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The Case of the Vanishing Millionaire

I wrote about this last week in the context of some "studies" which show that the wealthy are fleeing high-tax states. Now comes the Wall Street Journal with a specific example:

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.

No doubt the majority of that loss in millionaire filings results from the recession. However, this is one reason that depending on the rich to finance government is so ill-advised: Progressive tax rates create mountains of cash during good times that vanish during recessions.

But don't expect this to penetrate the thick skulls of Democrats. For them it's quite simple: "rich people have our money and we're gonna take it from them." Why people believe the President's BS about lowering taxes is beyond me. You want to lower taxes? Vote Republican.

Posted by: Gabriel Malor at 01:41 PM



Comments

1 What will happen is that the State of Maryland will now track this folks down and start taxing them for working in the State.

Gov't will always find a way to get it's money. Happens in NY all the time. Rush had a monologue about his fight with the NY State Dept. of Taxation.

Posted by: MikeH at May 26, 2009 01:46 PM (LdYLm)

2 The next step?  How about raising taxes on people that just can't up and leave?  That oughta work.  Suckers!

Posted by: rockhead at May 26, 2009 01:47 PM (DvaIL)

3 But don't expect this to penetrate the thick skulls of Democrats. For them it's quite simple: "rich people have our money and we're gonna take it from them."

Reminds me of bank robber Willie Sutton's response when asked why he robbed banks:  "Because that's where the money is."

Posted by: WalrusRex at May 26, 2009 01:48 PM (xxgag)

4 All those freakin idiots from Maryland are moving away from the craphole they call a state to here in Northern Virginia. Funny thing is they still vote the same way. Freakin morons.

Posted by: Mr. Pink at May 26, 2009 01:49 PM (NM1Nu)

5 Rush had to pay because he has to work in NYC a few days a year. I would certainly make sure, if I left, never to set foot in MD (or in my case, NJ) again. 

Posted by: Luca Brasi at May 26, 2009 01:50 PM (YmPwQ)

6

See! Ace's is a centrist blog.

Posted by: andycanuck at May 26, 2009 01:52 PM (MB+jN)

7 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.

Politicians are such financial geniuses.

Posted by: Dan F at May 26, 2009 01:56 PM (79OIm)

8 The progressive income tax doesn't work, because at a certain ratio of expenses to income and assets, that income becomes flexible and portable. 


Posted by: Jean at May 26, 2009 01:56 PM (L64A6)

9

No doubt the majority of that loss in millionaire filings results from the recession.

Objection.  Conjecture.

Posted by: Circa (Insert Year Here) at May 26, 2009 01:57 PM (B+qrE)

10

Eventually some governor is going to figure out that setting policy, specifically tax policy, that rewards hard work and achievement and discourages drug addiction, out of wedlock births and general laziness, makes for a state that desirable people want to live in and the riff raff don't.

Not my state of course, but eventually one will.

Posted by: AndrewsDad at May 26, 2009 01:57 PM (C2//T)

11 I'm sure they will make up that $200M swing in stupid taxes (gambling).  That is behaviour they can predict.

Posted by: Jean at May 26, 2009 01:58 PM (L64A6)

12 Who is John Galt?

Posted by: tired of being shafted at May 26, 2009 01:59 PM (MrYGd)

13

The fatal conceit of socialism is that the "greed" of the "rich" will always make them want to have more. Consequently, taxes don't matter.

However, as anyone who has ever lived in a socialist country can tell you, it takes a lot of hard work to be "rich" (unless you're Obama). If you are disincentivized to work hard, your greed becomes greed for free time which the buggers can't tax (yet). Ask any Frenchman.

We are going to have a lot of $249,000 tax filers in the coming years (until Lightworker lowers the boom, at which point folks will adjust to whatever cut-off rate is in effect).

Posted by: Teleprompter Messiah at May 26, 2009 02:01 PM (+kP2/)

14 #10

If a state did that, then they will attract a lot of hard-working, wealth generating residents that will establish a higher standard of living. Thus, they must be labeled as 'bigoted', and 'racist' and 'cold-hearted.' Fortunatley, Obama will "community organize" them out of their money.......

