Monday, November 23, 2009

Update on the ‘Millionaire’s Tax’

By Ronald W. Wineholt
Vice President of Government Affairs
Maryland Chamber of Commerce
Monday, November 23, 2009 at 05:10 PM
Archive

During the 2008 session, the Maryland General Assembly enacted a 0.75 percent surcharge on individuals and joint filers with incomes over $1 million. The surcharge was enacted for tax years 2008, 2009 and 2010, with assurances from legislative leaders that the tax bracket would be allowed to sunset after that date.  The fiscal note on the legislation projected an estimated tax yield of $155 million for FY 2009, $113 million for FY 2010, and $61 million for FY 2011.
Today the Comptrollers’ Office released a letter analyzing the number of individuals who have filed Maryland individual income tax returns reporting over $1 million in recent years. The data suggest that:

• The number of individuals who reported $1 million in income, but did not file a tax return with the state in the following year, increased for the second consecutive year; and
• The number of individuals reporting $1 million in income dropped by 30 percent from tax year 2007 to 2008.

In light of this data, it is unlikely that the surcharge has yielded the amount of revenues that were originally estimated. This tax surcharge falls disproportionately on small businesses that pay income taxes as sole proprietors, LLC’s and S corporations. The Tax Foundation advises us that Maryland has the 6th highest marginal income tax bracket in the country, and higher marginal rates than all of our surrounding states. When combined with pending federal tax increases contained in the health reform legislation, individuals in this tax bracket would pay over 55% of their income to the state and federal governments.

Maryland needs a competitive tax structure if we are to retain and attract businesses to our state. We would urge the Governor and General Assembly to allow the surcharge to end, as provided by current law.

For more information, contact Ron Wineholt at .(JavaScript must be enabled to view this email address).

Related Story:
MarylandReporter.com: Final count of millionaires filing in Md. drops 30 percent