The state tried to declare him a resident and claimed thousands in back taxes, even though he owned a house in Nevada. A comptroller's hearing officer rejected the claim.
Maybe the most famous Maryland "domicile" case involved a former Internal Revenue Service manager and tax consultant for the state. The guy bought a condo in Miami Beach, kept his house in Pikesville and claimed residency in low-tax Florida.
Maryland tax authorities, his former colleagues, came after him with guns blazing. They investigated his voting records, car registration and phone book listings, declared him a Marylander and billed him $2,246 in back taxes.
FOR THE RECORD - Jay Hancock's column in Friday's editions gave an incorrect figure for a hypothetical family's Maryland estate tax. The maximum state tax on an estate of $3 million would be $182,000.
The Baltimore Sun regrets the error.
"Former tax collectors do not like to pay income taxes any more than other taxpayers," wrote the judge who ruled on his appeal.
They probably like to pay estate taxes even less. Virginia eliminated its estate tax in 2007; Florida, in 2005. Many other states have done the same.
The federal estate tax doesn't kick in on accumulations smaller than $3.5 million. But Maryland taxes 16 percent of estates exceeding $1 million, which when you think about it is not huge for a lifetime of earning and saving. The value of a home alone in Maryland could get you halfway there. It got worse in 2005 after Congress no longer allowed a federal credit for state-paid estate taxes.
For somebody worth $3 million, leaving Maryland would save his or her heirs $320,000. That's well worth the effort and often easy to do. People worried about the estate tax are mainly retirees. Many already own second homes in low-tax states, and it's hardly a sacrifice spending a few extra months a year in Sarasota to avoid filing in Maryland.
OK, you don't feel sorry for the retiree with $3 million. It doesn't matter. She can choose where to live, and driving her from Maryland means she's not buying in local stores, attending the symphony, or paying sales and income tax.
"I've never said this about any other law," said Herman, who agrees it's the estate tax, not the income tax, that's compelling the wealthy to leave. "This is one of the dumbest laws I've ever seen. It's very shortsighted from an economic and sociological standpoint for the state of Maryland."
One problem with that view is that last year, Maryland's estate-tax haul hit a record $195 million. But that could have been an aberration, swelled by the deaths of a few very rich folks, says David Roose, director of the comptroller's Bureau of Revenue Estimates.
We'll know much more in a year or two, after the comptroller's office replaces its neolithic computers. It'll be able to track how many people in which tax brackets are moving in, moving out, living and dying.
If Maryland hasn't cut the estate tax by then, don't be surprised if it shows the millionaire exodus has increased.
