Taxing the Rich
[Guest post by DRJ]
Last year, Maryland lawmakers decided to balance the budget by creating a millionaire tax bracket that raised the top marginal income-tax rate to 6.25%. One year later, there are 1/3 fewer Maryland millionaires and state collections from millionaires have plummeted by $100M:
“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.”
The shortfall apparently results from some rich taxpayers moving out-of-state and a decline in the number of millionaires due to the recession. And it’s another example of why it’s unwise to depend solely on the rich for revenue.
— DRJ
Boy. I totally couldn’t have called this one.
What a shocker…
Scott Jacobs (90ff96) — 5/25/2009 @ 8:14 pmThese people never learn, do they?
Paul (creator of "Staunch Brayer") (14d6a1) — 5/25/2009 @ 8:33 pmPaul – Examples like this are precisely why the Leftists go apesh*t when the discussion of static v. dynamic scoring comes up during the budget/tax process.
JD (920eba) — 5/25/2009 @ 8:40 pmI’m actually starting to believe that the left really thinks that the government creates wealth and all we have to do is sit around a let it rain down upon us.
Ag80 (425b0a) — 5/25/2009 @ 8:55 pmYou are just now starting to believe that? They speak of taxes as revenue, that should have been your first hint đ
JD (920eba) — 5/25/2009 @ 8:57 pmJD:
We’ll all be mining the big rock candy mountain soon.
Ag80 (425b0a) — 5/25/2009 @ 9:10 pmThese are the people who took Women’s Studies instead of calculus. What do you expect ?
Mike K (2cf494) — 5/25/2009 @ 9:11 pmJD and everyone else:
I’m just a poor old country boy with a limited edjumication, but I believe I have a basic idea of how markets work.
And, I know this, without a shadow of a doubt: Markets work. Government control, religion, private enterprise or the shades of the moon may influence them, but markets work.
And no matter how many times you can drive that point into the heads of anyone who disagrees, be it a commie, lefty, libertarian, conservative or my old Aunt Minnie, the answer comes out the same.
Ag80 (425b0a) — 5/25/2009 @ 9:23 pmPoliticians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%.
Left untouched was the next lowest bracket: 5.5 percent for those making more than $500,000.
I would not leap to the conclusion several hundred millionaires in 2008 were willing to start over as refugees in Virginia or Pennsylvania in order to save 0.75%. The VA income tax rate is 5.75% for anyone earning $17,000 or more.
Perhaps Maryland’s estate tax played a more prominent role. Or maybe the market tanking.
steve (1254cc) — 5/25/2009 @ 9:30 pmsteve knows things …
JD (920eba) — 5/25/2009 @ 9:35 pmsteve,
First, I clearly said in the post that this result wasn’t solely due to millionaires moving out of state.
Second, it doesn’t matter why the millionaires’ tax didn’t work. The point is that, this time, “soak the rich” didn’t work to balance the budget. Maybe it works now and then but lawmakers and voters should keep in mind that it doesn’t work every time.
Third, the article suggested the next bracket won’t be left untouched for long. Apparently they are the new rich, at least for Maryland tax purposes.
DRJ (2901e6) — 5/25/2009 @ 9:37 pmHeh! If it was easy to take rich people’s money from them, they wouldn’t be rich in the first place.
nk (e71733) — 5/25/2009 @ 9:39 pmThis is similar to Obama believing his tinkering with the U.S. tax code relative to foreign source corporate income will lead to greater U.S. collections and potentially more U.S. jobs rather than understanding than many U.S. corporations who operate globally may finally say screw this and redomesticate overseas, especially in light of the Administration’s anti-business leanings.
daleyrocks (5d22c0) — 5/25/2009 @ 9:48 pmIt clearly does matter why the millionaire’s tax didn’t work. There was pitched debate about whether it might drive people across the Potomac. Opponents are saying “I told you so.” Others pin it on the recession and capital gains losses. Anyway, selling a house in Montgomery county right now would be incautious. Most people making over a million a year are not incautious.
steve (1254cc) — 5/25/2009 @ 9:55 pmStatic vs. dynamic scoring. This is how Dems manage to call a tax cut a decrease in revenue when revenues increase, etc …
JD (920eba) — 5/25/2009 @ 9:55 pmIt matters because steve says so. Period. He knows things. Just like Andrew.
JD (920eba) — 5/25/2009 @ 9:57 pmI would not leap to the conclusion several hundred millionaires in 2008 were willing to start over as refugees in Virginia or Pennsylvania in order to save 0.75%.
Did DRJ write anything about Virginia or Pennsylvania in the post?
No, she did not. Pay attention.
Millionaires that move from a high-tax go to a no income tax state and establish residency there for the required number of days to avoid the high taxes of the original state.
