Maryland gains if estate tax falls [Letter]

January 19, 2014

Although I am not surprised at yet another left-leaning editorial in The Sun, I think you have missed some very important points in your opposition to reducing Maryland's estate tax ("Settling the estate tax," Jan. 17).

The federal government took steps to increase the exemption from $1 million some years ago to $5.25 million in 2013. Maryland "decoupled" and stayed at $1 million so Maryland is way out of step with the IRS and many other states. That puts Maryland at a great disadvantage in the competition to attract new employers, especially layering that on top of the high personal income tax rate. Successful business owners avoid states were they are considered fair targets for high taxes.

More importantly, when Maryland "decoupled," so did huge numbers of successful Marylanders. We simply moved out of state, by last estimate some 10,000 of us. I personally know more than a dozen ex-Marylanders who are now residents of Delaware, North Carolina, South Carolina and Florida (most of us chose Florida because there is no estate tax or income tax.) Successful and affluent people are much more mobile than the poor and middle class. If Maryland had at least been reasonable about this tax, many of us would have stayed and continued to pay income tax and sales tax as well.

Do the math yourselves, but here is one approach. Ten thousand departed residents might each have paid $8,000 state income tax annually which is equal to the $80 million in lost annual revenue caused by realigning the estate tax, plus something more for sales taxes, plus something more from estate tax collections. Add to that your own estimate of what new employers who avoided Maryland might have paid in all those taxes and you start to understand what Maryland is missing. It could easily be well north of $100 million.

Let me also suggest you should question your opinion that "affluent people who are poised to receive hundreds of thousands of dollars in inheritance ... ought to get in line" behind others seeking tax relief. That implies that inheritance belongs to the state of Maryland and family members should be last in line to receive what their elders earned. Those of us with potentially taxable estates do not see it that way. Our first obligation is to our kids and grandkids, and we feel a responsibility to protect their interests from the greedy hands of state bureaucrats. Regretfully, if that means we have to leave Maryland, we do.

Perhaps the origin of all this pressure to increase taxes (and not decrease any of them) is the irresponsible growth in state spending under Gov. Martin O'Malley. The state budget has increased 36 percent under his leadership. Governor O'Malley has his "spin" on this of course, but that is what happened during a period of financial stagnation for the average citizen. Did your own family budget increase that much? Did the state's economy grow that much? Of course not, and that is the underlying problem regarding taxes in Maryland.

Rick Uhlig

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