Gov. Chris Christie (R-NJ), despite the budget woes faced by the Garden State, has seen fit to twice veto a millionaires tax passed by his state’s Democratic legislature. Christie, backed up by his chief economist, Charles Steindel, claims that enacting a millionaires tax would drive wealthy New Jerseyans out of the state. “Ladies and gentlemen, if you tax [millionaires], they will leave,” Christie says.
However, just a few months before joining the Christie administration, Steindel had a very different view, as Bloomberg News noted. In a report for the New York Federal Reserve, Steindel and his co-authors wrote that increasing taxes on high-income households was a good tool for balancing the state’s budget, as it has the advantage of placing the burden of deficit reduction on those who can afford it:
Another approach to closing sizable budget gaps like New York’s and New Jersey’s is to follow a policy rule of temporarily raising income taxes on high-income households during a downturn. The advantage of this approach is that it places a larger burden on households that are less liquidity-constrained than the average household during an economic decline (and less liquidity constrained than the state itself). Such a tax would be removed once the economy begins to improve. Edgerton, Haughwout, and Rosen (2004) point out that New York City has adopted this balancing strategy in the past, adding temporary surcharges to the top income tax bracket during downturns.
The report is careful to caveat that all the proposed approaches have drawbacks, but there is nothing resembling Steindel’s denunciation of a millionaire’s tax that he officially released one year later for the Christie administration. “I would assume [Steindel] had to take a special course at the University of Christie to reorient his economic thinking,” said state Senator Loretta Weinberg (D).
A study released last week by the Political Economy Research Institute at the University of Massachusetts found that contrary to conservative beliefs, millionaires don’t move to avoid higher taxes. “The evidence available in the research literature suggests that the worst fears of the policy debates over raising additional revenue from high-income households to sustain spending on public services are unlikely to materialize,” the study says. “They will not cease working, stop investing, or even move.” And once upon a time, Christie’s own economist seemed to believe that was the case, as well.