Fri. Feb 28th, 2025

Gov. Wes Moore (D) calls on House fiscal committees to pass his budget proposals, which he said would solve a $3 billion deficit and help improve Maryland’s economy. (Photo by Bryan P. Sears/Maryland Matters)

Snack and property taxes and a four-year moratorium on Program Open Space purchases are all on a menu of options lawmakers could consider as the General Assembly works to finalize a balanced budget for the coming year.

The increases were among a list of options that legislative analysts presented Thursday to the House Appropriations and Ways and Means committees as they considered a budget reconciliation bill proposed by Gov. Wes Moore (D).

Moore, in his first appearance before a legislative committee this year, testified in support of the bill that makes it possible to balance the fiscal 2026 budget and includes a plan to revamp the state tax code. But Moore drew a line on areas that are important to him in his proposal.

“Now is the time,” Moore said. “We are eager to be able to work together to deliver a final budget that responds to the unprecedented crisis that we now face. The ability to compromise and collaborate must guide us through the session. But there are three principles that we cannot retreat from.”

Those principles include his proposal to “reform the tax code,” diversify the state economy with a focus on aerospace, tech and life sciences, and protect “the essential services that Marylanders count on.”

The governor and General Assembly must craft a budget that resolves a projected $3 billion deficit for fiscal 2026. Larger deficits loom in the out years. including a fiscal 2030 projection that exceeds $6 billion.

Small-business owners welcome Moore proposals — with an asterisk

Those projections were made before President Donald Trump followed through on promises to slash the federal workforce and cut federal funding. They also came before the U.S. House this week passed a spending plan that could result in billions less in federal aid for states, including funding for Medicaid and SNAP benefits.

Moore’s proposal — known as the Budget Reconciliation and Financing Act — is a companion to his proposed fiscal 2026 budget that includes cost shifts, some to counties, and a tax proposal that gives many a tax cut while raising taxes on high-income earners.

“We will make our taxes simpler, fair for growth and lower and will also increase government efficiency,” Moore said.

Moore faced only a handful of questions from Republican delegates. No Democrats questioned of the governor, reserving that for budget staff that testified later.

House Appropriations Chair Ben Barnes (D-Prince George’s and Anne Arundel) said the governor “gave a thoughtful, detailed defense of his proposal.”

The governor is expected to testify on the same proposal in the Senate Friday.

Passing a bill without altering Moore’s proposals could be a challenge.

More than 100 people signed up to testify Thursday — ranging from those who opposed cuts to programs for persons with developmental disabilities to representatives of casinos and gaming associations objecting to a doubling of the state’s tax on gambling.

Eric Luedtke, a senior adviser for policy to Moore, told lawmakers “there are few good decisions” in this year’s budget discussion.

Luedtke, a former Democratic delegate who served on Ways and Means, said every dollar of proposed cuts is “a dollar that somebody in the rows behind us cares about, and every revenue proposal affects somebody who would rather it not happen to them.”

Despite Democrats’ silence Thursday, Moore’s proposal also faces challenges from his own party, with leaders in the House and Senate saying they are looking at possible changes.

Both sides would like to roll back some cuts proposed by the governor. The Senate has been opposed to broad-based tax increases, while the House said it would not accept Moore’s proposal to delay portions of the Blueprint for Maryland’s Future education reforms.

Republicans — who make up less than 30% of the House and Senate — say they oppose Moore’s tax plan.

House Minority Leader Del. Jason C. Buckel (R-Allegany) holds a Bureau of Revenue Estimates report he said shows the governor’s proposal will raise taxes for some residents regardless of their tax bracket. (Photo by Bryan P. Sears/Maryland Matters)

“Gov. Moore’s proposal, in and of itself, we believe, adds up to about $1.4 billion in new taxes and fees,” said House Minority Leader Jason C. Buckel (R-Allegany). “Those aren’t monies that come from the sky. Those are monies that come from the pockets of Maryland’s families and businesses that are taken out of our private-sector economy.”

Republicans pointed to a recent Bureau of Revenue Estimates report that confirmed Moore’s proposal will offer at least modest cuts to about 60% of state taxpayers. The plan also includes tax increases affecting some people in every tax bracket. The most affected would be for high earners, including Moore himself.

Buckel said Moore “has tried to be, I think, clever but disingenuous, to suggest that these are broad-based tax cuts there.”

House and Senate Republicans, in a joint press conference, said they would vote against any tax increases. The Republicans are also expected to develop their own list of budget-taming recommendations.

“We got into this position, from our perspective, because we spent too much money over the last decade,” said Del. Jefferson L. Ghrist (R-Upper Shore), a member of the House Appropriations Committee.

Changes to Moore’s tax proposal may also be in the offing, but to do that the House and Senate would need to find other ways of filling the $3 billion gap. Legislative analysts, following Moore’s testimony, offered a number of possibilities.

All told, analysts identified roughly $1.3 billion in cuts and revenues for the proposed budget, according to an Appropriations Committee source. The recommendations — which lawmakers are not obligated to accept — included a wide menu of options from taxes to shifting costs and cutting funding to programs.

Topping the list is a proposal to increase the state property tax by a full penny, to 12.2-cents per $100 of assessed value. Maryland has been at the current rate since 2007 when it was lowered from 13.2-cents.

Another option eliminates the state’s seven-day tax-free back to school shopping period.

A third would revisit the so-called snack tax, imposing the state sales tax on items such as potato chips, pretzels, cheese puffs and other salty snacks. The state passed a similar tax in 1991 but repealed it in 1996. Lawmakers have considered reimposing it over the years, including in 2004 and 2020.

“While we respect and understand that DLS [the Department of Legislative Services] is obligated to search under the proverbial couch cushions for any spare money they can find in this budget and spending environment, the significant revenue increases they have identified — from eliminating tax-free back-to-school week, to increasing the state property tax, to imposing a ‘snack tax’ … on many food items — should be clearly and immediately rejected,” Buckel said. “It’s time to get serious about the drivers of our budget crisis — a poor private-sector economy and rampant state spending, rather than look for ways to increase taxes in every way possible on Maryland’s citizens.”

Analysts also proposed doubling the transfer tax on so-called high-value properties to 1%. The tax would be imposed on residential properties valued at $1 million or more and commercial properties valued at at least $10 million. The tax is projected to bring in about $40 million, analysts said.

Local governments could be asked to share the costs of compensating those who were erroneously convicted and incarcerated. Analysts suggested a possible 50-50 state split with local governments for any compensation awarded in an erroneous conviction settlement approved by the Board of Public Works in fiscal 2026.

Local governments could also lose funding to purchase open space under one proposal. Analysts proposed a freeze on all state Program Open Space land purchases for the next four years. The recommendation includes a 50% cut on the county share of Program Open Space funds for the same period. Money saved under the recommendation would be transferred to the General Fund, excluding a $40 million annual allocation — inflated annually — to the Maryland Park Service from fiscal 2027 -2029.

Higher education could see reductions if the legislature accepts analyst recommendations to reduce community college scholarships from $15 million to $10 million. Those same analysts recommended eliminating the Joseph A. Sellinger formula, which provides aid to private universities. In its place, analysts recommended a grant program based on financial need totaling nearly $36.7 million .

Analysts also recommended nearly $100 million from various funds. Of that total, $47 million would come from fund balances maintained by the University System of Maryland and another $30 million would come from the Strategic Energy Investment Fund.

It is unclear if any of those proposals or others will be part of a final package in a version the House is expected to send to the Senate in just over two weeks.