Posted by: NotMe! at May 26, 2009 02:02 PM (cJLrA)

15 this is one reason that depending on the rich to finance government is so ill-advised

Oh come on, I think this lesson is already known to "The Won".  Afterall, he did promise to lower the taxes for 95% of Americans  ...  like a ton of bricks.

Posted by: Neo at May 26, 2009 02:08 PM (5d1ix)

16 All those freakin idiots from Maryland are moving away from the craphole they call a state to here in Northern Virginia. Funny thing is they still vote the same way. Freakin morons.

Socialists always think that although it has failed every time it has been tried, that this time it will work.

Posted by: WalrusRex at May 26, 2009 02:08 PM (xxgag)

17 11 I'm sure they will make up that $200M swing in stupid taxes (gambling).  That is behaviour they can predict.

They thought the same thing in IL, that is until they banned smoking statewide.  Casino revenues were off something like 35% the first full year of the ban.  When people have choices, they will always opt for the better deal.

Posted by: Dan F at May 26, 2009 02:09 PM (79OIm)

18

I live in Maryland.  O'Malley is a toolbag of the highest order.  He raised all the taxes.  Really.  All of them.  I wish I was exaggerating. 

Oh, and he turned his Republican predecessor's surplus into a deficit of greater magnitude within a few months.  But at least he's a Democrat.  And handsome.  Sure does a lot of good when he running the State into the ground. 

Posted by: Shillelagh at May 26, 2009 02:10 PM (Oz4Bj)

19 Politicians are such financial geniuses.

Wait 'til they're in charge of health care.

Posted by: nickless at May 26, 2009 02:10 PM (MMC8r)

20

Tom Golisano is leaving New York for Florida.  I'm not remotely in his league, but I'm not staying, either.  This was a nice state, until Rockefeller and Cuomo decided that the only business we needed was government and Wall Street.  Civil Servants elect Democrats and Wall Street pays the bills.  What could possibly go wrong?

I know Rockefeller was nominally a Republican.  Except for the R after his name, the difference between him and most  Democrats eludes me.

Posted by: MarkD at May 26, 2009 02:11 PM (MMy4A)

21 From a progressive perspective, it's not a bug, it's a feature.

Posted by: Kae Gregory at May 26, 2009 02:15 PM (RkRxq)

22 Another thing that fails to penetrate the thick skulls of Democrats is how wildly imprudent it is to spend every last nickel during the boon times, so when the pendulum swings back the other way, there's not only nothing left to spend, but crushing shortfalls due to all the "feel good" bullshit that was passed in order to use up their windfalls.

Posted by: CB at May 26, 2009 02:16 PM (9Wv2j)

23 and in the Garden State we have Chris Christie attacking the Flat Tax rate. Wonder if Forbes wants to pull his endorsement now?

Hoser.

Posted by: MikeH at May 26, 2009 02:22 PM (LdYLm)

24

I hate remakes! This is obviously a ripoff of the British production The Case of the Vanishing Billionaire. I mean even the ending is the exact same. Boy, I hate Hollywood. And I think John Lennon starred in an even-earlier version too in the early '70s. [Via Kate at Small Dead Animals.]

Posted by: andycanuck at May 26, 2009 02:29 PM (MB+jN)

25 A friend of mine went to college with this dipshit O'Malley and remembers  him saying that he couldn't get a car loan because his wife (now a judge) wrecked his credit.   This clown is taking and spending my money.

And by the way, O'Malley turned a billion $ surplus into a multi billion dollar "structural deficit" so he had to raise taxes.  When I asked my state congressman what the hell a "structural deficit" was he told me that O'Malley didn't have enough money for all the new government spending so he created the term.  He called a special session in the fall because he couldn't wait until January to start raising taxes.

Finally, when he was Mayor of Baltimore and supporting the teachers union even though money was disappearing daily, his children were attending a private catholic school outside the city of Baltimore.  They still go there.  The police drop them off and pick them up, 80 mile round trip usually in a Suburban.  Oh the irony...

