In 2008, when Maryland Gov. Martin O'Malley pushed his "millionaires' tax" through a compliant General Assembly, he clearly did not anticipate that his state's millionaire tax returns would plummet by 30 percent, resulting in a net revenue loss of $257 million. He could not have known that 2,369 affluent taxpayers would choose to leave the state instead of getting fleeced again. The millionaire's tax was soon repealed, but O'Malley does not appear to have learned from his embarrassing mistake.
Maryland is already the nation's fourth-highest taxed state, but that didn't stop O'Malley and the Democrat-controlled legislature from passing a "thousandaires' tax" during the special session, which raises personal income taxes for individuals earning more than $100,000 and couples earning more than $150,000 per year. Those hardest hit will be business owners and those living in the high-cost Washington suburbs.
The income tax hike alone will take a projected $247.3 million annually out of the productive private sector to pay for O'Malley's overspending. It's one of 24 tax increases passed since 2007 that have cost taxpayers $2.4 billion, even as Maryland's total operating budget has risen from $28.8 billion to $35.5 billion today. The general fund budget increased 15.5 percent between FY 2011 and FY 2013, more than any other state on the East Coast, according to the latest "Fiscal Survey of States," a new report by the non-partisan National Governors Association.
The end result should come as no surprise to Annapolis. With the top state income tax rate now a punishing 8.95 percent, and sales and corporate income taxes significantly higher than in neighboring states, more and more fed-up Maryland taxpayers are heading for the exits. A net total of 31,000 left between 2007 and 2010 -- the largest taxpayer exodus in the region and the seventh highest in the nation. Nearly 11,500 ex-Marylanders decamped to Virginia, depriving Maryland of $390 million in tax revenue. Virginia is also the preferred destination for corporate relocations. Their second largest destination is North Carolina, whose biotech industry competes directly with Maryland's.
This tax-and-brain-drain is accompanied by an alarming loss of jobs. Maryland led the nation with 6,000 jobs lost in April, according to the U.S. Department of Labor. Last month, the state shed another 7,500 jobs, bringing its unemployment rate to 6.8 percent -- 1.2 percent higher than Virginia's. So Maryland is already suffering the consequences of the governor's stubborn refusal to learn from his past mistakes.