As published in the Winter Park/Maitland Observer, Thursday Jan. 3, 2012 Edition Offers... Read More »
Rich Folks Flee Maryland, Say Goodbye to High Taxes
Maryland should change it’s state motto from Fatti Maschii Parole Femine ¹ to “we hate rich people, please don’t leave.”
The Wall Street Journal reports in an op-ed titled Maryland’s Mobile Millionaires that soaking the rich, instead of creating revenue for states, actually loses revenue (emphasis added):
We reported in May that after passing a millionaire surtax nearly one-third of Maryland’s millionaires had gone missing, thus contributing to a decline in state revenues. The politicians in Annapolis had said they’d collect $106 million by raising its income tax rate on millionaire households to 6.25% from 4.75%. In cities like Baltimore and Bethesda, which apply add-on income taxes, the top tax rate with the surcharge now reaches as high as 9.3%—fifth highest in the nation. Liberals said this was based on incomplete data and that rich Marylanders hadn’t fled the state.
Well, the state comptroller’s office now has the final tax return data for 2008, the first year that the higher tax rates applied. The number of millionaire tax returns fell sharply to 5,529 from 7,898 in 2007, a 30% tumble. The taxes paid by rich filers fell by 22%, and instead of their payments increasing by $106 million, they fell by some $257 million.
One-in-eight millionaires who filed a Maryland tax return in 2007 filed no return in 2008. Some died, but the others presumably changed their state of residence. (Hint to the class warfare crowd: A lot of rich people have two homes.)
But, as I’ve written before, the losses of Maryland and other high-tax state are the gains of the low-tax states states:
A Bank of America Merrill Lynch analysis of federal tax return data on people who migrated from one state to another found that Maryland lost $1 billion of its net tax base in 2008 by residents moving to other states. That’s income that’s now being taxed and is financing services in Virginia, South Carolina and elsewhere.
States like Florida and Texas have no personal income tax, so the savings for a rich person who stops paying taxes in Baltimore or Montgomery County can be in the hundreds of thousands of dollars each year. Montgomery County, outside of Washington, D.C., is Maryland’s wealthiest and was especially clobbered, losing nearly $4 billion in taxable income in 2008, with some 80% of those lost dollars from high-income returns.
The stupidity of some politicians is staggering.
Everyone knows that U.S. corporations often set up operations overseas in order to reduce costs. This is an expensive proposition, yet they do it. And a fifth grader is smart enough to deduce that relocation to another state is less costly than relocation to another country. How is it, then, that the state politicians of Maryland, Oregon, New Jersey, Colorado, Illinois and Washington failed to anticipate “wealth flight” when they chose to enact class warfare policies and further tax the rich?
What the people of these tax-happy states need instead of a tax on rich people is a tax on imbecilic legislators. If they’re lucky, it will induce moron–flight.
Hopefully, not to Florida.
¹ English translation: Strong deeds, gentle words. An ironic motto, indeed, since Maryland’s rich are now using the gentle words “bye-bye” while doing the strong deed of fleeing the state.
² As the WSJ article accurately points out relocation within America’s border is an easy and welcome transition for many rich people because a great many of them have second homes in Florida and other low tax states.