Maryland Senate GOP Slate: O’Malley Created $363 Million Budget Gap Thru High Income Surtax
Saturday, March 13, 2010 at 11:18am Maryland Senate GOP Slate's Notes
Final tax data from 2008 now proves what many predicted but had been strenuously denied by Democrats in Annapolis: Maryland’s high income earners are voting with their feet.
In calling a special session for the purpose of passing an historic tax increase less than a year after his election, Governor Martin O’Malley changed Maryland’s personal income tax from a flat rate to a graduated system with a surcharge on high income earners. During this 2007 special session, Republican Senators opposed these tax increases and forewarned that the net result would be revenue losses as this mobile segment of the population relocated their primary residences.
Wall Street Journal editorial writers agreed in a May 2009 opinion entitled “Soak the Rich – Lose the Rich” that described how the misguided budget policy of the O’Malley Administration would lead to outward migration of the very segment of the population that a state wants to keep for a healthy, progressive economy. In response, Democrats in Annapolis produced their own analysis attributing the loss of high income tax filers to the normal slack-off of annual returns.
Now the late filers have completed their returns and final numbers have been tallied. Instead of $106 million of new revenues predicted by O’Malley’s budget office, Maryland saw a decline of $257 million – for a total gap of $363 million. This is just part of the problem created by O’Malley that results in continuing out-year deficits over $2 billion each year.
In a follow-up editorial printed this week, the WSJ editors conclude: “We reported in May that after passing a millionaire surtax nearly one-third of Maryland's millionaires had gone missing, thus contributing to a decline in state revenues. The politicians in Annapolis had said they'd collect $106 million by raising its income tax rate on millionaire households to 6.25% from 4.75%. In cities like Baltimore and Bethesda, which apply add-on income taxes, the top tax rate with the surcharge now reaches as high as 9.3%—fifth highest in the nation. Liberals said this was based on incomplete data and that rich Marylanders hadn't fled the state. Well, the state comptroller's office now has the final tax return data for 2008, the first year that the higher tax rates applied. The number of millionaire tax returns fell sharply to 5,529 from 7,898 in 2007, a 30% tumble. The taxes paid by rich filers fell by 22%, and instead of their payments increasing by $106 million, they fell by some $257 million.”
To see the recent WSJ Online editorial “Maryland’s Mobile Millionaires,” visit: http://online.wsj.com/arti
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