Maryland Budget Deal Sparks Backlash Over $1.6B Tax Surge | Image Source: wjla.com
ANNAPOLIS, Maryland, 5 April 2025 – After a marathon of negotiations, the leaders of the House of Maryland and the Senate reached a budget agreement of $67 billion at the end of Friday, which gave so much praise for tax pragmatism and indignation for an unprecedented $1.6 billion in new taxes. The agreement, considered to be the largest one-year tax package in recent state history, is now addressed to the plenary chambers for a final vote on Monday last day of the 2025 legislative session.
At the heart of this budget is a bold attempt to save a structural deficit of $3 billion, a deficit compounded by the decline in federal aid, slow economic performance and the reserves of the pandemic era. Legislators, chaired by President Del. Ben Barnes (D-Prince George’s and Anne Arundel) and President of the Senate of the Sen Budget and Taxes. Guy Guzzone (D-Howard), insists that the agreement balances books while preserving basic programs. However, critics caution against long-term economic damage.
What are the key components of Maryland’s $1.6 million financial plan?
Maryland’s tax and rate increases cover almost every corner of its economy. From luxury entrepreneurs to vending machines, pain – or contribution, from perspective - is spreading widely. Key changes include:
- Income Tax: Two new brackets for high earners — 6.25% for incomes above $500,000, and 6.5% for those earning over $1 million.
- Capital Gains: A 2% surcharge on gains over $350,000, split between the General Fund and the Transportation Trust Fund.
- Tech Tax: A new 3% sales tax on IT and data services, expected to raise $500 million, although exemptions were carved out for firms in the Discovery District and affiliates.
- Itemized Deductions: Gradual phase-out begins at $200,000 in taxable income, though Moore’s plan to eliminate itemized deductions outright was rejected.
- Other Increases: Sales tax on cannabis jumps to 12%, sports betting tax rises from 15% to 20%, and vehicle excise tax increases to 6.5%.
New rates, such as the $5 per price charge and a 3.5% rental vehicle tax, will also add to the government’s trunks. Meanwhile, standard deductions will increase by 20%, providing modest relief to most households, averaging $50 to $65 in savings, according to fiscal analysts.
Why are legislators divided into budgets?
This commitment was welcomed by the Democrats as a model of cooperation and accountability. But for the Republicans, it was a missed opportunity to make larger cuts in spending without charging the Marylanders with what Del did. Mark Fisher (R-Calvert) called “O’Malley- was tax increases, recycling and reconditioning”
“Not only some Marylanders, but all Marylanders will feel that,” Fisher said. “It’s exactly like under O’Malley.”
This comparison is not without foundation. Data from Maryland’s Department of Legislative Services show that former Governor Martin O’Malley exceeded $1.5 billion in tax increases for eight years. In a single legislative session, the current package competes – and perhaps surpasses – with this.
Is the budget really balanced?
According to the Maryland Department of Legislative Services (MDLS), yes, for the time being. But budget experts and several legislators caution against future uncertainty, especially if federal support continues to decline or revenue forecasts are not reduced. An activation mechanism integrated into the bill requires the Department of Budget and Management to alert legislators if federal assistance is reduced by more than $1 billion.
Senator Guy Guzzone defended the measure:
“The idea is simply that as we progress when things happen to us from Washington, we will be ready and ready. »
What about business and innovation?
Perhaps the most controversial element is the technology tax. Although it aims to modernize Maryland’s tax code, it has caused fears of job losses and business relocations. Del. Brian Crosby (D-St. Mary’s), owner of a computer company, revealed that he had already moved his business out of the state to escape impact.
“This tax is punitive for small businesses entering into contracts with the federal government. It’s an exodus recipe,” said Crosby earlier.
However, the Democrats say they were surgical. The exemption for emerging technology companies in College Park, including the quantum IT giant IonQ, underscores the state’s commitment to foster innovation while increasing revenues elsewhere.
What programs are facing cuts or changes?
Reductions of $2 billion affected vacant posts, modified the costs of teachers ‘ pensions for local governments and adjusted government contributions to land assessments. In particular, the legislature overturned some of Moore’s cuts to developmental disability services, but the governor subsequently brought back $28.8 million in cuts - a movement considered a deaf tone by defenders.
Moore also suffered defeats. Its ENOUGH Act signature was underfunded, and its plans to repeal the estate tax, double the standard deduction and reduce corporate income tax to 7.99% were all rejected. Combined corporate reports were added and subsequently withdrawn during negotiations, renouncing departmental tax policy.
How to finance transport projects?
Approximately $2.3 billion over five years will strengthen the Transport Trust Fund, an essential reserve for roads, transit and infrastructure. Revenues will come from capital gains supplements, higher securities rates, increased vehicle inspection costs (from $14 to $30) and new excites. Even the rate of $5, initially allocated to roads, was transferred to the general transport fund.
Despite the rapid victory of the Republicans by ensuring a target for road expenses, the compromise agreement erases this provision. It’s Del. Ben Barnes said:
“He goes to the TTF like all the transport funds.”
What happened to the Raza Authority?
In a surprising move, legislators voted to dissolve the Maryland Carrier Operating Authority Thoroughbred, created last year. Pimlico track monitoring and related modernization efforts will be transferred to the Maryland Stadium Authority.
It’s Del. Vanessa Atterbeary (D-Howard) explained the decision arising from concerns about transparency:
We wanted more supervision and to be able to know and understand what is happening in real time
What are the Marylanders doing?
The public response is clearly divided. While some consider the budget a necessary drug, others consider it a financial overstatement. Del. Ryan Nawrocki (R-Baltimore County) criticized the governor’s leadership:
“We have a fiscal crisis in Maryland. We have done nothing to resolve this crisis. »
However, Del. Cayin Young (D-Baltimore City) framed the theme through a different objective:
“It’s never easy to raise income, but we want to make sure we take care of our residents. We do not want to lose the services that are provided.”
Meanwhile, the whispers about the potential exodus between rich and small business owners echo similar concerns in 2000 and 2010. IRS data show that Maryland lost more than $5.5 billion in taxable income between 2000 and 2010. Will the story be repeated?
And then what?
The budget awaits the final vote, with a passage expected given the democratic majority. But the political battle can continue until the summer or fall, especially if revenue deficits arise or federal aid evaporates. The questions to Governor Wes Moore remain unanswered, including whether he will convene an extraordinary session or take other steps to fill the persistent deficits.
According to MDLS, the State Rain Day Fund is still strong for now. But the structural gaps in the coming years seem to be very large. The act of balance is delicate and economic and political participation cannot be greater.
If this budget stabilizes Maryland’s finances or causes even more discord. One thing is clear: almost all residents, voters and taxpayers will monitor closely.
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