The following letter to the editor of the Wall Street Journal points out that their widely-cited op-ed on the Maryland "millionaires' tax" is both misleading and factually inaccurate. The letter makes clear that the Journal's general interpretation of the Maryland "millionaires' tax" -- which it first began touting nearly one year ago -- is grossly distorted. Perhaps as a result, the letter went unpublished.
Your March 12 editorial, “Maryland’s Mobile Millionaires,” (Review & Outlook, March 12) states that “one-in-eight millionaires who filed a Maryland tax return in 2007 filed no return in 2008.” But this is simply wrong. The most recent data from the Maryland Comptroller’s office show that just 6.8% of Maryland’s 2007 millionaires have yet to file their 2008 returns, far below the 12.5% your “one-in-eight” figure implies. And as the Comptroller’s Office has reminded anyone who will listen, there are two reasons to be skeptical that even this 6.8% figure can be attributed to the state’s “millionaires’ tax.”
First, Marylanders—like all Americans—were quite mobile before the millionaire’s tax was introduced. In the seven years before the enactment of the tax hike in question, an average of 5.6 percent of Maryland’s millionaire filing population moved out from one year to the next—not that different from the 6.8 percent we’re seeing in 2008 so far. Moreover, there are quite sensible reasons why upper-income taxpayers would be late filing their 2008 taxes. As Maryland Comptroller Peter Franchot noted in a May 2009 letter, “It is possible that, with the economic turmoil experienced in the last half of 2008, the tax situations of many wealthy individuals are more complicated than usual, and a higher proportion will therefore use the filing extension than is typical.” In other words, it’s far too soon to call these numbers final. It’s a shame that the Journal’s editorial board has jumped the gun on this once again.
Institute on Taxation and Economic Policy