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Tuesday, May 26, 2009

WSJ State Tax Editorials: Maryland, New Jersey

Maryland's Miilionaires Go Missing:

Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were "willing and able to pay their fair share." The Baltimore Sun predicted the rich would "grin and bear it."

One year later, nobody's grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates.

New Jersey's Flat Tax Debacle:

If ever a state were ripe for bold economic reform, it would be New Jersey, which is shedding jobs and is in perennial budget crisis despite one of the highest tax burdens in the land. So why is Chris Christie, the GOP front-runner in the state's 2009 gubernatorial race, taking cheap shots at the flat tax?

[H]e seems to be running scared in next month's Republican primary, when he faces former Mayor of Bogota Steve Lonegan, who is proposing to scrap Jersey's job-killing graduated income tax that has rates running from 1.4% to 8.97%. Mr. Lonegan wants to replace it with a 2.98% flat tax on the first dollar of income earned.

That's a good idea that would give the Garden State the lowest tax rate in the Northeast after New Hampshire. Mr. Lonegan says this will ensure that when New Jersey incomes "move-up," the residents "don't move out." Over the past decade, New Jersey has suffered the fourth highest rate of out-migration of all the states, with nearly half a million residents fleeing to the likes of Delaware, Florida and even New York. ...

If he wins the primary, Mr. Christie will need his own tax reform agenda, both to defeat Mr. Corzine and win a mandate for changing the corrupt mess that is Trenton. Mr. Christie should understand that a flatter tax is an economic and anticorruption strategy because it limits the opportunity for political mediation on behalf of special interests. Republicans can't credibly be the candidates of growth if they echo liberal class-envy rhetoric to attack tax reform.

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Comments

Gee, you think a near-depression could account for a decline in million dollar plus incomes?

Posted by: Commenter | May 26, 2009 2:10:08 PM