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Original Post:

This article made my day for its object lesson to class warriors:

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.


Apparently, if you decide to make life harder for someone, they will find some way to make it easier again. Novel concept. In this case, the rich folks either experienced income drops, or simply moved out of state.

Follow along with me here: let's say I'm a guy who owns his own business and makes a million bucks a year (or more) off of it. Life, she is good. Then the class warriors come along and say that I now have to pay more taxes on my million bucks. Wait a minute... I did say I own the business, right? I set my own salary... so for a relatively minor pay cut I can save myself some extra taxes. $990k for a year's work ain't too shabby either, and it's a nice tax dodge. The extra money can go back into the business for growth or savings or investment.

Or, as the article later says, I can just move my permanent residence to neighboring states with better tax laws, or simply go to one with no personal income tax at all. After all, I make a million bucks a year... moving house probably wouldn't be that big a deal, especially if I already had a second home in Florida or wherever.

And of course, since the state's expected $100 million windfall actually turned into a $100 million shortfall, that money will have to be made up somewhere. Easiest target: those middle class folks, working for a living, trying to pay the mortgage, and generally without the same level of mobility as the millionaires that escaped the fleecing. Johnny Punchclock, it turns out, is a captive taxpayer because it takes a fair amount of effort for him to uproot his kids and family and head to another state while hoping to get a job. Mr. Millions can probably do his work from anywhere. Johnny Punchclock would need to find someone new to hire him, or risk everything to go into business for himself in an environment that's increasingly hostile to small business and entrepreneurs. Thanks, class warriors!