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February 23, 2011

Why do millionaires love Maryland?

With Annapolis discussing extending Maryland's millionaire income-tax surcharge, it's time to talk again about how much of a disincentive to capital the state's taxes are. Maryland's personal income taxes are high relative to its neighbors. And Smart Money says Maryland is the second worst place to die, after New Jersey, from an estate/inheritance-tax point of view.

Yet Phoenix Marketing International says Maryland is No. 2 in the country in millionaires per capita. And New Jersey (also with high income taxes) is No. 3. (This is a strict definition of millionaire. You have to have $1 million in liquid assets; under their definition that doesn't count your house or your 401(k) plan.)

Hawaii is No. 1, which Erik Brynjolfsson says he can understand. But New Jersey? Tyler Cowen, former New Jersey state youth chess champion, responds:

why do millionaires love New Jersey? My answer: because it's really, really nice!

Especially if you are old. You don't have to live in New York or Philadelphia, and yet you have access to at least one of those cities, possibly both if you buy in Edison. You can have a splendid house in a nice, leafy neighborhood with reasonable public services, a socially excessive amount of parking, and good restaurants.

For smart young people, however, the nice parts of New Jersey are very much a net exporter.

That leaves Maryland. What are all these rich people doing here? How did they get here and why do they stay? Should we tax them more?

Posted by Jay Hancock at 9:12 AM | | Comments (14)
Categories: Taxes
        

Comments

The reason why Maryland has so many millionaires is because we are close to DC and the fat-cat government bureaucrats. It is an outrage that suburban DC has a higher standard of living than the everyday places in America that create the wealth that is confiscated by the government. Of course we can't forget the lobbyists, "advisors," etc. that feed off the bottom.

Why is Maryland popular with the wealthy? The jobs in DC; the high paying research jobs created by Johns Hopkins in the Baltimore area; the high paying jobs associated with large financial companies (T. Rowe Price, Legg Mason, etc.); and the simple fact that we are close to major population centers (DC, Philly, NYC). We should also give credit to the fact that we have a long history of being a tolerant and open minded state. Educated people flock here in a way they simply don't flock to West Virginia or Pennsylvania.

"the high paying research jobs created by Johns Hopkins in the Baltimore area"

LOL @ high paying research jobs created by JHU!!! JHU is NOTORIOUS for being at the bottom of the pay scale!

And high paying research job? Never heard of such a thing and I work in the industry! Maybe corporate positions at big pharma companies, but that hardly qualifies as a "research" position.

It has nothing to do with Baltimore that is for sure.

This is great. All of the rightwing Fox nuts have been stupefied into silence by this. It literally does not compute with them because they have been swimming in Fox's lies about how Democratic taxes are driving all the wealth from the state.

Roman and Rick,
Give me a break! Roman didn't even propose to answer Jay's questions.
If it weren't for DC, MD would be middle of the pack at best.
VA has 25% more millionaires coming in at #6 on the list. They're a bigger state with 50% more households.

@Rich
Ah yes, Maryland is a "tolerant and open minded state" with few of those messy uneducated hicks from Pennsylvania and West Virginia. Thanks for the lesson on tolerance, pal.

Maryland didn't always have as many millionaires. So you're left to struggle for the answer. I think it's two-part:
1) As the federal government grows so do contracting companies. Naturally they base their headquarters near the majority of their business. The secondary reason here is that heavily-regulated industries have also found it appropo to shift their industry to at least have secondary headquarters (see finance industry post-08).
2) The Chesapeake Bay is well known for it's vista, proximity to DC, and remote yet connected landscapes. Hence why folks like Donald Rumsfeld retire there (and he certainly doesn't like the millionaire tax, i'm sure).

The tax does hurt Maryland because the newer folks--like the financial sector--will choose to locate in VA.

Random thoughts:

(1) A million dollars ain't what it once was.

(2) It takes a million to live in a good Maryland neighborhood

(3) In the infamous words of Willie Sutton: That' where the money is

(4) The question to consider is not how many millionaires live in Maryland but how many die here

Two reasons.. First and foremost, our proximity to DC. Money flows from DC. Second, the cost of living near DC. Many of the homes around DC start at $500,000, and go up from there. Five of the ten highest per capita incomes are in the DC area, three in Northern VA, and Howard and Montgomery counties in MD.Coincidence? I think not.

I'm with Tyler-what is a few thousand dollars in income tax if you like the place and enjoy your life? High wealth individuals are far more concerned with the capital gains tax than income, because their income is so flexible and many years they make "nothing" in income despite having scads of relatively liquid assets and great homes. Not all "millionaires" do this, of course, but my guess is that the small business owners netting a million or more from time to time also stay here because they enjoy it. Maryland's income and sales tax rates are pitifully low by national standards, and uniform across the state. Why would you subject your family and finances to an inter-state move to save $20,000 a year if you're grossing or netting over a million? Instead of lowering taxes, let's get better international service at BWI and some decent restaurants in Baltimore and Annapolis, they will attract just as many millionaires as a 1% income tax reduction.

I am now a Florida resident, several of my successful friends moved here as well, and another is about to move. Guess why? Taxes - state income tax and Maryland's death tax. There are none in Florida.
If you believe that successful people are happy to pay high taxes in order to enjoy high crime, liberal social agendas and bad weather, I have a bridge I'd like to sell you.

Roman needs to turn his brain on.
The reason we have so many millianaires is because we have so many people who feed at the trough of the federal government. As long as they feed on taxpayer's money, they will live here. Once done, they usually move.
Jay Hancock should look at Maryland's success rate of holding on to millionaire retirees, that will complete this story.

Waht you really need to ask is who is adding more, VA or MD. I am tired of living in DC but do I want to move to MD when the fatcats in Annapolis see me as just another pocket to pick. VA and its 6% tax is much nicer. Also, I have a second house in MD but you can be damn sure that my retirement address will not be in MD!!!

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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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