Maryland lost the most residents in the mid-Atlantic between 2007 and 2010 - and many of them moved to Virginia, according to a study released Tuesday.
Almost 40,000 Marylanders crossed the Potomac River for new homes in Virginia, taking $2.17 billion with them, according to the Internal Revenue Service data used in the study conducted by Change Maryland, a nonpartisan group advocating for less state spending and lower taxes.
The high level of loss may reflect people’s dissatisfaction with Maryland’s tax policy, said Jim Pettit, spokesman for Change Maryland.
“People vote with their feet,” he said, adding that tax policies “absolutely” are tied to the number of people leaving the state. Critics have said Maryland has less-friendly tax policies than Virginia, and new income-tax increases for the state’s highest earners went into effect Sunday.
The study analyzed data from the IRS Statistics of Income Division to show county-by-county changes in the state’s tax base. The numbers represent people who have left Maryland for Virginia and do not take into account people who have moved to the state and their income levels.
According to Change Maryland, the Free State suffered a larger loss in its tax base than 43 other states.
“The benefits of a growing tax base ease the pressure to raise revenues and, conversely, a shrinking tax base often leads to a troublesome tax-and-spend downward spiral as actual revenues fail to meet estimates,” said Change Maryland Chairman Larry Hogan.
Decreasing population was most prevalent in larger jurisdictions, according to Change Maryland.
Prince George’s County lost more than 44,000 people, and 36,600 left Baltimore County.
Montgomery County’s tax base declined by $22 million.
Change Maryland found only six states that lost more people in the three-year period: New York, California, Michigan, Illinois, Ohio and New Jersey.
Nearby, the District lost more than 1,100 residents; Pennsylvania lost more than 8,200. Delaware, Virginia and West Virginia, on the other hand, gained tax filers, according to Change Maryland.
Some Marylanders have been given the opportunity to relocate when businesses move to Virginia. Many high-profile businesses have recently chosen Virginia over its Beltway neighbor.
Virginia won a high-stakes regional battle in 2010 to lure defense giant Northrop Grumman’s headquarters to the state from California. Bechtel Corp., based in Frederick, Md., announced in November it was relocating its corporate headquarters to Fairfax, bringing with it 625 jobs and an $18 million investment.
Silver Spring-based technology firm Acentia announced in January that it would invest $3.1 million in moving its headquarters to Fairfax, bringing with it 60 jobs.
“Maryland does not exist in a bubble. We compete with other states, and counties compete with other counties,” Mr. Pettit said.
Neil Bergsman, director of the Maryland Budget and Tax Policy Institute, chalks up the larger jurisdiction’s losses to housing costs. These areas should be more concerned about affordable housing options than taxes, he said.
Maryland Gov. Martin O’Malley’s administration has publicly questioned studies concluding that taxpayers are leaving Maryland especially to move to Virginia. O’Malley spokeswoman Raquel Guillory pointed out that the IRS data include only taxes filed before late September, which may exclude some of the wealthiest residents who received extensions for complex returns.
The Maryland Department of Budget and Management, in its own study analyzing IRS tax returns, found that the state had the region’s smallest percent change from 2007 to 2010, Ms. Guillory said.
The department’s report showed Maryland’s tax returns decreasing by 5.3 percent, compared with a 7.1 percent decrease in Virginia, she said.
Despite the losses, smaller counties gained people. According to Change Maryland’s study, those along the Eastern Shore benefited from in-state migration. Kent, Talbot, Queen Anne’s and Worcester counties’ numbers were on the upswing.
Mr. Pettit credits small county government, which is typically not dominated by Democrats as in many of the state’s larger areas, for the growth of smaller counties.
“There’s a give and take on tax and spending issues,” he said. “The focus should be on increasing the tax base, not increasing taxes.”
Mr. Bergsman cited economists and sociologists who conclude that more people move because of life changes such as marriage and jobs than because of taxes. The quality of public services -such as education, health care and environmental quality - play a large factor, too, he said.
“I’m a little bit worried for Virginia that they’re embarking on a program of disinvesting in those things,” he said.
Mr. Bergsman emphasized that the overall number of people who left the state is small in comparison with the total number of tax filers.
“People are moving across the border in both directions. The vast majority are staying put,” he said.