Millionaires fleeing taxes

DougMD · 05-27-2009, 03:58 AM

So reads a newspaper magazine distributed in the Maryland/DC area. It is directed specifically at Maryland taxpayers and their reaction to the mere 3/4 of 1% increase in taxes by governor Martin O'Malley. It says that Maryland had 1/3 fewer millionaire filers than last year. To be fair, the article says that the economy could be a reason as well, but seems to indicate that those people didn't file at all, not even at some lower level of income. Some may have moved. More likely, they simply changed their residency to that of one of their homes in a neighboring state.

Bottom line? If a tax increase of less than one percent is enough to drive taxpayers away, think about the effect of an even larger increase at the state or federal level. Maryland nowLOSES the taxes it would have collected at the lower rates had O'Malley not jacked up taxes on the wealthy. If they did MOVE, perhaps they took their businesses and hence jobs with them? As someone on the radio put it this morning, and we've all heard some version of this before,"stupidiy is doing the same thing over and over and expecting different results."

Paterson lamented the concept that producerscan be mobile when they are asked to carry the leeches in greater and greater degrees, so we'll see how his game of rob the rich plays out in New York, given that he's playing the game with his eyes wide open (no pun intended)...

kevin1 · 05-27-2009, 04:03 AM

I've read an article recentlywhich verifiedthat the wealthy are in fact moving out of states that have high income tax rates, and who could blame them?

Alsatian · 05-27-2009, 04:16 AM

DougMD: I'm with you.

Suppose the Maryland income tax was 8% and increased to 8.75%. Moving from Maryland to a zero income tax state (Texas and New Hampshire are two such -- there are others) nets 8.75% income increase -- tax free (you don't pay tax on saved statetaxes). Thus, suppose your income is $500,000/year. The example taxes (no deductions, let's keep it simple for purposes of illustration) would be $43,750. By moving from Maryland to Texas, just as an example, that is an extra $43,750 in the exemplary tax payer's pocket. Not too shabby. Sure, maybe it is difficult to imagine moving for a 0.75% tax increase . . . but this consideration isn't looking at the bigger picture, that is that ALL of the tax, not just the recent increase, can be avoided by moving out. Other advantages may also be part of the consideration -- lower property tax rates, lower sales tax rates, lower energy costs, better traffic, better real estate values.

DougMD · 05-27-2009, 04:43 AM

Exactly, and that is a great point. The 3/4% increase could simply be the straw that broke the camel's back, so to speak. I hope all producers who are asked to shoulder greater burdens of the states that overspend other people's money move away so the state gets ZERO from them, or simply change their residency so states still get zero!

burniegoeasily · 05-27-2009, 05:41 AM

Tax the crap out of those worthless, sorry, no good rich bastards. Why work hard, when the rich can pay for your sorry butt. Isnt that the mantra that Obama preached. Not verbatim but pretty muchan attack on the rich. Trickle up poverty is what he is creating, while painting it with a class warfare brush.

Champlain Islander · 05-27-2009, 05:52 AM

While money can be saved by living in a state tax free location there are other variables that can affect the actual savings. Some states have an excise tax that people pay each year that are a percentage of their vehicles value as an example.

hillbillyhunter1 · 05-27-2009, 07:39 AM

Quote:

(you don't pay tax on saved statetaxes).

Actually most probably do as they would no longer be able to claim it as a tax deduction...therefore it would increase their taxable income. However, if were talking about the wealthy then the alternative minimum tax mayoffset any tax savings from a state tax deduction. In any case, having the extra money and losing the deduction is always a better deal.

I'd have to believe that these wealthy must have just up and moved becausee if they already had "dual residense" in a tax free statein addition toMD (or wherever), that would have been a little foolish to wait this long to claim residence elsewhere.

You also have to consider that capital gains may have made up a large portion of income for many "millionaire filers" (I'm assuming those that showed over 1 million in income)and that that portion may have fallen substantially because of the economy or that those income producing transactions were simply fewer because the assetts were held instead of sold for whatever reason.

Alsatian · 05-27-2009, 09:49 AM

Quote:

ORIGINAL: Champlain Islander

While money can be saved by living in a state tax free location there are other variables that can affect the actual savings. Some states have an excise tax that people pay each year that are a percentage of their vehicles value as an example.

I'm not sure what your point is. If your point is you can't save significant money by paying less taxes in a state with a better tax environment . . . you are kidding yourself. And you don't have to be a millionaire to save significant money, either.

Champlain Islander · 05-27-2009, 11:13 AM

Read what I said Alsatian. I just pointed out that the tax savings wan't always what it appeared to be at face value. I never said there couldn't be significant tax savings did I? And you are right you don't have to be rich to save on taxes. Some states don't have income tax but as has been said there wouldn't be any write off on the federal. Some states have higher property taxes, county taxes, city taxes and the list goes on. My state in particular has it all. We pay state taxes, high property taxes and a sales tax of 6%. Vermont is one of the most expensive states to live in but I choose to stay. Some things are worth more than money.

DougMD · 05-27-2009, 04:54 PM

Problem is, many of those higher tax paying states are the ones most likely to jack them up further, and at some point it will cost them taxpayers. My guess is the states with the highest tax rates are the liberal spending states that are never satisfied with the amount of taxes they charge to cover their insatiable spending habits. You know it's bad when states use their stimulus money simply to pay their deficit spending, because it only means trouble in the years to come. True as well is the notion that the states with the highest state taxes export a federal tax burden to those with lower state taxes, due to the state tax deduction. But a deduction is not a tax credit, so the higher the state tax, the higher overall taxes filers will have to pay.