By Matt Gallagher
Chief of Staff
This morning, Governor O’Malley welcomed over 300 business leaders to Annapolis for a symposium on job creation. We discussed a wide variety of topics ranging from real estate sign regulations to putting solar panels in parking lots to cutting unnecessary business regulations. The topic of the millionaires tax came up and we wanted to share these two charts:
Has the number of people earning over a million dollars dropped? Yes, it has, as it does during most recessions. But the truth is this number is rebounding. The number of millionaires increased in the last year–just as they did after the 2002 recession, by 16%.
While Maryland is a state that is built to innovate and prosper, even our wealthiest earners were unable to escape the losses brought on by this Great Recession. Just as they did in 2002, million dollar plus income filings dropped sharply in 2008 as Lehman Brothers and AIG spiraled out of control. And just as they did during the last recession, these same filings have begun to pick up again, increasing 16% last year.
The bottom line is that Maryland delivers a quality of life that is difficult to match and demonstrated consistently in national rankings of best places to live. There was no mass exodus of wealthy Marylanders due to the temporary millionaires tax.
Some may ask why we created this temporary policy in the first place. When we inherited a $1.7 billion structural deficit in 2007, we had an honest discussion with the people of Maryland about the path to sound fiscal stewardship. It involved some tough choices and shared sacrifice, and since then we have come together to cut $6.8 billion in spending and introduced real progressivity to Maryland’s income tax for the first time in our state’s history. One small piece of that package was a decision to ask a very small subset of Marylanders – millionaires –to temporarily pay a slightly higher rate (6.25%) on annual income over one million dollars.
To better understand its effect, an individual earning $1,000,000 during any of those years would not be subject to any increase from the temporary surcharge. An individual earning $1,000,050 – would pay the higher rate only on $50 (the amount over $1 million,) which would result in an additional tax burden of approximately $1.12. This tax surcharge was designed to affect the least number of people while asking those who have enjoyed extraordinary affluence to chip in a little more to protect our common investment.
Everyone has a role to play in the economic recovery, and despite a few objections, many of us believe that our common enterprise, the one in which we are all stockholders, has a big role to play in this effort. Throughout history, the private sector has performed at its best when our government creates a balanced, fiscally responsible budget and a stable, predictable rule of law. And we believe that a balanced approach is the best way for us to achieve our common goals.
Of course, Maryland’s strength lies not in the wealth of a few of our neighbors, but in our revolutionary and entrepreneurial spirit, as Gabrielle and Daniel Williams demonstrated today. Gabrielle is 11 years and has a thriving jewelry business and recently authored a book on entrepreneurship. Her brother Daniel, 13, authors a blog where he reviews books and movies for children. They joined us today to talk about their experience starting a business in Maryland, and reminded us all why we must continue to work together every day to solve our most challenging issues.