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Published on August 10th, 2011 | by Len Lazarick

13

Tax flight a reality for Frederick business owner

Our story last week on a national study, “Tax flight is a myth,” produced more reader comments than any we’ve posted this summer. Some supported the study’s conclusion, but most scoffed.

Mark Gaver

Mark Gaver

One of the comments came from Frederick County businessman Mark Gaver, for whom fleeing from Maryland taxes is now a personal reality. Gaver is the owner of GTI Federal, an IT provider to federal agencies, and of Gaver Holdings, a real estate company.

Gaver, 50, and his wife bought a home in Bonita Springs, Fla., in 2009, and have been staying there eight months out of the year. He will make the residence change permanent in October. He is also considering moving his 75-employee GTI to Florida as well, where it recently picked up a contract with NASA.

The move is not taken lightly. Ten generations of Gavers have lived in Frederick County since 1762; his wife’s family has lived in Maryland for eight generations.

“The move is primarily to get out of the cold weather, but the tax benefits are certainly substantial,” Gaver said in an interview.

Gaver earns about $750,000 a year. With state and local income taxes his top marginal rate comes to 8.5%. That’s more than $60,000 in taxes per year, a little less than the total income for half of Maryland households.

Gaver’s father was career Air Force, and “I am the first person in my family to have significant financial success. … I’m being punished for that financial success.”

The state and federal government seem hell bent on redistributing wealth, he said. A family member who works for him makes a bit above $40,000 per year. A single mom, she paid $4,800 in federal withholding taxes last year, but got a refund of $6,900 with the earned income tax credit that means half of U.S. households pay no income tax.

“I don’t mind paying my fair share,” Gaver insists. “I don’t think the state of Maryland cares to keep people like me here.”

“I don’t think the state of Maryland cares to keep people like me here”

When he moves, he points out, the loss will not be  just to the local economy, but to the civic wealth of Frederick County. He and his wife give “a couple hundred thousand dollars a year” to local charities, and he’s already begun re-targeting some of that to Florida. He said the state of Maryland will look at his “charitable intent” in assessing whether he really, truly has made his permanent abode in the Sunshine State.

“I’m the kind of guy that the state of Maryland will come after,” Gaver said. He said he knows of three other Maryland businessmen who have moved to his area to the Gulf Coast. There are now several direct flights a day from BWI to the Fort Myers airport near his new home.

The Center for Budget and Policy Priorities and the Maryland Budget and Tax Policy Institute insist that an analysis of the data shows the large numbers of high-income folks do not move when taxes are raised. But last week’s study does not look at the total tax burden they often complain of, along with Maryland’s heavy-handed regulatory climate. “I think they’re kidding themselves,” Gaver said.

As John Brown from the Eastern Shore said in a comment on the original tax flight story, “If the studies are true, why is my farm now surrounded by people from New Jersey who are flee[ing] high taxes?”

Advocates for higher taxes to pay for maintaining and increasing social services say this is all “anecdotal,” but the anecdotes pile up.

I first ran into this phenomenon 14 years ago when I was between journalism jobs and doing some writing for a Maryland businessman with operations in Florida. It turned out he had already established permanent residency in Florida, and kept track of the days he needed to stay there. He said the move saved him $100,000 a year. I did the quick math, and realized he was making over $1 million a year.

I still see him occasionally in Maryland, where he remains active in business and civic affairs, and even is a substantial donor to local charities (unfortunately not to MarylandReporter.com).

Most of these folks will admit they like Florida for the balmy weather in the winter, but as Gaver said, the tax benefits are substantial. They can eat out by the pool on their screened patios in January, and save more money than half of Marylanders make in a year.

–Len Lazarick
Len@MarylandReporter.com

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  • http://alchemytoday.com alchemytoday

    “Gaver is the owner of GTI Federal, an IT provider to federal agencies.” … ““I am the first person in my family to have significant financial success. … I’m being punished for that financial success.”

    I’m fairly certain that Gaver’s received more Federal largesse than his allegedly free-loading relative.

    • David

      Fascinating. He said nothing about a “free loading” relative. Furthermore, few stories are there because they LEAVE. Furthermore, alchemytoday chooses to overlook the scores of jobs created by Gaver in this community. Do you REALLY think ONE GUY does all the work? Could it be the ONE guy has the guts to negotiate the contracts and ensure they’re FULFILLED so the next contract can be secured, ENSURING additional work???? But these are the people (entrepreneurs) Maryland has taken for granted (at best) or gone after (at worse).

      There are a few immutable laws: physics (as in gravity; try changing the laws of gravity) and economics. Capital moves. Capital can mean money, but in this case it means employment opportunity. Ignore these immutable laws at your peril.

  • Emiller

    I am a small business owner in the state of MD, employee 11 people, 3 of whom have already moved to PA, one is moving soon.

    Last evening I attended a “cousin’s dinner”.  14 cousin’s meet fairly often, (all women, which includes some of the wives of the male cousins).  All were born and raised in MD. Most are
    between the ages of 50-72.  Of the 14 people there, only 1 is planning to remain in MD.  Almost all are homeowners.  Some retired and some like me are still working and plan to work for as long as we can.

    We were discussing future plans and everyone at the table said they were leaving MD when they could. 
    They are moving to DE or PA, one to SC. Everyone said they were leaving because of the tax situation in MD.

    None are politically active, but almost all are knowledgeable about what’s going on, both in the US and in the State. They all know the Vice President’s name and who was the first Pres. They probably know
    the first Vice Pres name. In other words, we are not dummies.

    Why in heaven’s name isn’t someone paying attention to us? Is it because they are trying to attract the “new Americans” (otherwise known to most of us as “illegal aliens”)?  We are the backbone of this state and it is becoming fairly obvious that not many in Annapolis are the least bit interested
    in our opinions.

