Maryland's Missing Millionaires

Gov. Martin O'Folley of Maryland is a determined class warfare enthusiast. Since Maryland has greatly overextended itself with entitlement spending, including over-compensating state employees (see my 6 June 2009 entry), it was desperate to increase tax revenues. Gov. O'Folley and the Democrat legislature increased the income tax rate on millionaires to 6.25%, among other tax increases. The counties in Maryland add on to the income tax rate, with the richest counties adding tax rates of 3.2% on top of the state income tax rate.

The state anticipated collecting an additional $106 million for the politicians to spend. But, the millionaires wound up paying $100 million less instead. In 2007, 3000 millionaires paid taxes in Maryland, while in 2008, only 2000 millionaires paid taxes in Maryland. Some of this decline was due to the recession. Taxes too dependent upon higher income taxpayers are also subject to greater swings in revenue in accordance with the economy's swings. Highly progressive income tax rates have thus created major recession decreases in California, New Jersey, and New York, for example.

Many millionaires own second homes in other states and these are commonly states with lower income taxes than Maryland has. Florida, Virginia, South Carolina, and Delaware are such states where many Marylanders have second homes. It is easy to change residency from Maryland to the state in which their second home lies and it appears that many did just that. I expect we will see the state of Maryland challenge some of these changes of residency. It will be interesting to see how many millionaires have moved out of the state, when someone figures that out. At least, it will be interesting to see how long it will be before there are 3,000 millionaire tax filers in the so-called Free State of Maryland again.

P.S. Most people call the Governor of Maryland Martin O'Malley, but O'Folley is a more honest name, unless you note that Malley relates to mal, which as a noun is 'evil' in French, as an adjective is 'wrong,' and as an adverb is 'badly.'