On January 15, Governor Moore presented his proposed $67.3 billion state budget to the General Assembly.
His proposed budget includes the following:
Approximately $2 billion in spending cuts
Approximately $1 billion in new revenue from select tax code changes and fee increases
Additional select tax code changes
A state initiative comparable to the new federal Department of Government Efficiency (DOGE) that will identify $50 million in savings that can be accomplished by implementing greater efficiencies in state government operations and programs
The proposed budget includes the following tax changes:
Maintain an income tax rate of 5.75% for those earning over $300,000 annually
Increase an income tax rate to 6.25% for those earning up to $500,000 annually
Increase income tax rates to 6.50% for those earning $1.2 million or more annually
Add a 1% surcharge on capital gains for households earning more than $350,000 annually
A flat 4.7% tax rate for Maryland singles earning less than $100,000 annually
A flat 4.7% tax rate for married Marylanders filing jointly earning less than $150,000 annually
Doubling the standard deduction from the current $2,700 for single taxpayers and $5,450 for head of household, a surviving spouse and taxpayers filing jointly
Double the state take on sports betting from 15% to 30%
Raise the tax on casino table games from 15% to 20%
Increase the tax on recreational cannabis from 9% to 15% (effective in 2028)
Eliminate the inheritance tax
Lower the estate tax threshold from $5 million to $2 million (except for agricultural property)
A 75-cent fee for retail deliveries by companies with $500,000 or more in annual earnings
Increase the fee for vehicle emission inspections from $14 to $30
Double the late fees for vehicle emission inspections from $15 to $30
Limit the trade-in credit on car sales, which lowers the amount that can be taxed on a car purchase, to sales of no more than $15,000
Phase in higher vehicle registration fees in two years instead of the previously approved three-year schedule
Add a fee for motorists who pay their registration fees annually instead of biennially
For existing or new businesses, Moore proposes to cut the corporate tax rate from 8.25% to 7.99% by the beginning of fiscal 2028.
This proposed change anticipates legislative approval of combined reporting for corporations headquartered in Maryland.
That is not a given despite the fact that combined reporting has been and is a top priority for progressive members in the General Assembly and progressive advocacy organizations. Preventing combined reporting has been and is a top priority for Maryland businesses and businesses advocacy organizations.
Last but not least, Moore proposes tapping the state’s “rainy day fund” for about $500 million, while leaving more than $2 billion in the fund.
That is a draw down that maintains the current balance requirements for that fund.
All these proposals as well as others will be subject to intense discussions and deliberations between now and April 7. The only certainty is April 7 is the last day for the General Assembly to approve a balanced budget and send it to the governor.
There are almost countless ‘what if’ scenarios that could occur between now and then.
I suggest they include:
What if the General Assembly reduces or eliminates the governors’ proposed budget cuts?
What if the General Assembly adds or increases the governor’s proposed spending levels coupled which requires their approval of a funding source for that new or increased funding?
What if Governor Moore uses line-item vetoes if either occurs?
What if the General Assembly overrides those vetoes?
What if the proposed tax increases result in “wealthy” residents leaving the state like it occurred when roughly 30% of Maryland’s millionaires left the state after the income tax rate on more than $1 million of income was increased from 5.5% to 6.25%?
What if low and middle-income taxpayers leave Maryland because of the projected fee increases which will offset any proposed modest income tax revisions?
What if combined reporting is approved and businesses move their headquarters to other states?
What if the $50 million in savings from the initiative to identify and implement greater efficiencies in state government operations come in lower than expected or not at all?
What if, when all is said and done, Wes Moore’s actions lead to negative impacts from Maryland voters and the media on his re-election and pursuit of a national office?
David Reel is a public affairs and public relations consultant living in Easton.