TRENTON, N.J. — Maryland residents are facing a series of new tax proposals and increases under Governor Wes Moore’s administration, aimed at addressing a projected $3 billion budget deficit for fiscal year 2026. While Moore frames the changes as part of a “pro-growth agenda,” critics argue they place an undue burden on small businesses and working families.
The governor’s fiscal 2026 budget proposal includes $1 billion in new and redirected revenues alongside $2 billion in spending cuts, bringing the state’s operating budget to $67.3 billion. One of the most significant changes is a restructuring of Maryland’s income tax system, compressing lower tax brackets while introducing higher rates for top earners. Individuals making over $500,000 will see a 6.25% tax rate, while those earning over $1 million will be taxed at 6.5%. A temporary 1% surtax on capital gains for households earning more than $350,000 is also proposed.
Maryland businesses face new financial pressures, including a controversial 2% tax on small service-based businesses and a $1 billion tax on professional services. Additionally, the corporate tax rate is set to decrease from 8.25% to 7.99% by 2028, contingent on closing tax loopholes through combined reporting.
Transportation-related fees are also increasing, with a new 75-cent tax on retail deliveries and a hike in vehicle inspection fees from $14 to $30. The estate tax threshold will drop from $5 million to $2 million, while the state’s inheritance tax will be eliminated. Meanwhile, taxes on sports betting, casino table games, and recreational cannabis will rise significantly over the next few years.
Other tax proposals under legislative consideration include a soda tax, a snack tax, a property tax increase, and the elimination of the state’s back-to-school tax-free shopping week. Maryland’s tax competitiveness ranking, already low at 46th in the nation, continues to be a point of contention as the state grapples with economic challenges and a growing budget gap.
As the Maryland General Assembly debates the proposals, residents and businesses remain divided over whether the tax increases will stabilize the economy or drive jobs and investment out of the state.