Lower tax cap attractive to high-income taxpayers
By Doug Gardner
Sunday, October 28, 2018
Carolina Panthers fans know the name David Tepper.
He's the new owner of the Charlotte team, buying the club in May for an NFL-record $2.2 billion.
Tepper is an interesting guy to me because he is a notable tax refugee from New Jersey, my former home state.
The billionaire founder of Appaloosa Management (his hedge fund) fled the Garden State and its 8.97 percent income tax in 2016, settling in Florida with a state income tax of zero. New Jersey also has the distinction of levying the highest property taxes in the U.S. and it has an estate tax.
You don't become worth $11.6 billion (according to Forbes Magazine) by being cavalier about taxes.
Tepper earned $6 billion between 2012 and 2015, forking over more than $500 million in taxes to Trenton. In New Jersey, the top one percent of earners pay one third of all state income taxes, as they do in California, Connecticut and Maryland. This gives the lie to the liberal fiction that the high income don't pay their "fair share," whatever that is.
New Jersey officials noticed when their largest taxpayer departed.
"We may be facing an increased degree of income tax forecast risk," said Frank W. Haines II, chief New Jersey legislative and budget officer, to reporters at the time.
That's a diplomatic way of saying Tepper's departure blew a nine-figure hole in the state budget.
And what did the honorables in the New Jersey General Assembly do about this? They raised the top tax rate on those making over $5 million to 10.75 percent in July. The corporate levy went up from 9 percent to 11.5 percent.
Remember, this is just the state income tax rate. The federal hit goes up to 37 percent on these folks. Some places, like New York City, have a municipal income tax, as well.
Between 1992 and 2014 New Jersey lost $24.91 billion in adjusted gross income as affluent taxpayers left, 60 percent of them for Florida.
When you look at Census Bureau studies, 4.9 million people have moved from the 25 highest-taxed states to the 25 with the lowest rates (like North Carolina) between 2007 and 2016. Households earning over $200,000 comprised only 5 percent of these by headcount, but accounted for 36 percent of the income.
States are starting to pay attention to what these high-income families are doing. Connecticut has a state agency that keeps track of its 100 biggest taxpayers. When they make noise about leaving, the state steps in to mitigate the potential budgetary mayhem.
In 2016, the Nutmeg State appropriated a $22 million grant to Bridgewater Associates, the planet's largest hedge fund, to help it expand operations in the state. They must create 750 new jobs in Connecticut by 2021 to keep the money. Bridgewater CEO Ray Dalio earned $3.9 billion himself in 2011. Several lieutenants took home nine-figure paychecks themselves.
North Carolina has a maximum income tax rate of 5.49 percent. The corporate rate is 3 percent, dropping to 2.5 percent in 2019. Taxes collected have never been higher, according to the N.C. Office of State Budget Management.
Voters are being asked this year whether to enshrine a 7 percent top rate in the North Carolina Constitution, down from the current 10 percent.
This should be of more than passing interest to voters.
It certainly is to David Tepper.
Doug Gardner pays his local, state and federal taxes from the Weeksville section of Pasquotank County