Millionaires leave Maryland: Does Federalism still work?

The founding fathers set up a system of federalism, which was to create a system of competition between states. With the growth of the central government, federalism has become near obsolete. The central government can use funding in order to water-down the effectiveness of federalism. One example of this is that the federal government required states to put the drinking age at 21 and if they did not they would not recieve their transportation money. Right now federalism is working in Maryland this from The Baltimore Sun:

“Let’s break this down: In 2008, in an effort to repeal the hugely unpopular computer services tax, the General Assembly and Gov. Martin O’Malley approved a new, temporary millionaires’ tax bracket. Marginal income over $1 million would, for a three-year period, be taxed at 6.25 percent instead of 5.5 percent. We’re talking net taxable income over $1 million here, so that’s money you’re making IN EXCESS OF $1 million after all tax deductions, etc.

Let’s assume you’re making $2 million a year in net taxable income. That means you’re paying at the new tax rate on a whopping $1 million. Your increased income tax burden because of the millionaires tax is $7,500.

So, after crunching the numbers, our $2 million earner now pays $22,675 more than he or she would have if we’d kept the old, flat tax brackets. Translating back to our typical Maryland family, that’s the equivalent of $645.02 a year, or about $12.40 a week. Is that enough to make you move?”

Federalism allows those millionaires who think that they can get a better deal on their income, to move their. Obviously the costs will have to be pretty high as many will have to sell their houses and so on.

The rest is here.


Published in: on May 19, 2009 at 1:44 pm  Comments (1)  
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  1. I suspect that the latest compromise regarding state banking regulation in the midst of pressure for financial reform in Washington points to the influence of large corporations on the Congress as a culprit in the on-going eclipse of federalism. Pls see my blog if interested. Thanks.

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