April 7, 2011

Maryland's mobile millionaires

After passing a millionaire surtax in May of 2009, nearly one-third of Maryland’s millionaires have gone missing, thus contributing to a decline in state revenues, according to the Wall Street Journal. The politicians in Annapolis said they’d collect $106 million by raising the state’s income tax rate on millionaire households to 6.25 percent from 4.75 percent. 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 percent — fifth highest in the nation. Liberals claimed this was based on incomplete data and that rich Marylanders hadn’t fled the state. Well, when the state comptroller’s office confirmed the final tax return data for 2008, the first year that the higher tax rates applied, it showed:

The number of millionaire tax returns fell sharply toc5,529 from 7,898 in 2007 — a 30 percent decline. The taxes paid by rich filers fell by 22 percent, so instead of their payments increasing by $106 million, they fell by some $257 million.

While in reality a big part of that decline results from the recession that eroded incomes — especially from capital gains — stated the Journal, there is also little doubt that some rich people moved out or filed their taxes in other states with lower burdens. 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.

vvA 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 because of residents moving to other states. That’s income that’s now being taxed and financing services in Virginia, South Carolina and elsewhere, says the Journal.

Montgomery County, outside of Washington, D.C., is Maryland’s wealthiest county and was especially clobbered, losing nearly $4 billion in taxable income in 2008, with some 80 percent of those lost dollars from high-income returns. 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. SOURCE: Kitsap Peninsula Business Journal

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