One of my favorite sites, The Tax Foundation, had a phenomenal couple posts about Maryland’s so-called Millionaire Tax. The two main posts are, Maryland’s Millionaires Missing After Tax Hike and Maryland’s Lawmaker Proposes making Millionaires’ Tax Permanent. Maryland, like many other States out there are hurting for cash, so what else can a state to do except attack high income tax payers. Remember: No One Cares if We Tax the Hell out of the High Income Earners. Oh wait…someone does care. THE EARNER.
Maryland’s Millionaire Tax
As reported by The Tax Foundation Maryland imposed a tax starting in 2008 which taxed high earners:
- 5% on income between $150,000 and $300,000 (between $200,000 and $350,000 for couples);
- 5.25% on income between $300,000 and $500,000 (between $350,000 and $500,000 for couples);
- 5.5% on income between $500,000 and $1 million;
- and 6.25% on income over $1 million.
That tax was implemented in 2008. Well, what occurred:
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.)
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.
Thanks in part to its soak-the-rich theology, Maryland still has a $2 billion deficit and Montgomery County is $760 million in the red. Governor Martin O’Malley’s office tells us he wants the higher rates to expire “as scheduled at the end of 2010.” But there are bills in both chambers of the legislature to extend the surcharge. The state’s best hope is that politicians in other states are as self-destructive as those in Annapolis.
Tax them too much, and high earners will just leave!