Move from NJ because of taxes? Were it that easy...

Next Wednesday, April 29, is Tax Freedom Day in New Jersey. That's the day state residents have earned enough money to pay their total tax bill for the year.

Forgive M and me if we don’t celebrate.

Several times in the past, we’ve discussed getting out of New Jersey because of the tax burden—the biggest in the country. According to the Tax Foundation, Garden State taxpayers give an estimated 11.8% of income, $6,610 per person, to state and local governments.

Stiff price for a back yard
For us, high taxes hit home—literally. We’ve been looking for a while to move up from our three-bedroom townhouse to a four-bedroom, single-family house (“with a back yard,” as my 4-year-old son likes to point out). Higher property taxes mean less house that we can comfortably afford.

Obviously, we’re not alone in our frustration. On Tax Day this year, pseudo-“Boston tea parties” were reportedly held in all 50 states, with participants criticizing the federal government’s proposed tax increases and rash of recent spending. Emotions ran high enough that, at some gatherings, the word “secession” was facetiously hinted at.

Our home, for better or worse
M and I would love to “secede” on a more personal level by moving to lower-tax neighbor Pennsylvania (where I commute to and from for two hours each day). But in reality, we’re not going anywhere soon. New Jersey, whether we like it or not, is home.

The first and foremost reason is that we’re surrounded by family. My stepdaughter’s father lives and works within an easy drive of our house. My parents are five minutes away, M’s father and stepmother perhaps 10 minutes. My brother moved in literally down the street, after spending several years in Boston. Life is (most days) better and easier with family close by.

Second, M worked as a teacher for more than a decade in the New Jersey public school system. In a few years, she’ll go back to work and eventually be eligible for a nice state pension (paid for by those state taxes, and as long as it still exists). Since our only other source of retirement security is a 401(k) plan—which has been slammed in the past several months like everyone else’s—that’s a big incentive to stay put.

Accept what you can't control
We’ve talked round and round about other options, such as moving to one of the Pennsylvania towns just across the Delaware River. In the end, though, we always come back to the same conclusion: The best option is where we are.

It’s easy to get worked up over things you can’t control, like high taxes or the direction of the stock market. But after weighing the pros and cons, both financial and non-financial, you may find you’ve already made the right decision. The next step is to accept it, and move on.

Thanks, Washington, but the economy doesn't need your help

I have a few cherished Philadelphia Phillies bobblehead dolls on a bookshelf in my basement. When M and I aren't looking, our 3-year-old son likes to play with them. So not surprisingly, one day I came home to find Mike Schmidt with his arms snapped off.

"I've told you before: DO NOT TOUCH," I admonished my son while super-gluing Schmidty's limbs back into place. "It's not your toy to play with. Now leave it alone because you'll break it even more."

The "broken" economy
I find myself saying the same things today--except directed at President Bush, Bernard Bernanke, Nancy Pelosi, and all the others in Washington scrambling to "fix" the economy. The stock market is swooning, economic growth is slowing, and people--make that voters--are screaming: "The economy stinks and Washington doesn't care!"

So to show they have a heart, our government officials will offer up what many want: $150 billion to spend in the form of tax rebates, and lowered interest rates for borrowing money "more affordably." But isn't spending and borrowing how we got here in the first place?

As I see it, economic and investing forces aren't broken; they're working quite well. For example, when demand exceeds supply, prices drop (as with the housing market today). And with high risk can come punishing losses instead of soaring gains (as banks and mortgage companies have had to relearn).

No short-term fixes
What is broken is general perception: that Washington must do something to fix the economy. No, it shouldn't. Tax rebates while fighting a multibillion dollar war fought on two fronts and running up a monstrous federal deficit is a bad idea. Making borrowing more attractive while more people are struggling to pay the debt they already have is a bad idea.

No doubt, things look bleak right now. They will likely get worse in the months ahead. Unwinding the housing bubble of the last few years will take some time and involve some pain. Believe me, I don't enjoy seeing that M's and my 401(k) is down about $13,000 since the end of the year alone, and that our townhome has lost about $15,000 in value over the last several months.

But I have little faith that Washington's short-term fiscal band-aids will make things better in the long term. They won't change $90-$100 per barrel oil or fast-rising health care and education costs. Or Americans' general tendency to spend more than they earn.

Instead, the President and Congress should just leave the economy alone. "Don't touch it. It's not your toy to play with. You'll just end up breaking it even more."

Then again, those warnings don't really work with my son, either.

High taxes may be the least of your problems

The politicians here in New Jersey are at it again--trying to figure out a way to lower the highest state taxes in the country. Few Jersey residents believe they'll make much headway, as this Philadelphia Inquirer article points out, and I, too, will believe it when I see it.

But if you think that lower taxes will make a big difference in your personal finances, think again. If you're complaining that taxes are too high and are a big reason you don't have enough money to live, you just might be looking at the wrong side of the equation.

It's not the taxes that are killing you

I was struck by this quote at the end of the Inquirer article linked to above:

"I just spent $200 on beauty products and makeup and had to pay $14 in sales tax," said Elisa, a woman shopping in Atlantic County. "I think that's ridiculous. They better start giving us something back or people are going to start moving to states where they have to pay out less money in taxes."

Now I'm trying hard not to rush to judgment. I've been with my wife M when she's bought makeup and I know it can cost a pretty penny (even at our local drugstore). Plus, I know that M wears makeup to look nice, mostly for me, and so I can be held responsible for the lipsticks and eyeliners in her purse. Guilty as charged. (Though she looks beautiful naturally, too--seriously.)

But $200? For makeup? And then complaining about $14 from a 7% state sales tax?

I can't make that kind of logic add up.

Taxes are a good, not great, deal
No one likes a big tax bill. And I've done my share of griping about the big chunk of our family income that goes to our federal and state governments.

But taxes are a fact of life. They pay for things our country and states couldn't do without, like roads, schools, and the protection of our homes and families. In the big scheme of things they might not be a bargain, but they could be considered a pretty good deal.

Being money-wise is less taxing
I don't know if Elisa is rich or poor. I don't know if that $200 in makeup will last her a year or a month. I don't know if she carefully included the expense in her monthly spending plan.

But if she's in a financial mess, I know one thing: Paying $14 less in taxes--or moving to another state with no sales or income tax--isn't going to get her out. Her best chance at financial redemption is to change how she thinks about her money, and how she behaves in regards to it. Save more, spend less, know where every dollar goes. That's taking a wise approach to managing your money.

It's good advice for every person to follow. And come to think of it, for every legislator too.