In Maryland, Higher Taxes Chase Out Rich: Study

[Parkbandit]

A new report says wealthy Maryland residents may be moving out due to recent tax hikes – a finding that is sure to escalate the battle over taxing the American rich.

The study, by the anti-tax group Change Maryland, says that a net 31,000 residents left the state between 2007 and 2010, the tenure of a "millionaire's tax" pushed through by Gov. Martin O'Malley. The tax, which expired in 2010, in imposed a rate of 6.25 percent on incomes of more than $1 million a year.

The Change Maryland study found that the tax cost Maryland $1.7 billion in lost tax revenues. A county-by-county analysis by Change Maryland also found that the state’s wealthiest counties also had some of the largest population outflows.

In total, Maryland has added 24 new taxes or fees in recent years, Change Maryland says. Florida, which has no income-tax, has been a large recipient of Maryland's exiled wealthy.

“Maryland has reached the point of diminishing returns. We're taxing people too much and people are voting with their feet," said Change Maryland Chairman Larry Hogan. “Until we change our focus from tax increases to increasing the tax base, more people are simply going to leave, leading to a downward spiral of raising revenues on fewer citizens."

CNBC article

If people believe you are taxing them unfairly, they will move to a city/state/country that they believe doesn't. Raising taxes, even on evil rich bastards doesn't always prove to be a good revenue policy.

[AbnInfamy]

Maryland has more than 31000 people making over $1.8 million a year?

[Parkbandit]

Maryland has more than 31000 people making over $1.8 million a year?

The tax was on anyone making over 1 million a year.

[g++]

Not really anything new. People have been dodging taxes by living in PA and commuting over a 100 miles to Baltimore/Baltimore County for the past 30 years. I suggest a 900 dollar toll on I-83 personally. I wouldn't miss their sunny personalities or driving abilities either.

[AbnInfamy]

I was assuming that each person was paying an average of $55,000 to make up that $1.7 billion. Which is 6.25% of $880,000. So for it to be an additional tax they would have to make over $1.8 million, on average.

[Latrinsorm]

If I may offer an alternative hypothesis: People who make more tend to be older. People who are older tend to retire more. People who retire tend to move to someplace nice: your Floridas, etc. (Not Maryland.) When we see increased rich emigration, all we are really seeing is the Baby Boom.

My advice to the Change Maryland group would be to actually find these people and ask them why they left. That would be a lot more convincing than just making up a reason.

[Parkbandit]

I was assuming that each person was paying an average of $55,000 to make up that $1.7 billion. Which is 6.25% of $880,000. So for it to be an additional tax they would have to make over $1.8 million, on average.

"on average" is different than what you were saying in your first post.

[crb]

I recall a billionaire writing an editorial in the NYT some years back saying goodbye to the big apple for the taxes, he moved to Florida as well.

But ya, this is nothing new:

http://www.investopedia.com/terms/l/laffercurve.asp

At some point higher taxes result in lower revenue.

[Back]

Next thing you know they'll set up Swiss bank accounts and off shore tax havens or even go so far as to renounce their citizenship to avoid paying taxes.

Wait...

[Parkbandit]

If I may offer an alternative hypothesis: People who make more tend to be older. People who are older tend to retire more. People who retire tend to move to someplace nice: your Floridas, etc. (Not Maryland.) When we see increased rich emigration, all we are really seeing is the Baby Boom.

My advice to the Change Maryland group would be to actually find these people and ask them why they left. That would be a lot more convincing than just making up a reason.

People have been moving to Florida for retirement for years... Was there a jump in the number of millionaires doing it for that 3 year period compared to the other previous years?

[Lady Lightning]

While I only know a few millionaires, most of the middle and upper middle class on this end of MD lives in West Virginia to avoid the taxes (particularly real estate). Additionally there is little to no benefit for businesses to move to Maryland, and worse yet, many counties charge an additional business tax. At this point we've shot off both feet and we're aiming for the head.

[Latrinsorm]

As it turns out, Florida in particular has seen less immigration according to this (http://www.reuters.com/article/2012/03/09/us-usa-retirees-idUSBRE82714G20120309) article; however, "The most popular destinations now include Atlanta, Las Vegas, Dallas and Phoenix, but New York, Washington, D.C., and Chicago also attract many retirees." This is interesting for several reasons: who the hell would want to retire to Chicago? and it also represents a very wide range of tax situations. NYC and Chicago are notoriously high tax, while Dallas and Texas are towards the other end. While the article also points out that only 1.6% of retirees move across state lines, I think my hypothesis merits further generalization. We have a study here of people who clearly do not place a lot of emphasis on local/state tax rates. I think the burden falls on Change Maryland to prove that these people did otherwise, rather than merely leap to the plausible conclusion.

[g++]

Meh you could easily make the argument that the data from the article you linked(only 2% of retirees cross state lines) makes the OP more compelling not less. Im sure the original report is blown out of proportion but it takes very little to convince Marylanders that tax dodging is happening. Its prevalent here and always has been. The local governments are extremely spendy and Maryland is a small state surrounded by places with lower taxes (mostly property as Lightning pointed out). Im sure people would be dodging taxes even if they didn't raise taxes and they will continue too even if they are lowered its just the way it is. Its a horrible waste too, I would much rather see a report on the amount of pollution produced and oil wasted because of the property tax differentials.

[Alfster]

Is the Florida real estate marking still horrible for sellers?

[Parkbandit]

Is the Florida real estate marking still horrible for sellers?

For sellers, yes. For buyers... it's awesome.