Maryland's Ongoing Millionaire Migration Myth

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Despite a lack of data to support their claims, some lawmakers and business groups continue to insist that extending Maryland’s 0.75 percentage point income tax rate hike on incomes over $1 million has caused an exodus of millionaires from the state.  To help clear things up, this week ITEP released a two-page brief explaining why evidence surrounding a similar policy in New Jersey does not provide support for this claim (despite many assertions to the contrary), and testified before the Maryland Senate Budget and Tax Committee on the merits of extending the “millionaires’ tax.”

In 2004, New Jersey implemented a 2.5 percentage point increase in the top tax rate on incomes over $500,000, frequently called the “half millionaires’ tax.”  Opponents of the Maryland “millionaires’ tax” have recently begun to portray the New Jersey experience as a horribly failed experiment in order to discredit any attempts at extending Maryland’s version of the tax.

In response, ITEP's brief looks specifically at two academic studies that have recently been touted as evidence against the New Jersey policy. One study was published by Boston College, the other by Princeton University.  The Boston College (BC) study, in particular, has recently become a favorite among opponents of Maryland’s “millionaires’ tax.”  But while the BC study does show that $70 billion in wealth left the state over the 2004 to 2008 period, it makes absolutely no attempt to focus its analysis on that small subset of New Jerseyans actually affected by the “half millionaires’ tax,” and does not mention taxes even once as a potential contributing factor.

The Princeton study, in contrast, actually does attempt to evaluate the “half-millionaires’ tax,” and finds that its effect in driving people from the state was “small.”  It goes on to conclude that “if the New Jersey experience is any guide, Maryland’s ‘millionaires’ tax’ is likely to generate substantial revenues and very little out-migration.”  Oddly, these straightforward findings never seem to find their way into the talking points used by the anti-taxers.  Simply put, opponents of the “millionaires’ tax,” unhappy with the results of the Princeton study, have turned toward the infinitely less relevant BC study to create the appearance that the facts are on their side.

ITEP also relayed the facts behind the “millionaires’ tax” to the Maryland Senate Budget and Tax Committee in testimony it gave this past Tuesday.  In addition to refuting claims that the “millionaires’ tax” has resulted in an exodus among the rich, the testimony also explains how the “millionaires’ tax” reduces the unfairness inherent in Maryland’s tax system, and how the tax results in a sizeable federal tax cut for millionaires, as they are able to write-off the tax increase as a federal itemized deduction.

Read ITEP’s Brief on the New Jersey Migration Studies’ Relevance (or Lack Thereof) to Maryland.

Read ITEP’s Testimony on Extending the Maryland “Millionaires’ Tax”.

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