Affluent Taxpayers, Jobs Fled Maryland Under O’Malley

Ethan Barton | Deputy Editor

Wealthy taxpayers and job-creating businesses fled Maryland at an accelerating rate as then-Gov. Martin O’Malley implemented a long list of tax hikes during his first five years in the state capital.

More than 18,600 tax filers left Maryland with $4.2 billion in adjusted gross income from 2007 – O’Malley’s first year as governor — through 2012, according to a Daily Caller News Foundation analysis of the most recently available Internal Revenue Service state-level income and migration data. The wealth of the fleeing Marylanders  increased significantly during that time.

O’Malley raised taxes 40 times at an estimated cost to Maryland residents of $9.5 billion. The O’Malley tax blitz is widely credited with the 2014 victory of Republican Larry Hogan, only the second GOP governor in the deep-blue state in nearly 60 years.

O’Malley’s economic record may partially explain why his campaign for the 2016 Democratic presidential nomination has yet to gain traction among voters outside of Maryland.

Taxes are “another piece of the pie that speaks to the structural problems that Maryland has,” Maryland Public Policy Institute fellow Marta Mossburg told TheDCNF. “It needs to be remedied immediately.”

MD's Total Income Migration

O’Malley’s harshest taxes took effect on wealthy residents by 2012. Income and sales taxes were increased, while new taxes on flushing commodes and rainwater were imposed.

“Literally every single budget that he put forward and that was passed spent more than the state was taking in,” Mossburg said. “What kind of fiscal path does that put us on? It’s very scary for future taxpayers.”

O’Malley also created a climate that drove businesses out of Maryland, TheDCNF previously reported.

Nearly 5,600 state-tax filers left Maryland in 2012 and took $1.6 billion with them, more than double the 2,300 who departed with $732 million in 2011.

The fleeing 5,600 filers had average incomes of nearly $291,900 — more than double the $119,100 the net average filer brought out of Maryland during O’Malley’s first year in office.

“A state cannot balance its budget on the backs of the 1 percent most productive citizens,” according to a Heritage Foundation analysis. “They will leave and they are leaving. Americans are voting with their feet to keep more of their income.”

Maryland’s Comptroller agreed, concluding that the state’s population of millionaires decreased by one-third to around 2,000 in 2009. There was debate as to whether the millionaires moved because the Great Recession of 2008 caused incomes to dwindle or because the wealthy were fleeing the state’s increasing levies, the Baltimore Sun reported.

“When you have wealthy people leaving and you keep burdening the remaining people with more taxes, they have less and less left,” Mossburg said.

Maryland's Migrating Household Income

Fleeing Marylanders’ incomes increased by 30 percent to $73,700 per filer from O’Malley’s inauguration to 2012, though there was a dip during the recession. Meanwhile, arriving filers’ average incomes peaked at $59,000 in 2012 — only an 18 percent increase over the same time.

The disparity between inbound and outgoing Marylanders’ incomes increased drastically during O’Malley’s tenure. Departing residents earned around $6,500 more per filer than incoming Marylanders in 2007, but that difference more than doubled to more than $14,600 by the 2012.

Maryland saw the smallest income difference in 2009 with outgoing filer incomes only outweighing those arriving by about $1,100 when more residents were likely staying put because of the recession.

“There weren’t jobs for people to find elsewhere and people couldn’t sell their houses,” Mossburg said. “Once they could, they left.”

The income disparity sharply increased following the recession and O’Malley’s continuing tax hike blitz. The difference doubled to $2,000 in 2010, and then increased nearly seven-fold in 2011 to more than $7,100.

Maryland had the smallest outflow in 2009 when an estimated $14.3 million left the state. It was the only time during O’Malley’s tenure that saw an influx of tax returns — a growth of nearly 1,300.

But an average of around 3,100 tax returns and $696.3 million left the state over that five-year period.

Most of 2012’s departing residents moved to the more business-friendly Virginia, according to the data. Washington, D.C. saw the second largest influx of Marylanders.

Florida was the third most common destination for Marylanders. It’s likely, however, that at least some of those were affluent residents who switched their official residencies to second homes in Florida to avoid the Old Line State’s high taxes, Mossburg said.

That’s further evidenced by the fact those departing for Florida were the wealthiest Marylanders, with average incomes of $118,900 — more than twice the average income of filers moving to D.C.

Nearly one-third of the departing income — or nearly $2 billion — came from Montgomery County, which is one of the wealthiest counties in the nation. The nearly 19,800 filers took around $101,100 with them, each.

“So many of the people that live in Montgomery County work in D.C. and can easily move to Virginia,” Mossburg said.

The county, which borders D.C. and is teeming with federal jobs, also saw the greatest influx in Maryland, with nearly 18,600 new tax returns, but they brought only $80,200 per filer.

Many of Montgomery County’s new residents likely moved for jobs related to the federal government, rather than for Maryland’s economic climate, Mossburg said.

Another third of the departing income came from Baltimore, Anne Arundel, and Prince George’s counties, accounting for another nearly $2 billion.

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