There is a glaring inaccuracy in the linked WSJ article on vanishing Maryland millionaires. Essentially, It is not “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.
It is a one-minute, fifty-second drill in soak-the-rich economics. I was curious, and timed myself reading it aloud. Admittedly, I talk quickly sometimes, but I made it a point to try to pace myself for this one.
Otherwise, it’s an article that’s almost brutal in its simple accuracy. The refusal of fans of progressive taxation to understand that there’s a direct correlation between how much people hate progressive taxes and how much they suffer from them – and that people reserve the right to either stop being so productive, or just simply go somewhere else – would be sad, except that too many of said fans have a say in crafting fiscal policy. This is really kitchen economics: if there’s not enough money, stop spending it until there is. Even if it’d be really, really great if [Insert Feel-Good Initiative Here] was done.
And, speaking as a Marylander, I would appreciate it if Governor O’Malley stopped driving away our state’s wealthiest individuals; particularly before we reach the point where I’m one of them by default.
Moe Lane
Hi Moe,
A friendly word of advice: what you view as the “simple accuracy” of the WSJ editorial is anything but. It cites two pieces of “evidence”: first, what Franchot has said about millionaires leaving MD, and second, a recent report written by a WSJ editorial board member arguing that states with high income tax rates have slow economic growth.
Taking these in order:
1) what Franchot said is that the number of MD income tax filers with taxable income> $1M, as of late April, went down by 300 compared to the same point last year. But what he didn’t say is that the number of filers with TI between $500K and $1M went UP by almost exactly the same number, and the number between $250K and $500K went up big time. Why he chose to release the information about the millionaires, but not about the sub-millionaires, is a thing to speculate about. Sounds to me like a guy who’s looking for free publicity in his quest for higher office. But even Franchot, when forced to really explain what the data mean, has consistently said that we need to wait for all 2008 returns to be filed before drawing conclusions. The only people citing this as hard-code evidence of anything are the WSJ and, well, you.
2) The WSJ “study” on high-income tax states is just garbage. They use a convoluted measure of “high tax” and a cherry-picked measure of “economic growth” to get their answer. For example, they put Maryland in the “high tax state” category by saying that the state’s slow economic growth from 1997 to 2007 was caused by a top rate of 9.3 percent (combined state and Baltimore County) that didn’t take effect until 2008.
In short, there’s a very good reason for what you describe as the “refusal of fans of progressive taxation to understand that there’s a direct correlation” between taxes and economic growth– the direct correlation you’re reading about is based on smoke and mirrors. It has not been shown to exist.
To be certain, you can find specific folks who are willing to say “I moved out of Maryland because I was mad about the 2008 tax hike.” You can also find people who say “I moved to Maryland for the good schools.” From an economic development perspective, the important question is, in the aggregate, how these things balance out. To me, “kitchen economics” means evaluating both sides of the ledger: what you’re paying out, and what you’re getting back for it. You’re arguing that the only thing that matters is what you’re paying out.
Translation: “Ow! OW! Quit it! QUIT IT!”
Which reminds me: apologize to your other readers for lying in your next post here: you weren’t offering ‘friendly advice,’ and we all know it.
Moe,
Your [Amazing how these guys can’t follow simple instructions, isn’t it? Particularly when the instruction is ‘apologize.’ Ach, well. – ML]