Perhaps Marylandâs estate tax played a more prominent role. Or maybe the market tanking.
Or maybe they reduced their income to fall below the higher tax bracket. Ever think of that?
Millionaires that earned their wealth aren’t idiots.
DRJ also said:
That’s already happening in New York. $250,000 is the new millionaire (although Algore defined that while he was still vice-president.)
Paul (creator of "Staunch Brayer") (14d6a1) — 5/25/2009 @ 10:05 pmsteve – Reread the article. It addresses your points and makes it clear that nobody has the answers yet. Also, you don’t have to sell a house to change residency.
daleyrocks (5d22c0) — 5/25/2009 @ 10:13 pmThe same thing happened in CA in the early 90’s in reaction to Pete Wilson raising taxes to combat the economic slowdown resulting from the end of the Cold War. Tax receipts at the higher rate decreased. It took years to get back to the previous norm.
AD - RtR/OS! (f03f38) — 5/25/2009 @ 10:19 pmEvery time that the pols contemplate raising the taxes on the “rich”, they are told it won’t work,
they do it anyway, and then they stand there wondering:
What Happened?
As they are told time after time:
You don’t have a revenue problem, you have a spending problem, and that is where you’ll find the solution –
but, they never listen for they are Morons!
steve:
I want to make sure I understand your point. As I read your comment, you think it matters because lawmakers predicted millionaires would (or wouldn’t) move out-of-state. Thus, the fact there was another reason millionaires weren’t there to be taxed (the recession) negates the lawmakers’ responsibility for budget deficits under this tax plan. In other words, it was a good plan that didn’t work for an unforeseen reason. Is that correct?
I disagree if that’s your position. Whatever the reason, the tax revenue isn’t there and Maryland has a budget deficit. Maybe it’s an example of the “Don’t put all your eggs in one basket” principle, or maybe it just very, very hard to forecast how people will act, let alone control everything they decide and do. But it should be no defense that Maryland lawmakers never considered an economic downturn would jeopardize their “tax the rich” budget plan.
DRJ (2901e6) — 5/25/2009 @ 10:26 pmSteve,
However, it is perfectly logical to assume that some portion of those that left did so because of the tax rate.
And your comment about a “mere” .75% savings is inaccurate, since Pennsylvania has a flat rate state income tax of 3.07%. A significant savings (more than half).
Also, two states that are not too terribly far away are Tennesee and New Hampshire, which only tax income from dividend and interest income only.
There are also several states that have no income tax (or corporate tax, for that matter), and if one is rich enough, moving it all to a more friendly tax climate (even if you take a wash on your house sale) is hardly a concern. It is likely that they can make their money from anywhere they like.
For example, lets say you own a t-shirt business, selling shirts to colleges and the like. You hardly need to be located in any one state to do that, since not all of your buyers will be in your area, or even your state.
Scott Jacobs (90ff96) — 5/25/2009 @ 10:35 pmThe projected revenue windfall didn’t materialize. While that may have been foreseeable, the battle lines were drawn before the downturn became a runaway train.
Another precinct heard from:
For all we know, the missing millionaires packed up for Nashville or other places with no state income tax. Those who left hurriedly in ’08, I gather, still pay property taxes on unsold, upscale homes.
steve (1254cc) — 5/25/2009 @ 10:54 pmOr they took a was on those homes, knowing they would recoup their losses in savings in state taxes.
They’re rich – they can afford to play the long game.
Scott Jacobs (90ff96) — 5/25/2009 @ 11:15 pmThose who left hurriedly in â08, I gather, still pay property taxes on unsold, upscale homes.
But that’s not part of the income tax increase, is it? Neither is the estate tax part of the income tax increase.
I see you ignored my point about income reductions to avoid income tax increases.
And why are you focusing on unsold homes?
Many people have more than one residency, and spend enough time at the lowest taxed one to avoid paying income taxes at the higher taxed ones.
Paul (creator of "Staunch Brayer") (14d6a1) — 5/26/2009 @ 4:10 am(Mocking emphasis added.)
You present no evidence that it’s the former or the latter or a combination of the two, on top of which you preface your “observation” with “apparently.”
Yet those in the choir sing the responses to this folderol as if it were gospel.
micdeniro (e6d6c2) — 5/26/2009 @ 5:17 amDo the trolls and drive-by’s ever bother to read the links?
JD (815958) — 5/26/2009 @ 5:52 amTheory: Higher tax rates means more government revenue.
Practice: Lower tax rates means more tax payer compliance which means more tax revenues
Anyone who has ever managed two sets of books for the mob knows this reality.
To the community spirit guys: go work for free feeding the poor, toss the car for a bike, toss the high protein/fat diet for high starch, stop asking others to pay your bills (implicitly or explicitly).
