Study by Varner GS refutes Governor Christie’s claims on tax law

A recent study published by Charles Varner, a Princeton doctoral candidate in sociology, and Christobal Young, an assistant professor of sociology at Stanford, has shed doubt on New Jersey Governor Chris Christie’s claim that the proposed “Millionaires’ Tax” would encourage wealthy residents to leave the state.

The proposed tax is currently backed by Democrats in the State House and would tax the state’s wealthiest residents in order to help close New Jersey’s current $10.5 billion budget deficit. It was first enacted by Governor Jim McGreevey in 2004 and was allowed to expire in 2009.

Christie has fought the tax on the grounds that it would deter wealthy citizens from residing in the state. “This is a tax which has proven to be destructive to job creation in states,” he said at a recent town hall meeting, according to The Philadelphia Inquirer. “That’s why states all over the country are rejecting it.”

Varner and Young’s study, however, found Christie’s claim to be false. In their study, which observed the migration patterns of millionaires — defined as those making over $500,000 per year — who were affected by the tax during the two years before and after it was first instated in 2004, they found only minimal migration out of the state.

“We estimated it was approximately 70 millionaires who moved due to the tax increases,” Varner explained. This number makes up only 0.04 percent of the millionaires in New Jersey.

The study also found that, during this same period, the total number of millionaires in the state actually increased by 43 percent, from around 33,000 in 2002 to around 47,000 in 2006.

New Jersey also has one of the highest marginal tax rates in the nation, with nearby states such as Pennsylvania and Connecticut having substantially lower rates.

“We think this is a strong test case,” Varner explained. “Our speculation as to why people did not leave is that people have numerous social and family ties that keep them where they are.”

More broadly, Varner also expressed his concern over the large influence that migration patterns have had on the tax debate. “Taxes are one of the small factors that go into why people might decide to pack their bags and leave the state,” he said.

Opponents of the tax have also claimed that the tax increase would fall heavily on small business owners, but the study showed a statistically negligible outflow of business owners below the top 0.01 percent of earners.

“It goes against what many people are arguing,” Varner said. “Migration statistics of retired people who are 65 years of age or older have a slightly more positive effect.”

Christie, however, has countered the Varner study, according to the Inquirer, with last year’s study by Boston College’s Center on Wealth and Philanthropy, which found that the state lost $70 billion due to Democratic tax increases between 2004 and 2008.

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“I’m shocked to know that a liberal professor from Princeton believes in higher taxes on rich people,” the Inquirer reported Christie as saying. “What’s your next news flash? That President Obama’s running for re-election?”

California, Connecticut, Hawaii, New York, Oregon and Wisconsin currently have millionaire’s taxes. New York’s is set to expire at the end of this year, and Maryland lawmakers are attempting to reinstate the tax after its expiration last year.