10/06/10 Paris, France – Expatriation. It’s happening. Thousands of people are picking up stakes and leaving. They’re leaving their high-tax home states.
“I’m outa here. I’ve had enough,” said a friend at dinner last week. “[Maryland Governor] O’Malley thinks he can tax us all he wants. But I don’t have to put up with it. I can move. We bought a place in Florida.
“He probably thinks it doesn’t matter. What’s a single taxpayer, more or less? That’s not going to change the outcome of an election. But I’m taking my business with me. I’ll set up shop in Florida. I don’t have to be in Maryland. I can get crab cakes in Miami too.”
What had set him off was an article in The Wall Street Journal. “Millionaires Go Missing: Maryland’s fleeced taxpayers fight back.”
The WSJ:
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.”
However, there were two things that Maryland politicians didn’t count on (1) a world-wide economic crisis decreasing the number of million dollar earners and (2) millionaires simply leaving (or taking in less income). “By April 2009, one-third of the millionaires have disappeared from Maryland tax rolls. 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.
What the WSJ failed to mention was that 6.25% isn’t the end of it. There are local taxes too. And in Baltimore City and Montgomery County, for example, the additional local taxes bring the total take up to nearly 10%.
If you have $100,000 of taxable income, in other words, you pay almost $10,000 for the dubious privilege of living in Baltimore rather than, say, some low-tax city in the Sunbelt.
In our own business, we have an office in Baltimore and one in Florida. We can’t move our entire business to Florida, but more and more we hear from employees in Baltimore who want to move to Florida. So the business moves…organically, naturally. And when we create new businesses we put them in Florida, rather than in Maryland.
We already see the results of this and similar policies in Baltimore. People who create wealth tend to live outside the city…or move out. In the city limits, zombies have taken over – with a high percentage of cities’ populations on government payrolls or various forms of welfare. They’re less interested in creating wealth than they are in redistributing it to the shuffling, mouth-breathing masses.
The city’s largest employer, for example, Johns Hopkins, is a private institution. And a great one, from what we’ve heard. But it is hardly independent of the zombies. Much of its research and operating budgets are funded by the government.
Regards,
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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I have always wondered what the heck you are doing in Baltimore? I was born there and lived in the area as an adult for a good while but have been long gone.
Of course I would not recommend FL either. The west is still the best.
Maryland is full of zombies. The real SHTF scenario is going to play out in Maryland and many other places when the zombies can’t be paid off anymore because there is no more money to do it. That is when it will not be good to be in Baltimore or within a tank of gas radius of Baltimore or any other crumbling blue state American city. I am starting to hope it happens soon just to get it over with while I am still somewhat young. All this waiting for the inevitable is stressful
Come on down to Texas, it’s wonderful here, and hey we got a great governor here.
I used to laugh in the ’90s when free trade advocates would point to Baltimore as an example of a successful Service Economy. It’s only successful when it’s subsidized by overpaid federal employees. I’m no millionaire, but my state taxes are more than double what I paid in the midwest. I’m still trying to figure out what I get for my extra dollars.
Private excess and public squalor. The big drivers of economic prosperity, not just personal well-being, in a community are quality education, quality health services, including health promotion and prevention service, stable law and a sense of equality before law and opportunity for civic participation- all public goods. By comparison, resource advantage, low taxes, and cut-throat IR policy come way down the list and can sometimes be counterproductive to economic prosperity. Build up social capital through great education, health services and an ethos of equity and you will not be able to hold back an economy.
As a lecturer and author on real estate and baby boomer topics, my research proves that there is no geo-political solution to the oppressive tax problem anywhere in the USA. New England property taxes you to death, other states attack your social security and pension income. Moving from one state to another just trades one tax problem for another. This explains the huge expat movement to Belize, Uruguay, Panama, etc., especially for retiring seniors.