WASHINGTON POST: Who pays more under Moore’s tax plan? Not just Maryland’s millionaires.
In January, Moore (D) proposed a tax-system overhaul to help fill a historic $3 billion budget deficit by, he said, primarily raising taxes for the state’s wealthiest residents, including himself, while lowering tax bills for more than half of Marylanders.
The report released last week by the Maryland Comptroller’s Office, which oversees the Board of Revenue Estimates, shows that is true: 60 percent of Marylanders would receive a modest tax cut, another 22 percent would have no change to their bill, and millionaires, who make up less than 1 percent of state taxpayers, would see the biggest tax hikes.
However, the governor has not publicly discussed the impact of that tax plan on some low- and middle-income Marylanders who claim itemized deductions for expenses like mortgage interest and charitable donations.
The BRE report offered a clearer picture of who would pay higher taxes under Moore’s proposal.
“In general, the proposal will reduce tax liabilities for most lower-income taxpayers and increase liabilities for higher-income taxpayers, particularly for taxpayers with the most income,” Robert J. Rehrmann, director of the Bureau of Revenue Estimates, wrote in a letter that accompanied the report.
“But many taxpayers with modest income who itemize would have paid more in taxes,” he added.
The governor’s plan would eliminate itemized deductions, double the standard deduction for all filers, and create new higher tax brackets for earners who make more than $500,000 per year and for those earning more than $1 million. Moore also proposed a 75 cent fee on deliveries from companies like Amazon and DoorDash; raising taxes on sports betting, table games and cannabis; and a 1 percent surcharge on capital gains for people making $350,000 or more.
The BRE report applied those proposed reforms to tax returns from 2023 and analyzed how the policy changes would have altered what taxpayers saw on their state tax bills that year. Under those conditions, the governor’s income and capital gains tax adjustments would net the state about $603.5 million to help close its budget gap, according to the report.
Very few Marylanders who made less than $50,000 would see their bill go up. Administration officials said scenarios where low-income earners would see a higher bill can be attributed to unusual cases; for example, a taxpayer who reports very little income but owns an expensive home.
Among the middle-income earners, those who take advantage of itemized deductions in the existing tax system would likely see higher state income tax bills. About 1 in 4 taxpayers who made between $75,000 and $100,000 would pay $666 more on average, according to the BRE report. And 1 in 3 who made between $100,001 and $200,000 would pay $877 more on average.
Altogether, more than half a million Maryland taxpayers who earned $500,000 or less a year would see an increase on their tax bill. Another 36,444 taxpayers who made more than $500,000 would also see an increase, but their tax hikes would be substantially higher.
The proposed tax overhaul would still mean the state’s wealthiest residents will individually pay more.
Among those earning more than $1 million per year, 98 percent would pay an average of $20,806 more in taxes, the BRE report shows. Roughly 3 in 4 taxpayers earning between $500,000 and $1 million would also pay more, with an average increase of $2,556.
The extra tax burden placed on millionaires would amount to about 36 percent of the additional revenue generated by the income tax policy changes, or about $258.6 million. Another $125.3 million would come from wealthy residents who pay the capital gains surcharge, the report found.
Marylanders who earn less than $500,000, meanwhile, would collectively contribute nearly 60 percent of the new revenue from income taxes to the state, about $462.6 million.
Any form of tax increase has landed with a thud among Republicans in Annapolis.
They have urged their Democratic colleagues in the state legislature, who control both chambers, to instead look for cuts to spending, targeting Democratic priorities such as the Red Line light rail in Baltimore — which is unlikely to move forward without federal investment — and the state’s education reform program known as the Blueprint for Maryland’s Future. Republicans have also suggested a temporary hiring freeze in the state government.
“Any suggestion that these tax cuts are only going to be borne by the very wealthy is not the truth,” said Jason C. Buckel (R-Allegany), minority leader in the House of Delegates. “A lot of families in almost every tax bracket are going to be paying more.”
Buckel said that Moore’s plan to eliminate tax incentives for homeowners and charitable giving, among other itemized deductions available to taxpayers, would have collateral consequences, especially for middle-income Marylanders looking to buy a home.
In a state that is already dealing with a housing shortage and an affordability crisis, it does not make sense to take away a tax benefit that makes it easier for working families to obtain mortgages, Buckel said.
Administration officials said that getting rid of itemized deductions would make the state’s tax system more fair, because two people who make the same amount of money should not pay radically different taxes just because one owns a home.
Buckel said he doesn’t buy that argument.
“It’s just disingenuous to say it’s to be fairer to renters,” he said. “They did this because they need money.”
Still, Buckel said he fully supports the governor’s long-term plans to ease Maryland’s budget woes by stoking economic growth, particularly in private sector industries like information technology, biotech, quantum computing, and aerospace and defense.
Meanwhile Democratic lawmakers in the General Assembly have their own ideas about how the state could balance its budget as it grapples with an uncertain fiscal future under the Trump administration.
Members of the House have revived legislation introduced in prior sessions to legalize online gambling, known colloquially as iGaming. That would generate $53.5 million in new net revenue in fiscal 2027, which would grow to as much as $310.4 million by fiscal 2030, according to the fiscal and policy note analyzing the bill. Senate leaders, however, have long been reluctant to take up the issue.
Senate President Bill Ferguson (D-Baltimore City) said last week that senate leaders are looking for hundreds of millions — if not more than $1 billion — in additional cuts to the budget to account for looming reductions to Medicaid and other federally supported programs that could come from Republicans in Congress in the next month or two.
“We are deeply going through the budget and looking for every place we can make additional adjustments in cuts,” Ferguson told reporters inside the State House on Tuesday. “We are anticipating it getting worse, and so we want to make sure that we have all the options on the table so that when we have more information come the end of March, we can make the soundest decisions possible.”
