Maryland state lawmakers were closing in on a $1.6 billion tax increase and $2 billion in budget cuts as their legislative session drew to a close Monday, as bills addressing reparations for Black residents and early release for long-term convicts were making their way to the governor’s desk for signatures.
Democratic leaders, who have a supermajority in the state Legislature, backed a budget plan that would add new taxes on high earners, bump up the surcharge on capital gains and raise taxes on technology companies, sports betting and retail cannabis sales.
Gov. Wes Moore, a Democrat, tied the increases to the state’s changing relationship with the federal government in light of President Trump’s drastic spending cuts.
“The current federal government isn’t a reliable partner for growing our state’s economy,” Mr. Moore posted Sunday on X. “That’s why both our budget and legislative agenda focus on growing our economy, investing in industries of the future, and protecting key industries and sectors, including our port & trade assets.”
A projected $3.3 billion deficit forced the state to take aggressive action on its spending this session — just two years after Maryland enjoyed a $5 billion surplus when former Gov. Larry Hogan, a Republican, left office in 2023.
The proposed cuts focused on shifting the costs of teacher pensions and property assessments from state agencies to local county governments. Mr. Moore’s administration also has cut vacant positions that were previously accounted for in the budget.
But despite slashing the state’s proposed budget, House Appropriations Chair Delegate Ben Barnes, a Democrat representing parts of Prince George’s and Anne Arundel counties, said last week that “our core programs are solid and funded.”
High earners in the state will bear the brunt of the proposed tax increases. The Board of Revenue Estimates said those making $500,000 or more per year, which covers more than 5% of taxpayers, will see more than $1,800 charged to their tax bill.
And a 2% surcharge on capital gains will affect residents making $350,000 or more annually.
Cannabis sales taxes will bump up from 9% to 12% under the proposed budget, and taxes on sports betting will jump from 15% to 20%.
But it’s the proposed tax increases on key industries, such a 3% “tech tax” targeting data and IT service companies, that have stoked anxiety from trade groups.
“Small businesses will bear a disproportionate burden, and all Maryland businesses may be incentivized to relocate to more tax-friendly states,” the Alliance for Digital Innovation and the Cybersecurity Coalition, two D.C.-based organizations, said in a letter to Mr. Moore and Democratic leaders last week.
Outside of the budget, a bill that would establish a reparations commission has been passed through the Legislature.
The bill’s potential remedies for “individuals whose ancestors were enslaved in the State or were impacted by certain inequitable government policies” include repayments, debt forgiveness, college tuition, child care costs and more.
Republicans, such as Delegate Matt Morgan of St. Mary’s County, criticized the bill for proposing an ideologically aligned commission that he said will mean more costs placed on Marylanders.
“When political parties are out of ideas, they resort to distractions, they resort to demonizing, and this is the bill that we have here,” Mr. Morgan said in Annapolis last week. “Let’s call this bill out for what it is: it’s a commission to set up a reparation tax.”
Criminals who were convicted between the ages of 18 and 25 and have served at least 20 years of their prison sentence could petition to have their sentence reduced under a new bill.
The “second look” legislation would not apply to people who have been sentenced to life without parole, sex offenders or people convicted of killing first responders.
The Maryland General Assembly was set to close its 90-day legislative session at midnight Monday.
• This article is based in part on wire service reports.
