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May 22, 2009

Maryland millionaires flee to keep their boodle

Reactions to today's column on Maryland's expensive estate tax, which starts:

The millionaires are fleeing Maryland, all right. But not because of the measly tax surcharge on income over $1 million.

They're bugging out because of Maryland's estate tax, which applies to a bigger portion of a dead person's hoard than the federal estate tax or those in other states.

Readers say:

My father never made a lot of money, but he lived long enough to see his 1946 purchase of a small farm and his investments in the stock market accumulate in value to more than a million dollars. We had to pay over $30,000 in estate taxes. I think it is time that someone sheds some light on the negative impact of high taxes in the State of Maryland and Baltimore City. People who accumulate money are spendthrifts: they are conscious of the value of a dollar. While an estate of slightly more than a million dollars may not be cause to relocate: an estate of two or three million dollars would be reason to give serious consideration to relocating to another jurisdiction.

And:

I would like to add that many middle income retirees flee Maryland after retirement. They move to states that do not tax or only tax a percentage of retirement income. You pay your state income taxes for 35, 40, 50 years and Maryland is still there to squeeze you until death. This also contributes to loss in state tax revenue.

And:

I'm too busy and too young (sort of!) to worry about estate taxes, but many sixty-something retirees are doing exactly what you described. As for state income taxes, I never thought my native state of "Taxachusetts" would seem like a tax haven relative to Maryland.

And:

It's not just milionaires that want to flee the Peoples Republic of Maryland. Add me to the list of those who wish to flee. I am not even close to being a milllionair. I have spent 60 of the last 62 years of my life in Marland and I have seen it degrade into a quasi-socialist state under the "fealess" leadership of the Democrats. Democrats who without any fear or sense of responsibility pass any tax law they choose. As a retiree it is cheaper for me to sell my house at a lose and move to Texas or Florida (to name a couple) for a lower cost of living, and lower taxes. And, as a side note, if some "fool" breaks into my house I can use whatever force is necessary to defend myself and my family, without first having to worry about if the cops will arrest me.


Posted by Jay Hancock at 9:56 AM | | Comments (7)
Categories: Taxes
        

Comments

If I worked hard to accumulate $1M of assets and could only pass on $970,000 after my death, I think my heirs would be pretty darn happy.

There are a number of factors that impact on Maryland estates.
In 2004, the credit for state death taxes allowed a 100% credit against the federal estate tax so that the state death tax did not cost an estate anything.
In 2004, the credit was eliminated and replaced by a deduction, so that the state death taxes cost 55%.
To compound this problem Maryland modified the death tax to provide for the levy at $1,000,000.
Why not leave the state?

A few months ago I found my client list (accounting and consulting) from the mid-80s.

Every successful entrepreneur moved to Florida by early 60s years of age, not only for the weather but in anticipation of Ohio's inheritence taxes and to avoid Ohio's other taxes on personal income and various business taxes.

And the weather is much nicer in Florida anyway..

By the way, Ohio does not call it an "inheritence tax," but it really is.

The floor is $333,833 I believe.

Much of the tax is passed down to the city and township of residence, which pushes a powerful lobbying effort by the local officials.

Ohio also death taxes Ohio assets of non-residents, which often causes the fleeing business owners to liquidate assets in Ohio and/or to move the entire business somewhere else when possible. Not good policy at all.

Northern states will be left with the old and the poor, if current trends continue.

Not sure if you saw this article.

http://online.wsj.com/article/SB124329282377252471.html

Schmuck says Maryland will add at least one millionaire next year with Oriole Nick Markakis officially making Baltimore his home. Of course I assume half of Markakis's salary was already being taxed at Maryland rates so this is really no gain for the Governor.

Much of the tax is passed down to the city and township of residence, which pushes a powerful lobbying effort by the local officials.

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About Jay Hancock
Jay Hancock has been a financial columnist for The Baltimore Sun since 2001. He has also been The Baltimore Sun's diplomatic correspondent in Washington and its chief economics writer. Before moving to Baltimore in 1994 he worked for The Virginian-Pilot of Norfolk and The Daily Press of Newport News.

His columns appear Tuesdays and Sundays.
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