TRENTON – David Rosen, budget officer for the Office of Legislative Services, told the Senate Budget and Appropriations Committee today that nearly all of the fluctuation in state revenue comes from high-income taxpayers, i.e. millionaires whose fortunes are tied to economic health nationally.
OLS presented a graph in their revenue projection packet that shows roller-coaster spikes and dips in gross income for Garden State millionaires going back to the 1990s. Overlaid on the graph, OLS presented the fluctuations of the S&P 500 Index over that time that mirrors almost exactly the pitfalls and upshots in state revenue.
“Is this spike in the income tax purely driven by Wall Street,” state Sen. Paul Sarlo, (D-36), of Wood-Ridge asked Rosen.
Not exactly, he responded. There is “some direct causation” between the health of Wall Street, as represented by the S&P 500, and the level of the state’s coffers.
“I don’t know if it’s all directly flowing from Wall Street,” Rosen said. “Clearly it’s high-end income.”
Sarlo challenged Gov. Chris Christie’s allegations that a millionaire’s tax was driving people out of the state. “This revenue picture, doesn’t that completely contradict that?”
Rosen’s office presented another graph – matching distinctly to the eye the other two graphs – that shows the number of millionaires in the state, also fluctuating in near lockstep with the S&P indicator.
Rosen said the number of millionaires in the state is “a function of what’s happening in the economy,” not specifically a state tax.
“Most tax strategy behavior of taxpayers living in any state is more related to federal tax rates – because they are much higher – than state tax rates
State Sen. Anthony Bucco, (R-25), of Boonton, asked, “It’s possible when you start talking about a second drop…in the market, a second dip. Is that possible?”
Rosen said a “second dip” is possible, and again noted the difficulty in projecting such outcomes.
State Sen. Steve Oroho, (R-24), of Franklin Township, asked if the OLS projections are based on S&P gains, which could rise or fall drastically against where it is currently at.
Rosen said the projection “assumes that the stock market is essentially flat” for the fiscal year. “But it certainly can go in either direction.”