Donald Fry: Maryland’s ‘leaking’ taxpayer wealth

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By: Donald C. Fry 

The topic of whether Maryland is leaking taxpayers to other states has been simmering for some time as an issue relating to our state’s business climate.

It surfaced again when a Gallup poll released in April reported that 47 percent of Maryland residents interviewed last year during a national survey said that, if given a chance to move to another state, they would leave.

This ranks Maryland third in the nation for the highest percentage of residents who say they would leave if they could. Gallup also reported that 17 percent of Marylanders polled said they are planning to move from the state within the next 12 months – the fourth-largest such proportion in the nation.

Among our state’s elected leaders, the issue of Marylanders leaving for elsewhere is not likely top of mind, but it has popped up recently.

The Gallup results were raised in passing by Maryland Attorney General Doug Gansler during Wednesday’s debate between Democratic candidates for governor.

In an April 15 “tax day” interview on WBAL Radio, Maryland Comptroller Peter Franchot said that our state has been losing wealthy taxpayers to lower-tax states. “There’s no doubt about it. This isn’t something I think. This is something I know,” Franchot told morning news anchor Bryan Nehman.   

Franchot was making the point that this year’s legislative action to reduce the estate tax was a step in the right direction if Maryland wants to stem the tide of wealthy citizens moving away.

Issues relating to why people move from one state to the other are complex. For example, 47 percent of Marylanders who told Gallup they plan to leave within 12 months said their reasons were related to work, family and friends or weather and location preferences.

However, 9 percent and 8 percent of those residents cited cost of living and taxes respectively, which rank significantly higher than the national average, according to Gallup.

Two other sources of state-to-state migration data lend some credibility to the notion that Maryland taxpayers are trickling away.

“How Money Walks,” a publication and website authored by Travis H. Brown, a Missouri-based policy researcher and advisor, reports that Maryland experienced a net loss of $7.27 billion in wealth, as measured by taxpayer adjusted gross incomes, to other states between 1992 and 2011. This includes more than $3 billion lost since 2005, according to Brown’s website.

This trend appears to be corroborated by the Tax Foundation’s detailed data on state-to-state migration, which calculates that Maryland lost more than $5 billion in net adjusted gross income to other states between 2000 and 2010, including $3.8 billion between 2005 and 2010.

Particularly troubling is that, between 2005 and 2010, $1.8 billion in wealth migrated from Maryland to states that border Maryland, the Tax Foundation reports. This included $708.7 million lost to Pennsylvania, $525.1 million to Virginia, $323.2 million to Delaware and $262.3 million to West Virginia.  

Outside the mid-Atlantic, the largest wealth migrations from Maryland between 2005 and 2010 were to Florida ($1.27 billion) and to North Carolina ($676.9 million).

While losing $5.5 billion in taxpayer wealth to 36 states between 2005 and 2010, Maryland attracted only $1.7 billion in taxpayer wealth from 14 states and the District of Columbia, including a combined $681 million from New York and New Jersey and $658 million from D.C., according to the Tax Foundation.

Granted, you can use statistics to make a case for anything. But these migration statistics at least merit consideration in any examination of the elements of Maryland’s business climate and what can be done to strengthen it.

There are a number of policymakers both inside and outside our state’s government who contend that Maryland’s business climate challenges are a matter of perception, not reality.

Whether perception or reality, these studies support the notion that strengthening Maryland’s competitiveness as a location for business and job growth needs to be a top priority for the next governor and state lawmakers.

Donald C. Fry is president and CEO of the Greater Baltimore Committee. He is a regular contributor to Center Maryland.

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Donald C. Fry has been the president and CEO of the Greater Baltimore Committee (GBC), the central Maryland region's most prominent organization of business and civic leaders, since November 2002.

Under Don’s leadership, the GBC is recognized as a knowledgeable and highly credible business voice in the Baltimore region, Annapolis and Washington, D.C. on policy issues and competitive challenges facing Maryland. Its mission is to apply private-sector leadership to strengthening the business climate and quality of life in the region and state.

Fry served as GBC executive vice president from 1999 to 2002. From 1980 to 1999 Fry was engaged in a private law practice in Harford County. During this time he also served in the Maryland General Assembly. He is one of only a handful of legislators to have served on each of the major budget committees of the General Assembly.

Serving in the Senate of Maryland from 1997 to 1998, Fry was a member of the Budget and Taxation Committee. As a member of the House of Delegates from 1991 to 1997 Fry served on the Ways and Means Committee and on the Appropriations Committee.

Fry is a 1979 graduate of the University of Baltimore School of Law. He earned a B.S. in political science from Frostburg State College.