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There is still no evidence that millionaires are fleeing Maryland in significant numbers to avoid state income taxes. The vast majority of Marylanders who make $1 million or more a year are staying put — paying their fair share to help the state invest in future prosperity.

Some commentators and politicians claim that data released recently by the Comptroller of Maryland proved their millionaire-exodus theory. The comptroller's office, in a Nov. 23 letter to two legislators, noted that 542 taxpayers of the 7,067 that reported at least $1 million in taxable income in 2007 did not file Maryland income tax returns in 2008.

That's it? That's the proof? The comptroller himself warns against jumping to the millionaires-fleeing-Maryland conclusion. In the letter he wrote, "There are several reasons a return may not be filed in following years including, among others, leaving the state, death of the taxpayer, and simply not filing a return or filing a delinquent return. We cannot readily determine the reason a return is not filed and, even if we know a taxpayer has left the state, we cannot determine why."

Over the past seven years, between 5 percent and 6 percent of millionaires drop off the rolls each year. The average was 5.7 percent. The 542-return drop-off last year comes to about 140 more than normal. That's at most one out of every 50 millionaires who might, possibly, have left the state because of the tax changes. Of course, those who stayed far, far outweighed those who might have left.

What about the 30 percent drop in millionaires cited in media stories? Here again, some claim it means millionaires left Maryland because of the tax increase. Again, the evidence says otherwise. Almost certainly, these taxpayers suffered in the poor economy to the point that their income declined from over $1 million to under $1 million. That also happens every year. The comptroller reported that over the past seven years, between 31 percent and 52 percent of millionaires failed to repeat. In 2008, reductions in investment income, business income and real estate proceeds very likely brought several hundred former millionaires under the million-dollar level in 2008. A 30 percent drop this year isn't exceptional. In fact, it's a trend seen nationwide.

Maryland's tax changes

Let's review the facts about Maryland's "millionaire tax." Before 2008, Maryland's state income tax essentially charged everyone the same rate: 4.75 percent. Households with incomes over $1 million paid the same tax rate as families that earned less than $100,000. In 2007 and 2008, the legislature made changes in the income tax to base it more on ability to pay and bring in more revenue to meet public needs.

The result today is that Maryland couples still pay 4.75 percent tax on most income up to $200,000. Beginning at $200,000, the rate begins to edge higher. Income above $1 million is now taxed at 6.25 percent. Keep in mind the rates only affect those specified income levels — so someone making over $1 million doesn't pay 6.25 percent on all their income, only on the portion exceeding $1 million.

The wealthiest are being called upon to pay 1.5 cents per dollar more than before on the part of their income that is over $1 million.

Research confirms policy's soundness

What has happened in other states? Last year, a Princeton University study on the impact of a New Jersey tax increase on incomes over $500,000 found little impact on migration. The study also found that, from 2002 to 2006, the number of New Jersey households with incomes over $500,000 grew by 70 percent. Similarly, the California Budget Project found the number of high-income households in that state grew substantially when higher top income tax rates were in effect. Marginal tax rates certainly matter in location decisions, but they are not among the most important factors.

Millionaires staying in Maryland

In 2008, nearly 5,000 millionaires managed to stay in Maryland and pay their fair share for state and local services. Figure in sales taxes and property taxes, and the millionaires still paid a smaller share of their incomes than did other Marylanders. The money goes mostly to fund investments in education, health care, transportation, police and corrections, and maintaining a basic social safety net in our communities.

Because the state and local governments are required to balance their budgets, without this funding there would be greater cuts in all those areas. These cuts would cause severe hardships and adversely affect the economy. Maryland's economic health depends in large part on the skills of its work force and the quality of life Maryland offers to families and businesses. Let's not retreat from that commitment based on unlikely theories and misinterpreted data.

Neil Bergsman is executive director of the Maryland Budget and Tax Policy Institute, a nonprofit organization that provides analysis of state budget and tax issues.