Maryland has lost one-third of its millionaires from a year ago. In 2008, Marland had 3,000 million dollar income tax returns filed by the end of April. In 2009, that number dropped to 2,000 according to a WSJ editorial. For sure, many of these taxpayers are still Maryland residents whose incomes dropped below one million dollars because of the recession, but it is bad policy to depend more and more on the wealthy to fund bloated governments.
It's interesting to note that three of the most heavily taxed states (California, New York and New Jersey) are experiencing huge budget deficits while the 9 states with NO income taxes are largely faring well.
State governments need to consider three things when they adopt a 'soak the rich' tax policy:
- Do you want to create an environment where the wealthy are inclined to move out?
- Do you want to create an environment where wealthy out-of-state residents are discouraged from moving in?
- Do you want to create an additional incentive for residents to legally shelter or deferr income recognition?
Each of these three scenarios would also adversely impact a local government's ability to collect tax revenues related to property and sales taxes.
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