The Revenge of The Millionaires
|June 3, 2009||Posted by Roshawn Watson under Uncategorized|
Wall Street Journal released a fascinating article last week called Millionaires Go Missing: Maryland’s fleeced taxpayers fight back. Briefly, Maryland failed to balance its budget last year, so it decided to create a special millionaire tax bracket to make up the deficit.
“Governor Martin O’Malley, a dedicated class warrior, declared that these richest 0.3% of filers were ‘willing and able to pay their fair share.’ The Baltimore Sun predicted the rich would ‘grin and bear it.’”
However, there were two things that Maryland politicians didn’t count on (1) a world-wide economic crisis decreasing the number of million dollar earners and (2) millionaires simply leaving (or taking in less income). “By April 2009, one-third of the millionaires have disappeared from Maryland tax rolls. On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year — even at higher rates.”
Tax the Rich
There you have it, yet another attempt to fleece the millionaires of their money ending as a dismal failure. Here is a quote addressing the subject from over a year ago.
Ralph Nader’s father purportedly once said that “Capitalism will never fail because Socialism will always bail it out.” My concern, especially in this election year, is that socialists will seek revenge. Already I can hear the war cry “tax the rich!” The problem with taxing the truly rich is that the rich simply move their money to countries that treat them and their money with undue respect. And when the rich move their money, the poor and middle class end up paying more taxes (Robert Kiyosaki on April 14, 2008)
In this case, the rich did not need to move their money to other countries, just to tax-friendlier states. After all, these high income earners often own second homes in tax-friendlier states, so switching your primary residence is not nearly as big of an ordeal as leaving the country. Additionally, many of these millionaires are also business owners who control their own salary, so it would not be a tall order for some, especially those who are marginally over the tax bracket, to adjust their salary slightly downward to avoid excess taxes. Of course, there are also several loop holes in almost any tax system (especially for business owners), and many of the wealthy would used their resources to find them.
You Cannot Tax the Rich Beyond Their Willingness to Pay
Notwithstanding the recession, no one is disputing that “the millionaires did leave.” Dare I say that if this departure is real, it is merely a reflection of their contempt for being forced the bare the burden of a financially inept state government who can’t balance its budget. After all, who made this governor the moral authority of Maryland? Who is he to say that what is the fair thing for others to do with their own income? I am definitely not making a political statement but am stating that Governor Martin O’Malley may be in deep need of a history lesson.
Simply put, you just cannot tax the rich beyond their willingness to pay.
I’m not sure whether or not he reached this point or if the loss of 1000 millionares was only due to the decimated economy dropping earnings, but history does show that those who do try to soak the rich ultimately cause the wealthy to leave (or get very creative at least), which means the middle class will bear the burden of the taxes increases. Perhaps that is one of the biggest limitations of a progressive tax system anyway: it creates an overdependence of the government on the incomes of relatively few people (0.3% or less). Thus, if they fall (i.e. because of the economy), change their residence, or lower their income, the whole system stumbles.
Image Credit: NOTperfect
Copyright 2012, Roshawn Watson, Pharm.D., Ph.D. All Rights Reserved.