Here’s a great story on the unintended consequences of taxation in my home state of Maryland.
A long time liberal bastion, it’s a place where soaking taxpayers of all sorts is a bigger sport than the game of lacrosse. Here in the land of pleasant living, it ranks right up there with crab cakes among the ruling elite.
The latest group to feel their hooks was none other than the states’ millionaires.
Apparently they weren’t paying their “fair share” which made them a juicy target for local class warriors.
So the fine folks in Annapolis decided to paper over their own problems by putting their hands much deeper into the pockets of the state’s top earners.
The funny thing is a bunch of them decided to take matters into their own hands. Instead they packed up and left.
From The Wall Street Journal entitled: Millionaires Go Missing
“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.'”
I guess that gives a whole new meaning to the idea that Maryland is somehow ” The Free State”.
Free to leave maybe. Nice work Governor.
Have a great weekend.
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