The Cost Of Raising Taxes In Maryland

Maryland Governor Martin O’Malley pushed through a millionaires tax that went into effect in 2007 and expired in 2010. Yesterday CNBC reported that during that time Maryland lost approximately $1.7 billion in lost tax revenues. The tax imposed a rate of 6.25 percent on incomes of more than $1 million a year. Approximately 31,000 residents left the state during the time the tax was in effect.

Obviously, there is no proof that the people who left the state left because of the additional tax, but if you look at population growth in various states, you find that statistically, states with the lowest tax rates are growing and states with the highest taxes are losing population (e.g. Californians are migrating to Texas). On December 19 of last year, I posted an article (rightwinggranny.com) about the migration of people from states with high taxes to states with low taxes.

The December article at rightwinggranny stated:

There are also some interesting statistics on what happened in Maryland after the state passed a millionaires’ tax in 2008–there was a 33 percent decline in tax returns from millionaire households. The article also reports that Maryland lost $1 billion of its net tax base in 2008 because of out-migration.

There is a point at which raising taxes is counterproductive. President Obama’s statement yesterday that he would keep the tax breaks for people making under $250,000 a year was interesting for a number of reasons. First, it contradicts his previous statement that it is unwise to raise taxes during a recession (technically we are no longer in a recession, but we currently have a very weak economy). Secondly, it changes the subject–instead of looking at the impact President Obama’s policies have had on the economy, this debate will stir up class envy and paint the Republicans as the party of the rich. This is getting old.

Raising taxes in a weak economy is economic suicide. The Obama Administration knows that and knows that the President will not win this debate, but as long as we are talking about raising taxes, we are not talking about the President’s record on the economy.

Enhanced by Zemanta