From the Star Ledger:
You might have seen that Fairleigh Dickinson poll released last week in which a sample of New Jersey residents were asked, “Are you considering a move out of New Jersey in order to improve your standard of living?”
The pollsters reported that 44 percent of New Jerseyans said they have considered leaving the state at some point in their lives.
More important, it showed that a third of those approaching retirement age said they were considering moving out within a mere five years.
The deal called for an increase in the gas tax. That is offset by a small reduction in the sales tax as well as elimination of the estate tax.
There was also a change in the way the state taxed retirement income, a change that created that cliff.
Until that deal went through, the state taxed retirement income as regular income. That was an open invitation for retirees to leave the Garden State for greener pastures, such as Pennsylvania, which excludes pension income from its state income tax, or Florida, which has no state income tax at all.
But there was some good news and some bad news in that 2017 deal.
The good news is that the first $100,000 of retirement income is exempt from the tax.
The bad news is that if you earn one penny over $100,000 then your entire pension is taxed from the first dollar.
This so-called “tax cliff” has the perverse effect of discouraging people from earning the income they need to survive in a high-tax state like New Jersey.
It’s possible to find yourself on the hook for $3,000 or so in taxes for a mere dollar in income.