In April of 2008 after coming under fire for their tax on computer services, the Maryland legislature moved on imposing an income tax hike taking the highest rate to 6.25 percent on taxpayers making over $1 million.  What they may not have expected is the exodus (wonder how many used the Chesapeake Bay Bridge to escape the state).  Tax revenue is down in Maryland as in many states, but what should be pointed out is that some of this can be attributed to about one third of the state's million dollar plus earners apparently leaving (click here to read article).  Though this is considered a temporary tax lasting only through 2010, one has to wonder if the population will then increase when the tax runs out.  The legislature should learn from this exercise that hiking taxes on the high wage earners and creating an increasingly progressive tax system is a bad idea.

In addition to Maryland, other states want to hike taxes on top earners.  Illinois is one of the most recent to pursue an income tax hike, but unlike Maryland this is not a two year tax hike.  This year Illinois Governor Quinn has proposed a 50 percent hike, an action that would take the individual rate from 3 to 4.5 percent and corporate rate from 4.8 to 7.2.  For more on state tax hikes read yesterday's Wall Street Journal article "Soak the Rich, Lose the Rich".

Hopefully before implementing bad policies and chasing both individuals and businesses from their states, legislators will look to the past examples (most recently Maryland) and realize that they are in competition with other state tax policies to attract individuals and businesses. 

Photo credit to: (runzzo1)