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Report: Less Than 1% of Marylanders Hold Over $901 Billion in Wealth 

Tackling wealth inequality through the tax code can boost economic opportunity

A tiny fraction of Maryland families hold a staggering amount of the state’s wealth, according to a new 50-state report by the D.C.-based research organization the Institute on Taxation and Economic Policy (ITEP). The wealth inequality highlighted by the holdings of these extremely wealthy families limits economic opportunities for everyday Marylanders, and both reflects and exacerbates racial inequality. Tax policy is a critical way that policymakers could start addressing this inequality, but right now federal and state tax codes barely tax extreme wealth at all, and instead often give favorable treatment to sources of income that are derived from wealth. 

“Runaway wealth inequality is an enormous problem for Maryland, but the good news is that we have the tools to fight it,” said Benjamin Orr, President and CEO of the Maryland Center on Economic Policy. “Closing the tax loopholes that have helped build so much of this nation’s extreme wealth is a commonsense way that lawmakers in Annapolis and Washington can combat inequality and promote opportunity.”

The report defines extreme wealth as the wealth held by households with net worth over $30 million. This tiny fraction of families holds more than one in four dollars of wealth in the U.S., and 33 percent in Maryland. ITEP estimates that total extreme wealth will reach $674 billion this year in Maryland and $26 trillion nationally. 

Other key findings:

  • A nationwide tax of 2 percent on wealth over $30 million could have raised nearly $415 billion if it were in effect this year, including nearly $10.8 billion from extremely wealthy Marylanders.
  • This tax would affect just 1 in 500 households in Maryland. Nationally it would affect 0.25 percent of the population.
  • Maryland is one of the 15 states that has an outsized concentration of extreme wealth compared to its overall population. It holds 2.6 percent of the nation’s extreme wealth but makes up just 1.9 percent of the country’s population. 
  • 92 percent of extreme wealth is owned by white, non-Hispanic families.
  • A large share of Maryland’s extreme wealth – 44 percent – is held in the form of unrealized capital gains, meaning investment income on which these families have yet to pay tax (and may never pay tax under current law). Nationally, this share is 43 percent.
  • A tax on the stock of unrealized gains in 2022 could be expected to raise between $529 billion and $3.9 trillion nationally depending on the tax rate chosen and the percentage of gains deemed to be realized. This includes between $12.9 billion and $95.8 billion from extremely wealthy Marylanders. The report models six different policy options for taxing unrealized gains.

In addition to a wealth tax or a tax on unrealized capital gains as outlined above, the report identifies other ways to strengthen the federal taxation of extremely wealthy people, including: 

  • Taxing increases in wealth annually as an asset grows (mark-to-market taxation)
  • Taxing increases in wealth before they are passed on to heirs (ending stepped-up basis)
  • Eliminating the tax preference that makes tax rates on realized capital gains lower than on income from work
  • Strengthening the estate tax
  • Creating an inheritance tax

All of these are viable policy options for lawmakers looking to curb wealth inequality. 

“A very small number of households hold a staggering share of nationwide wealth, and they’ve been able to grow their fortunes in part because our tax system asks very little of them,” said Carl Davis, ITEP’s research director and an author of the report. “New and strengthened taxes on extreme levels of wealth could dramatically reduce the runaway inequality we face today.”

At the state level, tax codes are already overwhelmingly regressive when it comes to income – and are even more lopsided when it comes to wealth. Maryland lawmakers seeking to fix this imbalance in the tax code also have several readily available options as identified in the report, such as: 

  • Strengthening taxation of corporate profits – Maryland is behind the most states in closing major corporate income tax loopholes 
  • Implementing increased top income tax rates – Maryland briefly had a millionaires tax in the past but legislators allowed it to expire 
  • Raising rates on realized capital gains income
  • Enacting progressive taxation of real estate wealth
  • Enhancing estate and inheritance taxes

“Over the last two years we have seen corporate profits soar and the ultra-rich make massive wealth gains while ordinary Marylanders and small business owners have struggled with the effects of the pandemic and rising costs,” said Trap Jervey, campaign manager for the Maryland Fair Funding Coalition. “It’s time for Maryland to fix our upside-down tax code by implementing the commonsense solutions that the Fair Funding Coalition and our legislative partners have been advocating for since 2019.”

For more detail on the coalition’s past policy recommendations see http://fairfundingmd.org/bill-list/ 

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Media Contact: Kali Schumitz, MDCEP, 410-412-9105 ext. 701

 

The Maryland Center on Economic Policy (MDCEP) advances innovative policy ideas to foster broadly shared prosperity and help our state be the standard-bearer for responsible public policy. We engage in research, analysis, strategic communications, public education, and grassroots alliances promoting robust debate and greater public awareness of the policy choices Maryland residents face together.

The Maryland Fair Funding Coalition is made up of more than 30 organizations from around the state committed to a tax code that is fair to working families and small businesses while providing the resources to meet critical state needs and ensure all Maryland families and communities can thrive.

The Institute on Taxation and Economic Policy (ITEP) is a non-profit, non-partisan tax policy organization that conducts rigorous analyses of tax and economic proposals and provides data-driven recommendations on how to shape equitable and sustainable tax systems. ITEP’s expertise and data uniquely enhance federal, state, and local policy debates by revealing how taxes affect both public revenues and people of various levels of income and wealth.