Wednesday, April 15, 2009

Overtaxed Executives

Memo to the governors of New York, New Jersey and Connecticut ... your executive talent pool is looking to bolt.

The barrage of recently announced state taxes has put many of those earning $250,000 or more in an untenable situation. And while some believe that these executives are people who can afford to pay more taxes, the reality is most can't.

The numbers don't lie

A senior executive I've coached for years is a prime example. He holds a highly responsible position at his company, earns a base salary of $175,000 and in some former years, almost doubled that with his bonus. His wife is a substitute teacher in New Jersey and between the two salaries, they've been providing for three children, employing a nanny, making monthly payments on two cars and a home mortgage and spending their fair share to best support the local economy.

However, his company did not award bonuses this year. His retirement portfolio declined by over 45% in 2008 and he pulled money out of his 401K recently to put on a badly needed new roof. His local property taxes have been rising steadily and he'd like to sell his house and downsize, but with the declining home values in the area, he finds he owes more on his house than it is worth.

His wife has been trying to get a full-time teaching position, but the funding has been cut back, so no solution there.

And now his already high-taxed state, one of the highest in the country, is raising the state income tax.

Recipe for disaster

As the tri-state area's governors seek to balance their budgets, they seem to have found no other alternative than to raise existing taxes and impose new ones to make up the shortfall.

This looks like it will backfire.

Many of the six-figure earners I'm coaching are exploring job options in states where they can keep more of their earnings. They argue that paying higher taxes for fewer services, while at the same time digging themselves into a deeper financial hole, defies logic.

Add to that the fact that career opportunities in the New York area are not exactly flourishing and you can understand why so many executives are willing and even eager to search elsewhere.

So at a time when the best and the brightest are needed to stay right here and lead our local market out of the current economic morass, the government is driving them away.

Now how exactly is this economic recovery working?

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