January 19, 2011

Number of millionaires goes down again

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By Len Lazarick
Len@MarylandReporter.com

The number of Marylanders filing million-dollar tax returns went down again in 2009, according to figures from the comptroller’s office.

In calendar year 2009, there were 4,134 returns showing net taxable income of $1 million or more, 798 or 16% fewer than there were in 2008, according to David Roose, director of the Bureau of Revenue Estimates. Roose produced the numbers at the request of MarylandReporter.com.

The legislature passed a surcharge on millionaires in 2008 to replace a sales tax on computer services. The “millionaires’ tax” expired Dec. 31, but liberal groups are proposing that the tax be extended this year. The surcharge was .75% on earnings over $1 million, on top of the top tax rate of 5.5%.

There was a “a slight uptick” in the percentage of taxpayers who filed a million-dollar return in 2008 but did not file a return in 2009 at all, Roose said. This could indicate that high-income people had left Maryland, as opponents of the millionaire’s tax say.

But Roose was unwilling to interpret the numbers that way.

“The reason we had a lot fewer millionaires in 2008 and 2009 is people made a lot less money,” Roose said.

Numbers of millionaires – Marylanders with seven-figure taxable incomes – rose steadily for five years from 2003 to a record of 7,192 filers in 2007. The next year the numbers fell by 30% to 4,932.

Almost half of the 2007 millionaires (3,404) filed returns with incomes under $1 million in 2008, and another 448 (6.2%) either filed a part-year return, or filed no return at all. About 40% of the 2008 millionaires had incomes less than that the following year, and 364 (7.4%) filed no return or for a partial year.

Ron Wineholt of the Maryland Chamber of Commerce had no doubt what the new figures meant.

“The CPAs I’ve talked to continue to tell of clients who have declared their tax domicile in other states because of this millionaire tax.”

“People at that level [of income] have choices,” Wineholt said, and tend to “own houses in more than one state.”
“I think that’s a big part of these numbers,” he said.

But Rion Dennis, executive director of Progressive Maryland, said Congress had already given Maryland millionaires a $77 million tax cut in the extensions of the Bush-era tax rates passed in December.

The reduction in millionaires reflect “two very bad economic years,” and “can be accounted for by the bad recession,” Dennis said.

Dennis cited a Phoenix Marketing International study released in September that found Maryland had the second highest percentage of millionaires in the nation, after Hawaii.

Phoenix estimated that 6.26% of Maryland’s households – 133,000 – had assets of $1 million or more.

“Phoenix defines a millionaire household as one with $1 million or more in investable or liquid assets (excluding sponsored retirement plans and real estate),” the company says.

This means that Phoenix measures “millionaires” based on accumulated wealth, rather than the  taxable incomes figures from Roose. People who make $1 million a year are likely to be wealthy, but many other households with incomes in the low six-figures could accumulate $1 million in liquid assets, including IRAs under their control.

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  • Bill

    As you note, there are two explanations put forward for the drop in Millionaire tax filings: 1.) That the Millionaire’s tax has driven our precious millionaires to other states, or 2.) That it’s the economy stupid. All the objective evidence points to the later. All of the self-serving anecdotal evidence points to the former. Looking at the figures you provide, “millionaires” were at a high in 2000 (the top of the internet / stock market bubble). They dropped sharply in 2001 and 2002, corresponding with the recession and stock market collapse of those years. Subsequently, the number again rose, through the peak of the housing bubble in 2007. And fell the following two years as we endured the great recession. Hmmm …

    But this might be easily cross checked. Were changes in tax domicile the primary cause of the most recent drop, one would expect to see a simultaneous spike in Virginia’s (or PA’s) million $ tax filings. Since none of the whimpering crowd has ever produced such a statistic, which would be highly persuasive of their case, I presume that such analysis does not support the desired thesis.

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