Md. millionaire tax could deter Northrop bosses
Wednesday's column is about Northrop Grumman's decision to move its headquarters to the Washington region -- either Virginia, Maryland or the District. Who will win? Northrop will shake down each of the jurisdictions for tax breaks and other incentives. But it may not be corporate taxes that clinch the decision (although no one would ever admit this). You can bet that Northrop execs will look closely at their own tax liability in the different spots, and Virginia has the huge advantage.
Let's assume new Northrop boss Wes Bush will make what outgoing CEO Ronald Sugar made in cash salary and bonus, which in 2008 was $4.3 million. If he settles in Montgomery County, Maryland, thanks (in part) to the state's "millionaire tax" he'll pay what I calculate to be $396,000 in state income tax and Montgomery County piggyback income tax. (This is highly simplified. I'm not counting deductions and in any given year his taxable income might be even more with option exercises, capital gains etc.)
UPDATE: O'Malley spokesman Rick Abbruzzese notes that the millionaire tax is due to expire at the end of this year. My bad: I thought it was 2011. In any case, thanks to the piggyback tax Northrop Grumman execs would still pay a lot more personal income tax in Virginia than in Maryland even if the millionaire tax expires.
But if they put Northrop's new headquarters just across the Potomac and Bush lives there, he would pay only $247,000 in Virginia income tax, saving $149,000. (Again, I'm simplifying. Since he would get a bigger deduction on his federal return by paying Maryland taxes, his federal taxes might be lower if he lived in Maryland. But overall he'd still be way ahead in Virginia, especially once he started paying taxes on capital gains.)
Where would you put your company? More in Wednesday's paper.
Comments
Not only does one pay less in state taxes but Virginians get 3 freeways that drop them right into the heart of the nations capital. Marylanders get New York Ave. What's up with that?
What if Maryland was as willing to draw companies to the state as it is to build slots parlors? One can only wonder what if ...
Posted by: Dan | January 5, 2010 9:06 AM
Dan,
You can thank Marion Barry for that. Before he was mayor of DC, Barry was a city activist who led the "freeway revolts"- which ultimately led to DC cancelling building their portions of I-95, I-270, and I-66. I-66 would have connected to US50 along the New York Avenue corridor.
Posted by: MCG | January 5, 2010 9:20 AM
MCG,
I'd say its a good thing to not have freeways running through the heart of the city. People do actually live in the district, its not just a tourist attraction.
Dan,
Marylanders have 6 Metro lines "that drop them right into the heart of the nations capital". Virginians only have 3. What's up with that? Have you tried commuting on those Virginia freeways in rush hour?
Jay,
Are there no millionaires in Montgomery County? I live in Chevy Chase, I'm fairly certain there are more than in a few in CC, Bethesda, Potomac, etc. Are they not aware of the tax differences?
Posted by: Irish | January 5, 2010 10:31 AM
MCG,
I'd say its a good thing to not have freeways running through the heart of the city. People do actually live in the district, its not just a tourist attraction.
Dan,
Marylanders have 6 Metro lines "that drop them right into the heart of the nations capital". Virginians only have 3. What's up with that? Why isn't Virginia "willing to draw companies to the state"? Have you tried commuting on those Virginia freeways in rush hour?
Jay,
Are there no millionaires in Montgomery County? I live in Chevy Chase, I'm fairly certain there are more than a few in CC, Bethesda, Potomac, etc. Are they not aware of the tax differences?
Posted by: Irish | January 5, 2010 10:34 AM
Jay,
If it means paying tens of millions in tax breaks, subsidies, grants, etc., then let Virginia have Northrop headquarters.
Why should MD wage earners subsidize these large corporations who often pay very little in corporate taxes to the state?
That's like renting out your house and forgiving the rent plus paying the renter's utility bill.
Posted by: Ted | January 5, 2010 11:52 AM
Brilliant, Jay. You've completely ignored the fact that Northrop would move into the state in 2011, a full year after the millionaire's tax expires. I'd say it was unbelievable, but I find your ignorance entirely believable.
Posted by: Scott | January 5, 2010 12:50 PM
Jay,
If it means paying tens of millions in tax breaks, subsidies, grants, etc., then let Virginia have Northrop headquarters.
Why should MD wage earners subsidize these large corporations who often pay very little in corporate taxes to the state?
That's like renting out your house and forgiving the rent plus paying the renter's utility bill.
Posted by: Ted | January 5, 2010 11:52AM
_______________________
Ted, I agree totally with your statements... there is no reason why we should be giving these multi-million dollar corporations ANY tax breaks to give them incentive to come into Maryland.
We should be telling them "You don't want to pay the LEGITIMATE TAXATION RATE and FAIR taxation rate that we have on busiensses in Maryland? Go to hell, we don't need you in our state! We can find some TRUE responsible corporations to come into Maryland, who are not going to insist that we bribe them to do so!"
Posted by: Abresh | January 5, 2010 4:26 PM
The metro is a good deal.
I just find it crazy that if one is leaving the Capital there is a convenient freeway exit to take you south but a nightmare of lights and left hand turns to head north.
Posted by: Dan | January 5, 2010 6:04 PM
Would live in Virginia, no doubt about it.
Posted by: Bar | January 5, 2010 7:25 PM