Will Maryland’s Millionaires Please Report to the Information Booth?
November 24, 2009
The Maryland Reporter writes that Maryland’s comptroller has issued a sort of missing persons bulletin on the state’s millionaires who may be moving out in response to the new “millionaires tax” that was enacted in 2008. Laura Smitherman at The Sun reports on the story, too, but Jay Hancock thinks the culprit might be estate taxes, not income taxes.
Millionaires’ taxes are all the rage. At the federal level, we’ve seen surtaxes on millionaires suggested to fund health care reform and the war in Afghanistan. And at the state level, the last two years has seen a wave of new tax rates on upper-income people.
When Maryland’s Governor O’Malley first introduced his idea to raise all of the state’s major taxes at once, effective in 2008, we warned that Maryland was ignoring the power of tax competition, and that the new rates might persuade millionaires that they would be better off living elsewhere.
Not that Maryland’s resident millionaires would jump ship right away, but in the medium-to-long term we thought most business-owning millionaires moving to the DC area would choose Virginia’s nearby wealthy neighborhood, McLean, instead of Montgomery County, the home to most of Maryland’s millionaires.
It appears that Maryland’s millionaires might have reacted more quickly than we predicted. As the state comptroller reports, in a normal year, 5-to-6 percent of Maryland’s millionaires move away or die. That is, they file a tax return one year but not the next. This year the percentage was much higher, 7.7 percent. There’s no definitive explanation, but since Maryland is surrounded by states with much lower tax rates, both for millionaires and middle-income people, we can’t help concluding that taxes are pushing people out of Maryland.
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