David Tepper is a hedge fund legend with an estimated $11.4 billion fortune. He is also moving his official residence to Florida, which lacks an income tax or estate tax, and is therefore a fetching locale for extreme wealth. This is a problem for his erstwhile home state, New Jersey, where officials are now having difficulty figuring out how much money they will be able to collect in taxes, Bloomberg reported earlier this week:
“We may be facing an unusual degree of income-tax forecast risk,” Frank Haines, budget and finance officer with the Office of Legislative Services told a Senate committee Tuesday in Trenton.
New Jersey relies on personal income taxes for about 40 percent of its revenue, and less than 1 percent of taxpayers contribute about a third of those collections, according to the legislative services office. A one percent forecasting error in the income-tax estimate can mean a $140 million gap, Haines said.
This is mostly a convenient anecdote about modern inequality. (No one man should have all that power … over a state’s revenue forecast). I would avoid reading too much into it as a parable about the dangers of progressive taxation on the state level, however, given that there’s little evidence that state tax rates have much influence on where Americans typically move.
That said, if your state budget does happen to specifically rely on taxing geographically mobile hedge fund managers, perhaps it’s worth rethinking things.
