While overburdened taxpayers flee Maryland for more hospitable states, Marylanders themselves are leaving the most populous jurisdictions with the highest local taxes and relocating to smaller Eastern Shore and western counties. Out-of-state migration reduced state revenue $1.7 billion between 2007 and 2010. Meanwhile, intrastate migration has helped Maryland’s smallest counties increase their tax bases while their larger counterparts are losing ground.
An analysis of Internal Revenue Service data by Change Maryland, a nonpartisan organization whose mission is to restore the state’s economic competitiveness, shows that Garrett, Kent, Queen Anne’s, St. Mary’s, Talbot and Worcester counties are doing better than Montgomery and Prince George’s in keeping and attracting taxpayers.
The most recent IRS data show that between 2009 and 2010, the number of individual income tax filers increased 2.07 percent in easternmost Worcester County, the highest percentage in the state, while westernmost Garrett County enjoyed a more modest .93 percent growth. However, despite their significant geographical advantages, both Montgomery and Prince George’s counties experienced a net outflow of taxpayers.
Montgomery County’s tax base declined .07 percent as the county added 25,377 tax filers, but lost 25,590. Likewise, Prince George’s welcomed 22,696 new tax filers, but lost 23,582 — a .27 percent decline. The steepest decline in the state was in Baltimore City, Gov. Martin O’Malley’s old stomping ground, which could ill afford to lose 1.41 percent of its remaining taxpayers.
Adjusted gross aggregate income levels tell the same story a different way: That figure increased $22.1 million in Worcester and $4.6 million in Garrett counties, but fell $22.1 million in Montgomery and $51.4 million in Prince George’s.
“A growing tax base is the ultimate win/win situation in public policy,” said Change Maryland Chairman Larry Hogan. “[C]onversely, a shrinking tax base often leads to a troublesome tax-and-spend downward spiral as actual revenues fail to meet estimates.” This is exactly what’s been happened in both Montgomery and Prince George’s, which have both been running large budget deficits in recent years.
As the IRS state and county data clearly indicate, a larger tax burden tends to erode the tax base. With the people who pay the bills heading for the hills (or the shore), the tax burdens imposed by Montgomery and Prince George’s have already passed the point of diminishing returns.
