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Brilliant response to increased tax burden on the rich

May 27 2009 at 3:07 PM

Food for thought for Obama and the rest of the Liberal administration (from WSJ, 5/27/09)

Here's a two-minute drill in soak-the-rich economics:

Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. 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."

One year later, nobody's grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." 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.

No doubt the majority of that loss in millionaire filings results from the recession. However, this is one reason that depending on the rich to finance government is so ill-advised: Progressive tax rates create mountains of cash during good times that vanish during recessions. For evidence, consult California, New York and New Jersey (see here).

The Maryland state revenue office says it's "way too early" to tell how many millionaires moved out of the state when the tax rates rose. But no one disputes that some rich filers did leave. It's easier than the redistributionists think. Christopher Summers, president of the Maryland Public Policy Institute, notes: "Marylanders with high incomes typically own second homes in tax friendlier states like Florida, Delaware, South Carolina and Virginia. So it's easy for them to change their residency."

All of this means that the burden of paying for bloated government in Annapolis will fall on the middle class. Thanks to the futility of soaking the rich, these working families will now pay Mr. O'Malley's "fair share."

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O's becoming desperate for tax revenues.

May 27 2009, 3:40 PM 

Tobacco taxes have already been increased (which, btw, disproportionately affects the poor). They're talking about taxing internet sales, raising the tax on alcohol, and even taxing sugary sodas. There's also Obama's massive energy tax. Finally, there's even discussion of a nationwide sales tax. For more on that, see the attached article:

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Re: O's becoming desperate for tax revenues.

May 28 2009, 9:36 AM 

What happened to 95% of Americans getting a tax cut? It was a ruse. We'll cut your income taxes and raise every other tax imaginable, and for good measure we will even create some new taxes.

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We can still have "hope"

May 28 2009, 11:08 AM 

My hope is that the people who voted for O will be first up to feel the pain that comes with all this hope and change. The phrase 'what goes around comes around' seems appropriate here.

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Tax increases? What tax increases?

May 28 2009, 12:46 PM 

Congress wants to increase tax on beer by 145%. This means you'll spend an extra $3 for a case. It doesn't stop there, with a 20% increase for hard liquor sales. Maybe the hardest hit is the wine drinkers. The tax on wine sales would increase by 233%. Get ready to shell out an extra $7 for a case of wine.

Reagan had it right: "Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

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