Maryland Politicians Crash on the Laffer Curve

An insightful editorial from the Wall Street Journal examines how soak-the-rich taxes in Maryland backfired, leading to less revenue for the government. The politicians would like us to think this is just the effect of the recession, but the article points out that one out of every eight millionaires who filed a tax return in 2007 did not file one in 2008. A few may have died, but the big reason for this shocking reduction is migration. As one study discovered, Maryland's tax base fell by $1 billion because successful taxpayers escaped to other states:

Illinois Governor Pat Quinn is the latest Democrat to demand a tax increase, this week proposing to raise the state's top marginal individual income tax rate to 4% from 3%. He'd better hope this works out better than it has for Maryland. ...The politicians in Annapolis had said they'd collect $106 million by raising its income tax rate on millionaire households to 6.25% from 4.75%. In cities like Baltimore and Bethesda, which apply add-on income taxes, the top tax rate with the surcharge now reaches as high as 9.3%—fifth highest in the nation. Liberals said this was based on incomplete data and that rich Marylanders hadn't fled the state. Well, the state comptroller's office now has the final tax return data for 2008, the first year that the higher tax rates applied. The number of millionaire tax returns fell sharply to 5,529 from 7,898 in 2007, a 30% tumble. The taxes paid by rich filers fell by 22%, and instead of their payments increasing by $106 million, they fell by some $257 million. Yes, a big part of that decline results from the recession that eroded incomes, especially from capital gains. But there is also little doubt that some rich people moved out or filed their taxes in other states with lower burdens. One-in-eight millionaires who filed a Maryland tax return in 2007 filed no return in 2008. Some died, but the others presumably changed their state of residence. (Hint to the class warfare crowd: A lot of rich people have two homes.) A Bank of America Merrill Lynch analysis of federal tax return data on people who migrated from one state to another found that Maryland lost $1 billion of its net tax base in 2008 by residents moving to other states. ...Thanks in part to its soak-the-rich theology, Maryland still has a $2 billion deficit... The state's best hope is that politicians in other states are as self-destructive as those in Annapolis.

Thomas Sowell: Obama's Policies Are a Sedative, not a Stimulus

As usual, Sowell is right on the mark. By expanding the size and burden of government, Obama is making it more difficult for the economy to prosper:

President Obama keeps telling us that he is "creating jobs." But more and more Americans have no jobs. The unemployment rate has declined slightly, but only because many people have stopped looking for jobs. You are only counted as unemployed if you are still looking for a job. If all the unemployed people were to decide that it is hopeless and stop looking for work, the unemployment statistics would drop like a rock. But that would hardly be a solution. What is going on, that nothing seems to work? None of this is new. What is going on is what went on during the Great Depression of the 1930s. Money circulated more slowly during the 1930s than during the 1920s. Banks lent out a smaller proportion of the money they had on hand during the 1930s than they did in the 1920s. Anti-business rhetoric and anti-business policies did not create business confidence then, any more than it does now. Economists have estimated that the New Deal prolonged the depression by several years. This is not another Great Depression, at least not yet, and the economy may recover on its own, if the government will let it. But Obama today, like FDR in the 1930s, cannot leave the economy alone. Both have felt a need to come up with one bright idea after another, to "do something."

Remarkable Picture of Current - and Future - Debt Crisis in U.S. and Europe

Flying back from Monaco, I read a very interesting article about Greece in the International Herald Tribune, but the accompanying illustration showing current and future debt is the really staggering part.

Worth Reading (to see America's Future under Obamanomics): Links about Greece

Here's a good big-picture analysis from the Weekly Standard blog.

Here's a story about riots and social chaos.

And here's a story comparing Greece and New York.

The common theme is that reckless overspending is the cause of Greece's fiscal crisis, yet American politicians are taking the United States down the same path of fiscal excess.

Bureaucrats vs. Taxpayers, Part XIV

This is a two-for-one blog post. Not only do we get more sordid details about overpaid bureaucrats scamming the pay rules, but we also find out that this latest taxpayer ripoff was financed with so-called stimulus funds:

Highly touted Bay State job creation programs have stimulated a pile of pocket-padding overtime for state workers and detail pay for cops even as the unemployment rate continues to climb, a Herald payroll analysis shows. Three civil engineers with the Department of Conservation and Recreation racked up overtime tallies last year of more than $100,000 each working “night and day” on bridge projects, officials say. One of the engineers propped up his $76,000 salary with added hours to secure a lofty $205,000 in take-home pay last year, according to the newly released state payroll obtained by the Herald. Two other civil engineers pocketed an extra $117,000 each in OT on top of their modest salaries. ...The news of the overtime bonanza hits as the state announced yesterday the January unemployment rate jumped to 9.5 percent. ...Out of the state’s 96,000-plus employees, close to 50,000 earned extra pay with overtime, second state positions, vacation and sick-time buyback and other varied reasons, according to a payroll analysis.

Additional Monaco Observations - Taxes, Gun Control, and Social Chaos

It's been nice pretending to be part of the top one-tenth of one percent, but I return to reality tomorrow (as if Washington, DC, could be considered part of the real world).

Two concluding observations about Monaco. On the plus side, gun ownership is very easy. It seems everyone has at least one weapon. Not surprisingly, there is almost no crime (unlike England, where crime rates are skyrocketing because thugs know that people have been disarmed by a disgusting government).

On the minus side, Monaco does have a payroll tax, which finances things such as health care. And it's a steep one, requiring about 35 percent from employers and somewhere about 10 percent for workers (it all comes out of workers' wages, of course, but that's an issue for another day). The only positive things to say about this punitive tax is that it only applies to about the first $40,000 of income, so it can be considered a very inefficient user fee for a set of (probably substandard) government services rather than a vehicle for redistributionism.

So while Monaco is a very attractive jurisdiction for many reasons, it ranks below Cayman in the Dan Mitchell ranking of ideal tax regimes.

One final point. It is astounding how many of Monaco's tax refugees fully expect social chaos to seize Europe sometime in the next 5-15 years as nations experience Greek-style fiscal collapse. I think 15 years is more realistic, but my main reaction is anger that Bush and Obama have been pushing the U.S. in that direction.

Why Does Obama Want to Make America More Like Sweden When Swedish Politicians Are Trying to Move in the Opposite Direction?