Market conditions have changed very little in the past week. Major indices remain overbought and overdue for a correction. Our assessment remains that the economy is very weak and market risk is at a high level.

There was an interesting article this week from The Wall Street Journal Online that referred to missing millionaires. Apparently, the state of Maryland decided to fix a budget shortfall by imposing a higher income tax on residents earning more than $1 million. There was plenty of support for the plan. After all, if anyone can afford to pay higher taxes it is those folks that most of us consider uber wealthy.

According to the report, by the end of April in 2008 approximately 3,000 Maryland residents filed tax returns showing more than $1 million in income. In 2009, that number dropped to about 2,000. Instead of the tax windfall legislators anticipated, the millionaires paid $100 million less in taxes in 2009 than in 2008, even with the higher tax rate.

This example raises important issues that need consideration during the current economic recession. First is the idea that somehow wealthy people are immune from the damage of a recession. In fact, that  group generally suffers right along with everyone else. It should not surprise Maryland legislators that there are significantly fewer millionaires than a year ago. Just like ordinary people have seen the value of their investments decline in 401K or other accounts, so have those that are considered most wealthy.

Millionaires in Maryland represented just 0.3% of the populace in 2008. Under the best circumstances that is too small a group to compensate for the economic challenges of the remaining 99.7%.

The problem on a national as well as regional basis is one of wealth creation rather than a simple redistribution of existing wealth. There currently is simply is not enough money to satisfy all of the wants and demands. After eliminating unnecessary expenses,  we must support economic growth, which will foster the creation of new sources of wealth.

This global recession impacts everyone. We all need to work together to make it as short and painless as possible.
F.S.

This entry was posted on Thursday, May 28th, 2009 at 4:35 pm and is filed under Newsletter. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.