Since officially moving to Florida in May, former Maryland resident Constance Kihm said she has met numerous other former residents of the Free State. They all have their reasons for moving, but hers came down to getting away from higher taxes and from policies she couldn’t stomach.
“Real estate agents I’ve talked with say the exodus from Maryland is astonishing,” Kihm said.
A new book, “How Money Walks” by Travis H. Brown, backs up the anecdotal evidence. Looking at IRS and Census Bureau data, Brown and his team determined that Maryland lost a little more than $7 billion in adjusted gross income due to residents moving away between 1992 and 2010.
Florida, which gained $95.6 billion during that period, North Carolina, with a $25.1 billion gain, and Virginia, up $3.3 billion, were major beneficiaries, according to the book. States with gains generally have low or no local income taxes, while those with losses have higher local taxes, the book says.
Maryland is considered a high-tax state, but not as high as some that have racked up larger losses, such as New York and New Jersey, according to “How Money Walks.”
The data might add fuel to the fire of those who have long claimed there has been a large exodus of people fleeing Maryland for better tax and regulatory climates. Last year, nonprofit watchdog group Change Maryland released a report that cited IRS data, claiming that more than 30,000 Marylanders fled the state between 2007 and 2010, taking about $2 billion with them.
That led to a response on the blog of Gov. Martin O’Malley that cited the Federal Funds Information for States in saying Maryland has the third-lowest state and local tax burden, adjusted for income.
The blog also said the number of millionaires in the state continued to increase and accused Change Maryland of being a “GOP-led, partisan organization,” which led to more back and forth between O’Malley and Change Maryland leaders.
O’Malley could not be reached for comment about Brown’s book.
Another study by the Center on Budget and Policy Priorities in Washington concluded that “tax flight is a myth.”
On average, 1.7 percent of Americans moved from one state to another per year between 2001 and 2010, and “a large body of scholarly evidence” showed that they moved primarily for new jobs, cheaper housing or better weather, researchers say.
“A family might be able to cut its taxes by a few percentage points by moving from one state to another, but housing costs are far more variable,” the report says. “The difference between housing costs in two different states is often many times greater than the difference in taxes. So what might look like migration in search of lower taxes is really often migration for cheaper housing.”
Julie Ann Garber, an estate planning attorney with The Andersen Firm in Florida, said she and her family moved from Maryland to Florida in 2004 “because we hate cold weather.” But she said people move south primarily to avoid state income taxes and estate taxes.
“My firm has worked with many clients who have changed their domicile from Maryland, New York and other states to minimize their income tax bills and/or state estate tax bills,” Garber said. “It is a quite common thing that estate planning attorneys who practice in Florida deal with on a frequent basis.”
Kihm estimated the move will save her thousands of dollars annually in taxes. She said she and her husband did not inherit money; they worked and saved for their nest egg.
“We lived within our means,” she said.
Maryland is also losing many hours of volunteer time for churches and charitable groups, as well as donations, when residents leave.
But the state comptroller’s office does not look at whether people who move out still contribute to charities in Maryland in determining residency, said Caron Brace, a spokeswoman for the comptroller.
“Generally, the comptroller’s office is not looking at where taxpayers make charitable contributions for purposes of determining where they should be filing tax returns,” Brace said.