UPDATE – Oct. 27, 2011 — Maryland now has more millionaires by density than any other state in the nation, according to a yearly report released today by Phoenix Marketing International.
The report ranks states based on the number of households with investable assets over $1 million. Maryland now has 157,779 millionaire households — an increase of more than 9 percent from last year. Of Maryland’s total household population — which increased 2.7 percent according to the report — about 7.2 percent qualify as millionaires.
Now second-place Hawaii had topped the list for three straight years.
WASHINGTON – In Maryland, a state with the nation’s second-highest concentration of millionaires, there are a lot of eyes on President Obama’s push for a “Buffett Rule” tax on the wealthiest Americans.
Details are still sketchy on the president’s plan, but Maryland multimillionaire Ted Leonsis — an Obama supporter — is among those already bristling.
“Economic Success has somehow become the new boogie (sic) man,” Leonsis, who declined to be interviewed, wrote in a Sept. 25 blog post, noting that he has already given the maximum contribution to Obama’s re-election campaign.
“(S)ome in the Democratic party are now casting about for enemies and business leaders and anyone who has achieved success in terms of rank or fiscal success is being cast as a bad guy in a black hat,” said the owner of the Washington Capitals, Wizards, Mystics and the Verizon Center.
The Senate Democrats seem to have heard that, proposing on Wednesday to fund the president’s jobs package with a 5 percent surtax on millionaires.
The idea of the “Buffett Rule” — named after billionaire Warren Buffett’s admission in The New York Times that he pays taxes at a lower rate than his office staff — is simple: The wealthy should pay taxes at a rate at least as high as everyone else.
What’s not simple is defining who should pay more — if anyone — and what the impact would be for states like Maryland, which has ranked second nationally in concentration of millionaire households for four consecutive years, according to Phoenix Marketing International. Hawaii has ranked first since 2008.
The state boasts eight Marylanders, all billionaires, on the Forbes Magazine ranking of the 400 richest Americans: Washington Nationals owner Ted Lerner, Danaher cofounder Mitchell Rales, Carlyle Group cofounder David Rubenstein, Host Hotels chairman Richard Marriott, Baltimore Ravens owner Stephen Bisciotti, Marriott International Chairman Bill Marriott, Saul Centers Chairman Bernard Saul and Washington Redskins owner Dan Snyder.
Any revenue from a Buffett Rule “would be an awful lot of money, and I think a fairly small impact on the lifestyle of the people affected,” said Neil Bergsman, director of the Maryland Budget and Tax Policy Institute.
Millionaires are split into two worlds, according to economist Roberton Williams of the non-partisan Tax Policy Center. There are those like Warren Buffet, chairman of the investment firm Berkshire Hathaway, who take income mostly from investments and can pay taxes at a rate of just 15 percent. Then there are those with wealth that comes mainly from wages and salary. This group usually pays taxes at a much higher income tax rate of 35 percent, Williams said.
Maryland millionaires’ average income, according to the state Comptroller’s Office tax records, was $2.4 million in 2009.
Some say the wealthy already give the government a big enough cut.
“If Warren Buffett would like to write a check, he should do so,” said John Kane, CEO of the Elkridge-based Kane Co. and former chairman of the Maryland Republican Party. “Beyond that, I don’t think we should be touching taxes.”
Kane, who said about $80 million in company revenue goes through his tax return, said he himself is not a millionaire. Kane argued that some business owners look wealthy when really they’re reporting revenue that is reinvested in their businesses.
Nationwide, millionaires will pay taxes at an average rate of 29.1 percent this year, according to the Tax Policy Center. But some will owe much less, and the Buffett Rule, according to the White House, would ensure that those who don’t pay at higher rates would be liable for at least as much as the middle class starting in 2013.
“Those who are doing the best ought to be paying the larger part,” said Bergsman, who also supports a tax on millionaires in Maryland. The wealthy benefit — sometimes more than the middle class — from tax-funded utilities and infrastructure and should do more to maintain them, he said.
In 2009, about 1,400 millionaires who filed tax forms nationally paid no federal income tax.
Maryland — which taxed millionaires in a higher bracket from 2008 to 2010 — tracks millionaires based on yearly income. In 2009, the state received 4,134 millionaire tax returns, according to the Comptroller’s Office, or about 160 returns with income over $1 million for every 100,000 returns.
The Maryland General Assembly allowed the state’s millionaire tax to expire last December, though Bergsman, along with others, including Prince George’s Democratic Delegate Jolene Ivey, hopes it will be revived next session.
For 2010, Phoenix Marketing’s study reported that Maryland had 144,686 millionaire households out of about 2.1 million households overall. Because these rankings take into account all investable assets, which can stretch out longer than a one-year period, the number of millionaires is higher. By these rankings, Virginia and Washington, D.C., are in the top 10 nationwide. Nearby Delaware is ranked 11th, with Pennsylvania ranked 24th. New national rankings are expected in October.
Just how many millionaires would be affected by a Buffett Rule is unclear, Williams said, citing murky data to differentiate between those who make money on investments and those who make money from wages.
It is also unclear how much money the Buffett Rule might raise, Williams said, and even the most lucrative scenario won’t dramatically lessen the nation’s $14.8 trillion debt and $1.3 trillion budget deficit.
“We are not going to be able to solve the problem simply by taxing the rich,” he said. “We’re not going to solve it simply by taxing the rest of us.”