Maryland has a problem:
One of Maryland's budget-balancing tactics - asking millionaires to pay more money to the state - appears to be backfiring as the number of the highest-earning taxpayers dwindles with the flagging economy.
A year ago, Maryland became one of the first states in the nation to create a higher tax bracket for millionaires as part of a broader package of maneuvers intended to help balance the state's finances and make the tax code more progressive.
But as the state comptroller's office sifts through this year's returns, it is finding that the number of Marylanders with more than $1 million in taxable income who filed by the end of April has fallen by one-third, to about 2,000. Taxes collected from those returns as of last month have declined by roughly $100 million.
Many taxpayers in that bracket likely filed an extension and won't complete their returns until October, but a trend is emerging that indicates a "substantial decline" in the number of residents and small businesses with that kind of income, Comptroller Peter Franchot wrote in a letter to Gov. Martin O'Malley and legislative leaders.
Is it a coincidence, that people move from Maryland - a state which, even before the millionaire tax was levied, was a high taxed state. Take a look at the highest of the high from taxfoundation.org. The states with the highest tax per capita: California, Maryland, Massachusetts, Connecticut, New York and New Jersey.
If California is the first failed liberal state, and you figure that it's the tax and spending excess that have taken it, with its darling programs, to its fate, then which State if any, will be next to fail under the weight of its own taxing and spending.
My bet's on Massachusetts. All the listed states suffer from Union driven payrolls, underfunded pensions, and high per capital debt loads.
However, Massachusetts with the highest of all states in per capita debt also has encumbered itself with State subsidized Universal healthcare. Massachusetts is a small state with nasty weather when the aging population might prefer the warm climate and cool taxes of say Florida, or North Carolina, or South Carolina, or frankly any other state that's cheaper to live in which is nearly any other state.
The wealthy folks of Massachusetts are probably pretty mobile, just like, say the people of Maryland were who decided it was a little pricey to live in that state and the border wasn't so far away. Plenty of Massachusetts retirees already have the seasonal southern home in which they spend just enough time to avoid the Massachusetts income tax on their pensions and investment income. A potential higher tax rate is more motivation for those who haven't yet figured out the non-resident "loophole".
The upcoming months will tell the story, as the Government tries to balance a budget on revenues that are 10% less than last year, and programs that evoke prayer. It's possible, but hard to imagine that Massachusetts will take the right step and cut costs, when history and Union and advocate pressures says tax increases are the solution.
The storm clouds are there. Like California, the Governor and Legislature are dithering over a budget, anxiously awaiting tax receipts from a single month or two.
They're quite about dozens of pension plans that have fallen off the rails, but easily ignoring the problem because it's a "long term problem." It's a long term problem, but the implicit in the State's funding plans was a 8.5% expected annual growth rate that ought to be pared back. Future growth assumption added to the steep market hit, will have the effect of dramatically affecting the future funding needs.
Look at the six-figure incomes of members of the State Troopers, a symptom of the Union strength, and at the Quinn bill, a guarantee of pay increases if the Officer gets a degree, even at one of the diploma mills that have sprung up as a cottage industry.
Consider the Teachers Union and the contractual guaranteed salary step increases, awarded even in times of budget cut backs.
And probably not last, and certainly not least, the Universal insurance and its billion dollar per year price tag-awarded in high times and available now to all.
Hard to know which foundation crack will fail first and when, but absent a leadership that actually cuts labor costs and thereby slowing the growth of government and taxes (BTW, the State employees' wage has inflated faster than the private employees' wage), there's a big reason not to stick around for a declining job market and rising taxes.
Already, over the prior 10 years, the labor market is complete flat. No growth in numbers whatsoever. A portion of the population is compelled to stay, forced to stay in the state because the health insurance is free and welfare abundant. Not exactly the population based to built a thriving economy.
Or, consider the retirees, by and large a wealthy group. Lamenting the weather, the high real estate prices and real estate tax and drawn by the Southern states, warmer and cheaper, the stage is set for them to move.
All in all, it's progressive emmigration.
