The Institute's Staff

The Facts on Maryland Millionaires and the Millionaire Tax

The millionaire tax

• Effective with 2008, Maryland adopted a new progressive schedule of tax rates.

• Maryland couples pay 4.75 percent tax on most income up to $200,000.
• Beginning at $200,000, the rate begins to edge higher,
  • Reaching 5.5% for taxpayers earning over $500,000
• Income above $1 million is now taxed at 6.25 percent.

• The rates are “marginal” rates - they only affect those specified income levels
  • Someone making over $1 million doesn’t pay 6.25% on all their income, only on the portion exceeding $1 million.

The new data on Maryland millionaires

• 7,067 people filed Maryland tax returns reporting income over $1 million for 2007

• 542 of them did not file a Maryland return for 2008
  • Equals 7.7% of Millionaires
• They may have left the state, died, or failed to file for some other reason.
• Over the past seven years, an average of 5.7% of millionaires fail to file a return in the next year.
• The number of drop-offs for 2008 is about 140 tax returns more than the average percent.

• For 2008, only 4,910 taxpayers filed returns with incomes over $1 million, a 30% reduction.
  • Every year between 31% and 55% of millionaires’ income fall to below the $1 million level.
• In 2008 this was likely magnified as investment income, business income and real estate proceeds all suffered in the national recession.

Source: Comptroller of Maryland, Bureau of Revenue Estimates, November 23, 2009

Conclusion

There is no evidence that the “millionaire tax” induced a significant number of millionaires to leave Maryland in 2008.

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