Maryland budget framework deal includes more cuts, fewer tax hikes on residents

Maryland Gov. Wes Moore announced lawmakers are making the largest amount of cuts from a state budget in 16 years.

The Maryland General Assembly and Gov. Moore reached an agreement on the framework for the Fiscal Year 2026 state budget, lawmakers announced Thursday. 

The agreement comes almost two months after the governor introduced his $67.3 billion budget proposal. The proposal aims to address the state's $3 billion budget deficit. 

The newly approved budget framework introduces new taxes and significant reductions in state spending  

On Thursday, lawmakers announced the agreed-upon plan includes $2.3 billion in cuts, which is about $500 million more than the governor initially proposed.

"This is the largest amount cuts from a Maryland state budget in 16 years," Moore said. "Because of our emphasis on growth, our biggest framework will emphasize spending cuts over tax increases."

The governor said the budget does three things; reforms the tax code without relying on the middle class, grows and diversifies the economy, and invests in the people of Maryland.

Republican lawmakers say they have serious concerns about the governor's plan.

"This proposal literally will raise taxes on every Marylander in some fashion," said Republican Senator Justin Ready.

"Marylanders want details," said Republican Stephen Hershey. "We've got just over two weeks left in this legislative session. We need to see a balanced budget and we need to see it on the backs of cuts, not tax increases."

Reforming Maryland's tax code

According to lawmakers, the budget framework maintains the governor's proposed tax code changes by creating two new tax brackets for the state's highest earners. 

Those who make $500,000 per year will be taxed at 6.25%, while those making $1 million will be taxed at 6.5%. Currently, Marylanders who make over $250,000 are taxed at 5.75%.

The standard deduction would double, while itemized deductions would be eliminated.

The budget will provide tax breaks for low- and middle-income residents who lawmakers said would struggle the most under the current presidential administration. 

"We are asking those of us who have done exceptionally well to pay slightly more, so we can have the best schools in the country, so we can support law enforcement and our firefighters, so we can make sure that we are growing our economy," Gov. Moore said. 

According to Gov. Moore, 94% of Marylanders will either get a tax cut or see no change in their income taxes under the agreed-upon budget. This is an increase from the governor's initial proposal in which 82% of residents would have received a tax cut or seen no change. 

Revenue changes

The budget framework also increases tax rates for gaming and cannabis. Lawmakers said the rates will match neighboring states. 

There will also be a 3% fee for IT services. The new fee will apply to both consumers and businesses. It will tax online cloud services, website software and other data services that are currently ineligible for the state sales tax. 

Gov. Moore said this will put Maryland in line with other states, both liberal and conservative, that already have this tax. 

"We need to make Maryland more business-friendly," Moore said.  

The governor said this is the third year in a row that there will not be increases in the broad-based sales tax or state property tax. 

The proposed 75-cent delivery fee and changes to the car trade-in allowance will not be included in the budget. The budget framework also scraps the proposed tax on sugary drinks which was introduced in the state House. 

Reducing impact of federal cuts 

During the announcement Thursday, lawmakers said the budget also aims to support those impacted by the federal workforce and budget cuts as the Trump administration works to make the government more efficient. 

The effort has resulted in thousands of layoffs from government agencies and funding cuts for research and education programs. 

"As [President] Trump continues his assault on workers, healthcare and our most vulnerable, we are preserving funding for state employee salaries, cancer research, victims of crime and DDA [Developmental Disabilities Administration]," said Speaker Adrienne Jones

Gov. Moore, citing the credit rating agency Moody's, said the federal cuts pose a greater threat to the State of Maryland than any other state in the country.