HeavenSent (ac3026) — 5/26/2009 @ 6:47 amAnyway, selling a house in Montgomery county right now would be incautious. Most people making over a million a year are not incautious.
I love how Steve resorts to merely offering his opinions to back up his fallacies. Hey Steve, how about some supporting evidence for these blanket statements?
âNobodyâs going to leave the state because income tax rates go up a point over a million dollars – or whatever it is. Itâs just not going to happen,â says Stuart Levine, a Baltimore tax lawyer and
Yeah, whatever, dude. That’s quite a compelling source. One obscure tax lawyer gives a rambling but supporting statement. We stand totally corrected.
Dmac (1ddf7e) — 5/26/2009 @ 9:53 amComment by Paul (creator of “Staunch Brayer”) â 5/25/2009 @ 10:05 pm
You’ve hit upon the real question:
How many people are “Going Galt”?
This option was thrown upon the table by many during the campaign, and was derided by those on the Left (as it always is), but they have no credible explanation for the disappearance from the tax-rolls of those they wish to impose additional taxes upon.
AD - RtR/OS! (428ddf) — 5/26/2009 @ 10:32 amAs was pointed out in the original article, many of these wealthy Marylanders may have vacation homes in other states. Changing their primary residency to the other state is just a matter of filing a form differently, and making sure the residency requirements are met with a pleasant Galtian vacation.
luagha (5cbe06) — 5/26/2009 @ 11:20 amsteve writes: “For all we know …”
Uh, really? That’s all we know? Uh, not.
SPQR (72771e) — 5/26/2009 @ 11:35 amYouâve hit upon the real question:
How many people are âGoing Galtâ?
Damn right, AD.
Paul (creator of "Staunch Brayer") (14d6a1) — 5/26/2009 @ 2:27 pm[…] Tax scrubone 10:37 am DRJ posts at Patterico that Maryland has had a massive decrease in millionaires. […]
Tax it and it dies « Something should go here, maybe later. (55a4b8) — 5/26/2009 @ 2:39 pmAt a time when schools are firing teachers,
Where?
jails are forced to furlough criminals early
Forced?
fire departments are cutting shifts and public health programs are being cut back,
Only because that’s what liberals cut first in order to preserve their bloated bureaucracies.
anyone who would relocate in order to avoid a 0.75 percentage point tax increase is a very good riddance.
Really? Who’s gonna pay fior those Utopian “wealth redistribution” programs when all the money is gone?
No one supports government waste any more than they support private waste,
Uh huh. “Porkulus,” Dark Beergod–look into it.
but, at some point, there has to be enough community spirit, enough willingness to contribute to help support the entire community, or, the community will fail.
There also has to be responsible leadership, and there isn’t, voting with feet is an obvious choice.
Maybe taxes are too high in Maryland and the local government is wasting or stealing the money. I just donât know.
Maybe you ought to do some research into this, you know, like reading the links.
But I do know that there are plenty of high-functioning societies on the planet where taxes are a lot higher than that.
Take a very close look into those societies. If you do honest research, you’ll find they ain’t as high-functioning as you’d like to think.
My local income taxes come to just more than 10 percent and it is painful to make those payments, but I wouldnât think of ditching the community in order to pay 8 percent.
So you don’t care how that money is being spent?
If anything, Iâd rather use the same time and effort to expose and lobby against whatever waste there is in the local budget, because I value what we have built here, as a community, including the local governmentâs role.
There are website and entire organization dedicated to that, Dark Beergod. In fact, such has been discussed at length.
On this site.
Repeatedly.
Where were you?
Paul (creator of "Staunch Brayer") (14d6a1) — 5/26/2009 @ 2:54 pmActually, Paul, I suspect that Dark Beergod has been ridiculing anyone who exposes and lobbies against “whatever” waste is in local budgets too.
SPQR (72771e) — 5/26/2009 @ 2:58 pmHad to hit on this again:
My local income taxes come to just more than 10 percent and it is painful to make those payments, but I wouldnât think of ditching the community in order to pay 8 percent.
Well, Dark Beergod, that makes you a better citizen than most of Obama’s appointments.
Paul (creator of "Staunch Brayer") (14d6a1) — 5/26/2009 @ 3:20 pmZING!
Actually, Paul, I suspect that Dark Beergod has been ridiculing anyone who exposes and lobbies against âwhateverâ waste is in local budgets too.
Wouldn’t surprise me a bit, SPQR.
Paul (creator of "Staunch Brayer") (14d6a1) — 5/26/2009 @ 3:21 pmBoy, it sure got quiet in here…
Paul (creator of "Staunch Brayer") (14d6a1) — 5/29/2009 @ 10:11 am