Friday, March 12, 2010

Maryland's Mobile Millionaires

The Wall Street Journal has an editorial in today's paper entitled "Maryland's Mobile Millionaires." With the final data now in for 2008, the editorial takes note of the decline in the number of tax returns filed by millionaires in the last reporting year – from 7898 in 2007 to 5529 in 2008. Most significantly, instead of increasing after passage of the Governor Martin O'Malley-led "millionaire's surtax" in 2007, millionaires' tax payments declined by approximately $257 million in 2008.

As the Journal editorial points out, certainly not all the decline in the filing of millionaire returns is due to flight from Maryland. Millionaires die too. And they lose money in stock market declines. But no doubt many just decided to take up residence elsewhere, or to extend their winter vacations in Florida beyond 180 days.

The WSJ editorial concludes:

"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."

It is not very smart – much less a sound basis for making policy – for Maryland's politicians to hope that their brethren in other states are equally as self-destructive. It could turn out to be a false hope.