It's quite an exclusive club, Maryland's new millionaires' tax bracket. A little more than 6,000 households statewide qualify for the distinction - more than 40 percent of whom reside in Montgomery County.
It's a group that includes a Fortune 500 executive in Potomac, an energy company CEO in Roland Park and wealthy retirees with bayside estates in St. Michaels. Throw in some developers in Howard County, a growing corps of black entrepreneurs in Prince George's County and certain small businesses statewide. The Ravens' star middle linebacker would appear to be among the 16 percent of the club that lives in Baltimore County, No. 2 in the state for resident millionaires.
With the General Assembly's passage of the new 6.25 percent top tax rate on incomes above $1 million, and Gov. Martin O'Malley's signing of the bill yesterday, Maryland has apparently become the first state to create an actual millionaires' bracket.
FOR THE RECORD
An article in Wednesday's editions of The Sun stated that the new 6.25 percent tax rate adopted by the General Assembly would be the nation's first millionaire's tax bracket in the United States. A provision of California law, approved by a ballot proposition, imposes an additional 1 percent tax on income over $1 million to fund mental health programs. According to the California Franchise Tax Board, the levy is not considered a tax bracket under state law, but the result for the taxpayer is similar.
Some other states have created high-income tax brackets - some paying rates that make Maryland's levy look like a bargain - but they kick in at lower thresholds. For instance, New Jersey residents in the top income bracket pay a rate of 8.97 percent but don't receive the cachet of being in a millionaires' club because it applies to all income above $500,000.
The new rate puts Maryland - which boasts the nation's highest median income, according to the Census Bureau - among the states with the highest income taxes at top earning levels if county "piggyback" taxes are included. Even with those included, Maryland still falls well short of Rhode Island's 9.9 percent top rate.
To join the Maryland club, you have to be a real millionaire - earning $1 million a year you can't offset with deductions. Just owning a big house that's appreciated won't cut it. Some sole proprietorships, limited liability corporations and other small businesses will pay, however.
Some prosperous Marylanders are not enthusiastic at the prospect of qualifying for the honor, which kicks in for the 2008 tax year and expires after 2010.
Howard Rensin, a successful Howard County businessman and developer, thinks many Maryland millionaires will decamp for less taxing locales.
"There's already been a substantial migration of people of high income out of Maryland," Rensin said. "I think you're going to see an increase in that type of flight."
But others who move in affluent circles think most of those privileged enough to feel the additional burden will just "grin and bear it."
