For decades, New York City residents and firms, seeking a haven from high taxes and overregulation, fled to New Jersey, boosting the state’s population and its economy. But a steady diet of New York–like tax increases and business-toxic legislation has reversed that trend, sending residents and businesses rushing for the exits and putting Jersey’s economy into a tailspin. (“The Mob That Whacked Jersey,” Spring 2006.)

After a tumultuous summer, marked by a budget confrontation between new governor Jon Corzine and the state legislature, resulting in an embarrassing shutdown of government for several days and a $1.2-billion-dollar tax hike, Jersey now has even more bad news to deal with. The state’s economy was anemic in 2006, adding private-sector jobs at less than one-half the national rate, marking the third straight year that its growth has lagged the nation’s. Even worse, much of Jersey’s job growth is in low-wage service employment. Industries that feature higher-paying jobs, like telecommunications and financial services, have produced little new employment.

A dispirited business community, meanwhile, thinks that the harsh times won’t end anytime soon. More than half the state’s businesses believe that Jersey’s economy will be worse in 2007, and only 17 percent now say that the state is a good place to expand in, according to a recent New Jersey Business & Industry Association survey.

State residents, weighed down by the highest local property taxes in the nation and a bevy of steep state levies, seem equally disenchanted. The number of residents moving out has tripled in four years, to about 72,000 last year, the U.S. Census Bureau recently noted, leaving Jersey with an essentially flat 0.2 percent overall population growth rate, as births and foreign immigration barely keep up with the exodus. With these latest census figures, Jersey has ceded its place as one of the country’s ten most populous states for the first time since 1920.

Corzine has accomplished little in his first year in office that might staunch the outflow of residents or encourage businesses. After the tax increase, Corzine rejected proposals by legislators from his own party to cut government spending by trimming sky-high public-sector employee benefits. Balking at taking on public-sector unions, Corzine instead is exploring ways to raise revenues through fiscal gimmicks, such as selling the New Jersey Turnpike for $10 billion and putting a big chunk of the proceeds toward fulfilling his campaign pledge to cut property taxes. Such a move, of course, would do nothing to trim government spending and would put Jersey in an even bigger hole when the money from the Turnpike sale ran out in a few years.

After an unparalleled run that began in the post–World War II era, in which it blossomed, luring New York companies and growing its economy at twice its neighbor’s rate, the Garden State now seems stuck in the same kind of managed decline that the Empire State has experienced for the past 40 years.

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