Posted on 02/17/25
| News Source: FOX45
Annapolis, MD - Feb. 17, 2025 - A national taxpayer advocate warned that Maryland Gov. Wes Moore’s tax plan could significantly affect the state’s middle class despite its purported focus on the wealthy.
Pete Sepp, president of the National Taxpayers Union, told Spotlight on Maryland that the Maryland General Assembly should reject the governor’s income tax restructuring plan.
It would be easy to accept the narrative that only the wealthiest taxpayers in Maryland are going to pay more while everyone else gets a break,” Sepp said. “[I]t’s much more complicated than that.”
Sepp said that the middle class typically bears a notable burden of tax increases imposed by local and state governments. According to data from GOBankingRates, Maryland residents are considered to be in the middle class if their annual income is between $65,641 and $196,922.
A report from the Maryland Bureau of Revenue Estimates (MBRE), published by the Comptroller's office, showed that nearly one in four households earning between $75,000 and $100,000 would face an average tax increase of approximately $666 under Gov. Moore's proposed income tax plan.
Report data also shows that approximately 47.1% of the state’s new income tax revenue will come from taxpayers and households with a federally adjusted gross income below $500,000. The governor's plan also calls for a 1% capital gains surcharge on households making more than $350,000.
Maryland’s single taxpayers or households with a federally adjusted gross income above $1 million will bear the highest income tax increases, according to MBRE data. This will be followed by households earning between $200,001 and $500,000. Middle-class households with incomes between $100,001 and $200,000 will average the third-highest revenue generation under the governor’s new plan.
Spotlight on Maryland sent questions to Gov. Moore’s office on Saturday regarding his budget plan to address the state’s projected $3 billion deficit. Dubbed the “growth agenda,” the governor’s proposal aims to generate a billion in new revenue through taxes and fees while reducing nearly $2 billion in operating expenses.
Some of the questions sent to the governor included:
David Turner, Gov. Moore's communications director, wrote that MBRE's data supports the administration's assertions that the governor’s budget benefits most Marylanders.
“Gov. Moore proposed a bold tax reform package that makes Maryland’s taxes simpler, fairer, and for most families, lower,” Turner told Spotlight on Maryland. “By raising tax rates on our highest earners, the plan asks for those who have done the best to contribute a little more.”
"Overall, the reform package gets three-quarters of its revenue from households making more than $500,000, a group that currently pays the lowest overall tax rate when all state and local taxes are considered,” Turner added.
Meanwhile, Sepp said that the governor's tax plan may prompt many middle-class families to relocate to a neighboring state, resulting in more affordable housing and lower overall tax burdens for migrating families.
In this region, Maryland can ill-afford not to be competitive with its neighbors,” Sepp said.
Gov. Moore’s budget also proposes new fees and taxes for middle-class residents in various aspects of life. The plan aims to introduce a 75-cent fee on online home deliveries from companies like Amazon and meal relay services like DoorDash.
Maryland General Assembly members are advocating for their own solutions to balancing the budget. Two state lawmakers introduced the “For Our Kids Act” on the House filing deadline. The measure would impose a 2-cent tax on drinks that contain added sugar. If the law is enacted, soda and energy drink consumers might pay an additional 40 cents per 20-ounce beverage purchase.
The sponsors of the drink tax bill aim to generate $500 million annually from this tax increase.
Tax and fee increases to balance the state’s fiscal year 2026 budget follow actions taken by Gov. Moore and the Maryland General Assembly during last year's session to raise revenue and offset increased spending.
One enacted initiative raised vehicle registration fees in the state from $110.00 to $161.50 annually, depending on the car's weight. Virginia vehicle registration and tag renewals average about $35.75.