt of what George Will just wrote, which included some spot-on analysis of the role of tax competition as a tool for constraining greedy politicians:

At the Pennsylvania end of the bridge, cigarette shops cluster: New Jersey’s per-pack tax is double Pennsylvania’s. In late afternoon, Gov. Chris Christie says, the bridge is congested with New Jersey government employees heading home to Pennsylvania, where the income tax rate is 3 percent, compared with New Jersey’s top rate of 9 percent. There are 700,000 more Democrats than Republicans in New Jersey, but in November Christie flattened the Democratic incumbent, Jon Corzine. Christie is built like a burly baseball catcher, and since his inauguration just 13 weeks ago, he has earned the name of the local minor-league team — the Trenton Thunder. He inherited a $2.2 billion deficit, and next year’s projected deficit of $10.7 billion is, relative to the state’s $29.3 billion budget, the nation’s worst. Democrats, with the verbal tic — “Tax the rich!” — that passes for progressive thinking, demanded that he reinstate the “millionaire’s tax,” which hit “millionaires” earning $400,000 until it expired Dec. 31. Instead, Christie noted that between 2004 and 2008 there was a net outflow of $70 billion in wealth as “the rich,” including small businesses, fled. And he said previous administrations had “raised taxes 115 times in the last eight years alone.” …New Jersey’s governors are the nation’s strongest — American Caesars, really — who can veto line items and even rewrite legislative language. Christie is using his power to remind New Jersey that wealth goes where it is welcome and stays where it is well-treated. Prosperous states are practicing, at the expense of slow learners like New Jersey, “entrepreneurial federalism” …competing to have the most enticing business climate.

Meanwhile, a column from the Wall Street Journal makes some of the same points, noting that productive people will move across borders when they reach a tipping point. This underscores the value of tax competition – which is made possible by federalism, and also shows the Laffer Curve in action:

Mr. Christie has started spreading the news that the Garden State aims to compete once again for businesses, jobs and residents. He notes that for years the state offered a better tax environment than New York, which encouraged city dwellers to discover New Jersey’s beautiful suburbs. Mr. Christie says that he recently bumped into former New York Gov. George Pataki, who noted that he’d been shocked to learn that New Jersey now has an even higher burden than its tax-crazy neighbor. “See what happens when you’re not looking?” he said to Mr. Pataki. “Snuck right up on ya.” The governor aims to move tax rates back to the glory days before 2004, when politicians lifted the top income tax rate to its current level of almost 9% from roughly 6%. Piled on top of the country’s highest property taxes, as well as sales and business income taxes, the increase brought the state to a tipping point where the affluent started to flee in droves. A Boston College study recently noted the outflow of wealthy people from the state in the period 2004-2008. The state has lately been in a vicious spiral of new taxes and fees to make up for the lost revenue, which in turn causes more high-income residents to leave, further reducing tax revenues.

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Barack Obama wants higher tax rates on the so-called rich, including steeper levies on income, capital gains, dividends, and even death! Along with other greedy politicians in Washington, he acts as if successful taxpayers are like sheep meekly awaiting slaughter. In reality, class-warfare tax policies generally backfire because of the five reasons outlined in this video:

A new study from Boston College provides additional evidence about the consequences of hate-and-envy tax policy. The research reveals that high tax rates in New Jersey have helped cause wealthy people to leave the state, leading to a net wealth reduction of $70 billion between 2004 and 2008. Wealth and income are different, of course, so it is worth pointing out that another study from 2007 estimated that the state lost $8 billion of gross income in 2005. That’s a huge amount of income that is now beyond the reach of the state’s greedy politicians. Here’s a report from the New Jersey Business News:

More than $70 billion in wealth left New Jersey between 2004 and 2008 as affluent residents moved elsewhere, according to a report released Wednesday that marks a swift reversal of fortune for a state once considered the nation’s wealthiest. Conducted by the Center on Wealth and Philanthropy at Boston College, the report found wealthy households in New Jersey were leaving for other states — mainly Florida, Pennsylvania and New York — at a faster rate than they were being replaced. …The study – the first on interstate wealth migration in the country — noted the state actually saw an influx of $98 billion in the five years preceding 2004. The exodus of wealth, then, local experts and economists concluded, was a reaction to a series of changes in the state’s tax structure — including increases in the income, sales, property and “millionaire” taxes. “This study makes it crystal clear that New Jersey’s tax policies are resulting in a significant decline in the state’s wealth,” said Dennis Bone, chairman of the New Jersey Chamber of Commerce and president of Verizon New Jersey. …In New Jersey, the top 1 percent of taxpayers pay more than 40 percent of the state’s income tax, he said. “That’s probably why we have these massive income shortfalls in the state budget, especially this year,” he said. Until the tax structure is improved, he said, “we’ll probably see a continuation of the trend, until there are no more high-wealth individuals left.” He added the report reinforces findings from a similar study he conducted in 2007 with fellow Rutgers professor Joseph Seneca, which found a sharp acceleration in residents leaving the state. That report, which focused on income rather than wealth, found the state lost nearly $8 billion in gross income in 2005. …Ken Hydock, a certified public accountant with Sobel and Company in Livingston, said in this 30-year-career he’s never seen so many of his wealthy clients leave for “purely tax reasons” for states like Florida, where property taxes are lower and there is no personal income or estate tax. In New Jersey, residents pay an estate tax if their assets amount to more than $675,000. That’s compared to a $3.5 million federal exemption for 2009. Several years ago, he recalled, one of his clients stood to make $60 million from stock options in a company that was being acquired by another. Before he cashed out, however, the client put his home up for sale, moved to Las Vegas, and “never stepped foot back in New Jersey again,” Hydock said. “He avoided paying about $6 million in taxes,” he said. “He passed away two years later and also saved a huge estate tax, so he probably saved $7 million.”

Still not convinced that high tax rates are causing wealth and income to escape from New Jersey? The Wall Street Journal wrote a very powerful editorial about the Boston College study, noting that New Jersey “…was once a fast-growing state but has now joined California and New York as high-tax, high-debt states with budget crises.” But the most powerful part of the editorial was this simple image. Prior to 1976, there was no state income tax in New Jersey. Now, by contrast, highly-productive people are getting fleeced by a 10.75 percent tax rate. No wonder so many of them are leaving.

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Yesterday’s elections were almost a complete disaster for the White House. In the races for governor, the GOP won a huge landslide in Virginia and knocked off the Democratic incumbent in New Jersey. The only silver lining to Obama’s dark cloud came in upstate New York, where the collectivist Republican nominee apparently was successful in helping the Democratic candidate beat the Conservative Party candidate in the race to fill a seat in the House of Representatives.

But this was a 99 percent defeat for the Obama Administration. Especially New Jersey.

From a policy perspective, it will make Democrats on Capitol Hill much more nervous about supporting government-run health care. This does not guarantee the defeat of Obamacare, but it is much less likely now than it was 24 hours ago.

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