The reason for returning to this topic in the midst of our corruption series is because there have been some significant developments in the race to bankruptcy court. However, before reviewing the latest news and seeing which state or city is making the best progress towards government bankruptcy, let’s review how these cities and states got themselves into this financial death spiral position to begin with:
- A government entity keeps expanding its budget, eventually putting pressure on the tax revenue stream it receives.
- At some point, rather than cut government spending or make its programs more efficient financially, the politicians in charge raise taxes to meet the ever growing government expenditures.
- The raising of taxes causes some residents and businesses to leave the city or state for less tax burdensome areas, reducing the tax base and reducing the revenue stream.
- Rather than cut expenses and become more efficient to match the reduced tax revenue stream, politicians in the above cities or states raise the tax burden even more.
- This causes more residents and businesses to flee the city or state, further reducing the tax base and tax revenue stream.
- At some point politicians panic and raise taxes more and start cutting vital government services (e.g. police, fire, education) in order to try and balance government spending against the shrinking tax base and revenue stream.
- The reduction in quality of government services in particular and quality of life in general drives more residents and businesses out of the area.
- Eventually, the expenses, costs and financial liabilities outstrip the reduced tax stream and bankruptcy occurs.
1)Our previous post discussed the great progress Seattle and its mayor are making in the race to bankruptcy court. And while Seattle has entered its own financial death spiral, New Jersey politicians have not been sitting idly by as they also have been driving companies and tax base out of their state:
- Samsung Electronics recently announced that it is moving a significant portion of its instate employee base out of New Jersey and moving to state income tax free Texas.
- The move would take about 1,000 company workers out of New Jersey.
- Samsung had been operating in the state since the 1980s.
- According to a company release: “Samsung Electronics America Inc. is undergoing a business transformation designed to better position our organization for long-term growth and future success. As part of this effort, we are relocating our US headquarters from New Jersey to our existing campus in Plano, Texas, building on our 30-year presence in the state.”
- This out migration comes less than a year after the company opened up a new headquarters campus in New Jersey.
- The New Jersey Business & Industry Association issued a statement that reinforced the perception that New Jersey is not an easy operating climate for businesses, urging the state political class to ease regulations, cut red tape, and make the state more attractive to businesses.
- Statements from the company were typical business nonsense, talking about realigning priorities, focusing resources in one location, etc.
2)But Samsung is not the only major company moving business resources, employees, and tax revenue out New Jersey:
- Budweiser recently announced that it is closing down one of its major historic breweries in Newark, New Jersey.
- While Samsung had a very short major presence in the state, the Newark brewery was a fixture in Newark and New Jersey for 75 years.
- The company also announced that it was selling the brewery property to a commercial real estate company that will likely convert the property to a warehouse facility.
- The brewery had operated through wars, recessions, inflationary periods, the pandemic, hurricanes, and other man made and natural disasters.
- But apparently it could not withstand the unfriendly and high tax environment of New Jersey.
- 475 brewery employees either have to relocate to another out of state Budweiser brewery or look for other employment.
- Has the highest corporate tax rate in the country at 11.5%.
- Has a 2.5% surcharge tax on the largest state employers.
- Has the highest tax burden in the region as a percentage of personal income.
- Has the second highest top personal income tax rate in the country.
- Has one of the highest unemployment insurance tax rates in the country.
- Has the worst business competitiveness rating in the region according to the New Jersey Business and Industry Association.
3)The website for radio station 101.5 recently did an excellent job in documenting how many jobs have been lost in the state since just the beginning of the year. Their review can be accessed at the following link:
https://nj1015.com/nj-job-losses-still-growing/
Some highlights of their reporting include the following:
https://nj1015.com/nj-job-losses-still-growing/
Some highlights of their reporting include the following:
- More than 7,600 employees have been laid off since the beginning of the year.
- These layoffs occurred in all sorts of businesses, including energy, retail, hotel, drug stores, and other business types.
- ExxonMobil is leaving the state in order to reincorporate in Texas, ending a whopping 140 year presence in New Jersey.
- ExxonMobil executives pointed out that Texas has no state income tax and lower business operating costs and regulations.
- The number of Fortune 500 companies headquartered in the state has dropped from 22 in 2018 to 15 in 2025.
- Other companies that have already moved operations and employees or intend to do so out of New Jersey include Verizon, Novartis, Johnson & Johnson, Prudential, JP Morgan Merck, Optum, and Acme supermarkets.
- As the article points out, not only do business and employee tax resources leave but economic vitality and growth, charitable donations, and future growth opportunities leave also.
- One state politician, Heather Simmons, understands the problem: "We grow revenue by growing our economy, not by raising taxes. There is increasing consensus, from the Governor’s office and colleagues in the Legislature, that new revenue must come from economic growth, not from raising taxes."
- A simple concept but one that eludes most politicians in cities and states in a financial death spiral.
- Verizon - 1,319 layoffs in Basking Ridge.
- Bristol Myers Squib - 1,156 layoffs in Lawrence
- Rite Aid Drugstores - 1,122 layoffs around the state, 16 store locations closed.
Yes, Seattle is coming on strong in the race to bankruptcy. California as a state probably still has the state led in the race to bankruptcy. But New Jersey is deep into its own financial death spiral so they are definitely still in the running.
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