    If anyone wants to know why the Tea-party is doing so well, it is exactly for that reason.  No one in
    politics listens.

    I personally will leave that State as soon as I retire. I
    can no longer afford to live here. 

    Ellen E. Miller, ERPA
    President
    Creative Benefits Services, Inc.

  • jonmarsh4

    As someone who makes $42000 per year and struggles to pay my mortgage, day care, utilities, car loan/insurance and health insurance, and still put food on the table, I would gladly switch places with “victim” Mark Gaver.  In fact, I’ll take it a step further: I’ll do his job for $500,000, the government can still take their $60k, and with the extra $250k, I’ll hire 5 additional employees at $50k each.  I’m truly sorry Mark doesn’t see any value in doing business in Maryland. I’m sure if Jesus were here right now, he’d give Mr. Gaver a big hug and assure him everything will be okay.  If taking home $690,000 a year is “being punished,” I’d be more than happy to let the State of Maryland beat the crap out of me.  As far as his neighbors fleeing New Jersey, I call B.S. because everyone knows Chris Christie has made it a paradise over there in the last two years.  That’s why they’re urging him to run for President.

    • dw

      What makes you think you could do Mark Gaver’s job at any salary level?

  • http://twitter.com/justdafacts Steve Lebowitz

    Mark Gaver is a great asset to the community–as business leader and a civic leader–but his statement doesn’t add up….The state and federal government seem hell bent on redistributing wealth, he said. A family member who works for him makes a bit above $40,000 per year. A single mom, she paid $4,800 in federal withholding taxes last year, but got a refund of $6,900 with the earned income tax credit that means half of U.S. households pay no income tax.
    I checked the data he provided against the IRS EITC calculatorhttp://apps.irs.gov/app/eitc2010/ShowCalcTips.doFor a head of household filing single with $40,000 in wages, estimating three dependents, the result was an earned income tax credit of $700, a far cry from the $6,900 refund Mr. Gaver claimed his relative received after paying $4,800 in federal withholding taxes. Even if Mr. Gaver’s relative has huge itemized deductions, no one earning $40,000 in wages has a $2,100 negative federal income tax liability (net refund on top of 100% refund of withholding including FICA) as he claims.There is just no possible way that Mr. Gaver’s statement can be true.- Steve Lebowitz, Annapolis

    • Lafayetteann

      You just earned yourself the ‘star reporter’ cub scout badge for doing more credible research in a few minutes than journalist Len Lazarick did in his entire article.

    • Len Lazarick

      The numbers came from Mr. Gaver, but he only cited them to illustrate his complaint about redistribution of wealth. I threw in the reference to the earned income credit, but I probably shouldn’t have. Without seeing the private income tax return of Mr. Gaver’s relative, if the numbers are accurate, a more credible explanation is that this single mother used the much larger child care tax credit, which could be as much as $3,000. Given how much dispute it’s stirred up, I might have been better off leaving out the whole reference to wealth redistribution because it related to federal taxes mostly. 

      I do wonder how Lafayetteann in her comment below was able to determine that my friend Steve — an excellent opposition researcher — spent a few minutes to come up with his speculation, as compared with my interview and research on Mr. Gaver, which was admittedly from only his point of view. The telepathic powers of some of my readers is astounding. But thanks for reading.

      Thanks, too, to Jay Hancock of the Sun for quoting and linking to my poorly researched article in the Sun. Hancock said:
      “MarylandReporter.com’s Len Lazarick has accomplished something that has
      eluded me for years: getting somebody who moved because of Maryland’s
      high taxes to go on the record. Maryland tax flight is real, but most
      folks changing their residence to Florida or Virginia don’t want to be
      quoted in the paper, for obvious reasons.”  http://weblogs.baltimoresun.com/business/hancock/blog/2011/08/a_millionaire_maryland_tax_ref.html

      I too have been trying to talk such people for years. Thanks to Mr. Gaver for talking. (He tells me, by the way, that he’s was contacted almost immediately by the Bonita Springs Chamber of Commerce and the Lee County FL economic development office.)

      BTW, there will be a follow-up article on Friday that will balance some of the observations by Mr. Gaver.

  • Guest

    Does this guy realize that his federal contracts are funded by the same taxes he doesn’t like paying?

  • Pingback: Jay Hancock: Millionaire fleeing Maryland taxes speaks out | #1 Accountants()

  • Len Lazarick

    Thanks also to Michael Rosenwald of the Washington Post for linking to this story yesterday from “the influential political blog MarylandReporter.com.” If the Post says it, it must be so. He got 17 comments to his story.
    http://www.washingtonpost.com/blogs/rosenwald-md/post/do-people-move-because-of-high-taxes/2011/08/10/gIQARmAm6I_blog.html

  • Van

    Taxation has the following effect:
    When you run a hurdle race and you win, the reward is that they (Federal, State, County Governments)  put an extra hurdle (“tax”) in your lane.  If you happen to win again despite the extra hurdle they put an additional hurdle in your lane to make sure that you all finish equally!!!
    What do you think will happen to the runner that wins?  Of course he/she will run just a fast as is necessary to “stay with the field”.  As we all know that is not how and why we make progress and on which basis this country is built.  This appraoch is socialism/communism in concept.
    Further more we do not apply this thinking to sports. We pay the highest price necessary to win and “we” means the public, because they make the ultimate game possible by watching and paying for it.
    We should stimulate and promote people who can achieve things so that all of us will benefit in one way or another, rather than punish them and thereby hold them and ultimately all of us back.
    Taxation does that.  Ans yes, also to Maryland.

  • Pingback: Taxpayers flee high tax rates? | Tax Attorney and Tax Resolution Services: IRS Help Blog()

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