Maryland Tax Raise Backfires When Millionaires Flee

[Rael]

Millionaires Go Missing
Maryland's fleeced taxpayers fight back.

Here's a two-minute drill in soak-the-rich economics:

Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were "willing and able to pay their fair share." The Baltimore Sun predicted the rich would "grin and bear it."

One year later, nobody's grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates.

No doubt the majority of that loss in millionaire filings results from the recession. However, this is one reason that depending on the rich to finance government is so ill-advised: Progressive tax rates create mountains of cash during good times that vanish during recessions. For evidence, consult California, New York and New Jersey (see here).

The Maryland state revenue office says it's "way too early" to tell how many millionaires moved out of the state when the tax rates rose. But no one disputes that some rich filers did leave. It's easier than the redistributionists think. Christopher Summers, president of the Maryland Public Policy Institute, notes: "Marylanders with high incomes typically own second homes in tax friendlier states like Florida, Delaware, South Carolina and Virginia. So it's easy for them to change their residency."

All of this means that the burden of paying for bloated government in Annapolis will fall on the middle class. Thanks to the futility of soaking the rich, these working families will now pay Mr. O'Malley's "fair share."

[MyLibertyStuff]

Millionaires Go Missing
Maryland's fleeced taxpayers fight back.

Here's a two-minute drill in soak-the-rich economics:

Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were "willing and able to pay their fair share." The Baltimore Sun predicted the rich would "grin and bear it."

One year later, nobody's grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates.

No doubt the majority of that loss in millionaire filings results from the recession. However, this is one reason that depending on the rich to finance government is so ill-advised: Progressive tax rates create mountains of cash during good times that vanish during recessions. For evidence, consult California, New York and New Jersey (see here).

The Maryland state revenue office says it's "way too early" to tell how many millionaires moved out of the state when the tax rates rose. But no one disputes that some rich filers did leave. It's easier than the redistributionists think. Christopher Summers, president of the Maryland Public Policy Institute, notes: "Marylanders with high incomes typically own second homes in tax friendlier states like Florida, Delaware, South Carolina and Virginia. So it's easy for them to change their residency."

All of this means that the burden of paying for bloated government in Annapolis will fall on the middle class. Thanks to the futility of soaking the rich, these working families will now pay Mr. O'Malley's "fair share."

Awesome

[fisharmor]

The point isn't so much how Maryland was screwed by its rich-fleecing strategy.
The point as I see it is this: there's an awful lot of compliance costs involved in maintaining a residency that aren't going to Maryland businesses, either.
So they're not just screwed out of simple income tax revenues... there is all sorts of unaccountable money that isn't getting spent in Maryland. Which means lower sales tax, corporate income tax, and property tax revenues as well.

The message shouldn't be "taxing the rich doesn't work". The message should be "Government can get away with skimming off the top, but as soon as they get greedy they collapse the system".

[qh4dotcom]

I'm not sure how this applies to Obama's tax increase on millionaires...you'd have to leave the country or earn less than $250,000 to avoid it...and if you leave the country and renounce your citizenship you're still supposed to pay it for the next 10 years.

[nobody's_hero]

Just wait until the Maryland liberals pass the fugitive slave laws.

Then we'll see who is equating the 10th Amendment with absolute negatives.



"Pardon me good sir, I'll have to ask you to return my millionaire."

[Krugerrand]

link to OP article in WSJ if interested:
http://online.wsj.com/article/SB124329282377252471.html

[ChaosControl]

They should all band together somewhere, buy up an entire county and then secede from the state and form their own state.

[Krugerrand]

They should all band together somewhere, buy up an entire county and then secede from the state and form their own state.

That would be funny.

[Keith and stuff]

It's good to see people voting with their feet. I did that when I moved from low freedom TN to high freedom NH as part of the Free State Project.

[Mesogen]

Isn't this what happened to California?

Cali raised taxes on the rich and the rich moved to Nevada and Texas.

[Mesogen]

They should all band together somewhere, buy up an entire county and then secede from the state and form their own state.

They could call it Galt's Gulch.

/sarc