![\"Maryland](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/06\/1749664631_607_960x0.jpg\")
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Maryland Governor Wes Moore (Photo by Nathan Howard\/Getty Images)<\/p>\n
Getty Images<\/p>\n
The United Kingdom\u2019s capital gains tax rate rose from 18% to 24% in April. The subsequent drop in capital gains tax collections following last year\u2019s announcement of that tax hike, however, might end up serving as a portent of the unintended consequences that could be coming to Maryland, where Governor Wes Moore (D-Md.) recently enacted a new budget that raises taxes on wage and capital gains income.<\/p>\n
\u201cAccording to data from HM Revenue & Customs, capital gains tax (CGT) receipts fell to \u00a313 billion in the 12 months to March 2025, down 10% from \u00a314.5 billion in the same period last year,\u201d the Times of London reported <\/a>on April 25. The drop in capital gains tax collections is attributed to a pause in asset sales and \u201ca trend of high-net-worth individuals leaving the UK.\u201d<\/p>\n Governor Wes Moore approved a new budget in May that raises the state tax on capital gains and also imposes higher tax rates on wage income. Governor Moore\u2019s first budget raises personal income tax rates for some Marylanders by as much as 13%, taking the top rate from 5.75% to as high as 6.5%, depending on income level. Some Maryland residents, meanwhile, are hit with a more than 47% increase in their state capital gains tax rate. A May 21 RSM report<\/a> summarizes the tax hikes in Maryland\u2019s new budget:<\/p>\n \u201cEffective July 1, 2025, and applicable to taxable years beginning after Dec. 31, 2024, the budget legislation creates two new individual income tax brackets on high earners. Individual filers with income between $250,001 and $500,000 will remain subject to the tax at a rate of 5.75%. Individuals with taxable income of $500,001 through $1 million will be subject to a new rate of 6.25%, and taxable income exceeding $1 million will be subject to a rate of 6.5%. Joint filers with income between $300,001 and $600,000 will remain subject to the tax at a rate of 5.75%. Joint filers with income between $600,001 and $1,200,000 and joint filers with income in excess of $1,200,000, will be subject to the new 6.25% and 6.5%, respectively.\u201d<\/p>\n \u201cAdditional individual tax changes include a new 2% tax on capital gains over $350,000, and individual taxpayer itemized deductions are reduced by 7.5% of the excess of federal adjusted gross income over $100,000 for married individuals filing separately, or over $200,000 for all other filers,\u201d the report added. In addition to the income tax hikes, the new Maryland budget also includes a provision allowing local officials to raise county income taxes from 3.20% to 3.30%.<\/p>\n Even before recent developments in the U.K., Europe was already awash with examples of failed efforts to target the wealthy with higher taxes.<\/p>\n \u201cThe experiment with the wealth tax in Europe was a failure in many countries,\u201d National Public Radio\u2019s Planet Money conceded<\/a> in 2019. \u201cFrance\u2019s wealth tax contributed to the exodus of an estimated 42,000 millionaires between 2000 and 2012, among other problems,\u201d prompting French President Emmanuel Macron to repeal the tax in 2019.<\/p>\n \u201cIn 1990, twelve countries in Europe had a wealth tax\u201d Planet Money added. \u201cToday, there are only three: Norway, Spain, and Switzerland. According to reports by the OECD and others, there were some clear themes with the policy: it was expensive to administer, it was hard on people with lots of assets but little cash, it distorted saving and investment decisions, it pushed the rich and their money out of the taxing countries\u2014and, perhaps worst of all, it didn\u2019t raise much revenue.\u201d<\/p>\n Governor Moore didn\u2019t need the new reminder from Europe about the negative unintended consequences that have followed previous attempts to target upper-income households with higher tax rates. Governor Moore\u2019s predecessor, Martin O\u2019Malley (D-Md.), already provided such a cautionary tale.<\/p>\n Then-Governor O\u2019Malley (D) hiked Maryland\u2019s top income tax rate in 2007 to 6.25% temporarily for all household earnings above one million dollars. There were fewer Marylanders who reported earning more than one million dollars, however, in the years subsequent to O\u2019Malley\u2019s soak-the-rich tax increase. In fact, a 2009 Wall Street Journal editorial reported<\/a> that a third of Maryland\u2019s million dollar-plus earners had disappeared from the tax rolls in the year following Governor O\u2019Malley\u2019s top rate hike.<\/p>\n \u201cIn 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April,\u201d the Wall Street Journal noted. A year later, however, that number had shrunk to 2,000, with the state comptroller\u2019s office calling it a \u201csubstantial decline.\u201d<\/p>\n \u201cOn those missing returns, the government collects 6.25% of nothing,\u201d the Journal added. \u201cInstead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year \u2014 even at higher rates.\u201d<\/p>\n Other such cautionary tales have been documented recently. Stanford researchers, for example, found a similar trend<\/a> following voter approval in 2012 of Proposition 30, which raised California\u2019s top marginal income tax rate.<\/p>\n Governor Moore\u2019s staff, in addition to challenging the premise that the tax hikes enacted by Governor O\u2019Malley chased millionaires out of Maryland, expressed confidence that the new state budget will put Maryland on a better path. \u201cAfter years of economic stagnation, it was clear Maryland had much to accomplish to undo the economic underperformance seen from 2017 to 2022,\u201d noted Carter Elliott, senior press secretary for Governor Moore. \u201cDuring that time, Maryland\u2019s economy flatlined while the rest of the country grew.\u201d<\/p>\n \u201cGovernor Moore worked with the leaders of the general assembly this session to turn this year\u2019s long-forecasted deficit into a $315 million surplus, all while providing 94% of Marylanders with a tax cut or no change in their income taxes,\u201d Elliott added. \u201cThe governor also ensured to preserve 8% in Maryland\u2019s rainy day fund \u2014more than the recommended amount.\u201d<\/p>\n The experience in Washington State and Massachusetts could provide Governor Moore and his team with reason to be optimistic. After the recent imposition of a 7% capital gains tax in Washington and a new 9% income tax rate for upper-income households in Massachusetts, the number of millionaire filers in both states has thus far not declined.<\/p>\n Wes Moore\u2019s Budget Makes Maryland A Tax Hiking Outlier<\/p>\n While Governor Moore and Maryland legislators are raising taxes on capital gains and wages, they are an outlier. Most states have been moving in the opposite direction for years, a trend that has continued in 2025. Governors and lawmakers in Oklahoma and Mississippi, for example, enacted legislation this year that will completely phase out their state income taxes over time.<\/p>\n The South Carolina House also passed legislation this spring to phase out their income tax, which the state Senate will take up in January. More recently, the Republicans who run the Ohio Senate will soon pass a new state budget that moves the state from two income tax brackets with a top rate of 3.5%, down to a single rate of 2.75%.<\/p>\n