Back in March an article by Nicholas Confessore for The New York Times concluded that there is very little evidence to support the notion that when a state raises its income tax on the wealthy, they flee in droves to states where there is a lower income tax rate or no income tax at all. Last week this topic was back in the news in an article by Jay Hancock for The Baltimore Sun -State income tax isn't why those millionaires are fleeing. It seems that like in New York, no one in Maryland believes that wealthy residents are fleeing the state in droves due to an additional income tax on millionaires. According to Stuart Levine, a Baltimore tax lawyer and adjunct professor at the University of Baltimore School of Law, "Nobody's going to leave the state [of Maryland] because income tax rates go up a point over a million dollars...It's just not going to happen. But they do have to leave to some degree because of the estate tax." So how much could a Marylander worth $3 million really save? About $182,000 according to the article. And as Hancock points out, "OK, you don't feel sorry for the retiree with $3 million. It doesn't matter. She can choose where to live, and driving her from Maryland means she's not buying in local stores, attending the symphony, or paying sales and income tax."
And according to Baltimore estate planning attorney Lowell G. Herman, "nearly a dozen customers with big stashes set up residence elsewhere, largely because of Maryland's failure to match other states in reducing or eliminating its estate tax. But that's just sort of the beginning. There are many others who are thinking about it."
As I wrote back in March, I really think that anyone studying this subject should start with a survey of estate planning attorneys who live and work in states without an income tax and/or an estate tax. Why? Because I estimate that at least half of my clients have changed their domicile from a state that collects an income tax and/or an estate tax - such as Illinois, Maryland, New Jersey, New York, Ohio or Pennsylvania - to a state such as Florida that doesn't collect an income tax or an estate tax. These days it's easy to move and as the Maryland example points out, $182,000 worth of estate tax savings is well worth the effort for the right group of people.