Posted by: Hedgehog at May 26, 2009 02:31 PM (aDOKh)

26 I wonder if anyone's ever tried to argue that the progressive tax rate, now in place nearly a century, has had a greater role in wealth disparities than Reaganomics?

Posted by: geewhiz at May 26, 2009 02:37 PM (Q43kq)

27 Dim-o-craps do not understand the difference between states in the US and provinces in other countries. The US is actually very different than most other places in that respect and the states are far more autonomous than provinces

Posted by: paranoid polly at May 26, 2009 03:38 PM (YLNjm)

28 Part of His Hooves sacred mission amongst mere mortals is to eradicate the remaining independence of the States. The Tenth Amendment shall be rendered meaningless, so wills The One.

Posted by: George Orwell at May 26, 2009 03:44 PM (AZGON)

29 Per TeleMess (#13), saying progressive tax rates aren't a good idea because they don't work in recessions is putting the cart before the horse.  When you adopt a progressive tax rate, you reduce the amount of earnings people will seek.  This results in an economic slowdown.  Recessions aren't a hazard for progressive tax rates, they're the result of progressive tax rates.

Posted by: Cautiously Pessimistic at May 26, 2009 04:06 PM (ltwze)

30 Gabe, sorry to write in this thread, but I did not know if you would be back to the Alito thread or not. I wonder if you would expand on your thoughts regarding questioning after someone asks for a lawyer? Does that mean after he/she demands a lawyer, or  after they say they do not want to talk anymore until they have a lawyer?

Posted by: mikeyslaw at May 26, 2009 04:09 PM (QMGr1)

31 Gabe, your mistake is in thinking that Democrats care how much money comes in from their class warfare.  It's about "fairness", not about what works best for the economy or the people who live in it.

Posted by: Loren Heal at May 26, 2009 05:25 PM (1/FwS)

32

We all better hope that ALL states don't accept Obama money, because that may well come at the price of losing state sovereignty.  Note well how Obama made Arnold back down on his pay cuts to union workers by threatening to withold billions.  That's just a really big hint of what may be to come.

It's not that big a step (or leap of logic) for Obama to eventually demand that all states on the federal dole dance to the tune of uniform state taxation, at Obama's behest...you know, he "won," and nothing is really free.  When that happens, not today, but sooner than we want...then beloved autonomy goes "poof," and the rich may as well stay put in their financial cages in Maryland, or California, or New York.  That daunted "portability" will be worthless as there will be "nowhere to run, nowhere to hide, baby." 

Just because we're paranoid, it doesn't mean Obama isn't planning to mess with us.

Posted by: marybel at May 26, 2009 05:39 PM (40oKN)

33

When communism didn't produce the the utopia that the Bolsheviks had promised they simply blamed the failure on the Kulaks(successful farmers) and continued the same failed policies for 70 years.

Beware of the true believers, it'll never be the Democrat's fault no matter how obvious it is to us.

Posted by: Speller at May 26, 2009 05:40 PM (fh5Oy)

34 With higher taxes, more regulation and the nationalization of private industries, there will be no state in America for millionaire refugees to seek asylum.  There will be a paucity of wealthy people, and millionaire sightings will be rarer than the dodo bird.  Instead of hunting hobos (who's numbers will fill the void created by the vanishing rich in spades), it might be better sport to hunt millionaires.  They will be much more scarce, more challenging to catch and much more rewarding to bag--can you imagine having the head of a bank CEO stuffed and mounted over the fire place?  Truly a prestigious trophy.  I mean hobos are like a dime a dozon.  Where's the fun in that? 

Posted by: runningrn at May 26, 2009 06:31 PM (aC/SY)

35

With higher taxes, more regulation and the nationalization of private industries, there will be no state in America for millionaire refugees to seek asylum. 

Have no fear, they're already using Canadian banks to keep their money in, they'll probably move here to be near their money.

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Posted by: replica watches at February 06, 2010 06:10 PM (KbTNE)

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Posted by: replica watches at February 07, 2010 11:21 AM (TUJDt)






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