By EMMA TUFO
Capital News Service
ANNAPOLIS – Both chambers of the Maryland General Assembly have passed their versions of a new state budget for the next fiscal year, setting the stage for a potential agreement in the coming days.
During months of negotiations, lawmakers have tried to balance protecting key services like healthcare and education while responding to fiscal hardship and shifting factors at the federal level. Through a combination of spending cuts and tax hikes, officials appear on track to pass something before the scheduled end of session on Monday.
Senate Vice Chair of the Budget and Taxation Committee Jim Rosapepe, a Democrat representing Prince George’s and Anne Arundel Counties, defended the Democratic spending plan.
“It shows that we’re not rolling over. We’re not rolling over for the attacks on Maryland,” Rosapape said. “We’re protecting health care, we’re protecting education, we’re protecting public safety, we’re protecting transportation … we’re making the tax system more fair.”
But Senate Minority Leader Stephen Hershey Jr., a Republican representing Caroline, Cecil, Kent and Queen Anne’s Counties, criticized the tax hikes on higher earners and blamed Maryland’s dependence on government employment and funding.
“People that do well aren’t just born well. They’re not just doing well because I have a certain job. People that do well, do well because they work hard,” he said. “And the governor’s saying, well, you’re fortunate, so we’re going to tax you a little bit more.”
The state was facing a $3 billion deficit when the budget process began in January, a gap that grew as President Donald Trump’s federal budget cuts and workforce reductions started to affect Maryland. Since then, debates have arisen over some of the key actions that would make this deficit smaller.
One option is tax increases, including a proposed hike in income tax rates on individual earnings. Specifically, rates for those earning above $500,000 could increase by up to .75%. These proposed increases are expected to help close the state’s budget gap.
Senate President Bill Ferguson, a Democrat representing Baltimore City, stressed the urgency of making difficult decisions.
“At the end of the day, unlike the federal government, the state of Maryland must balance its budget,” Ferguson said. “We don’t have the luxury of printing our own money and pushing problems down the line. We have to make hard choices to get through this year to balance the budget.”
After Trump announced new tariffs for imported vehicles and auto parts, the Senate moved to trim back the tax increase Democratic officials had been weighing for vehicles.
But they didn’t propose doing away with the hike, and some lawmakers are voicing concern over the long-term effects of new taxes on Maryland businesses. The budget includes a 3% sales tax on data and IT services – an area critics say is crucial for economic growth.
Sen. Justin Ready, a Republican representing Carroll and Frederick County, criticized the approach and said it would cause businesses and information tech professionals to leave the state.
“We still have the largest combined tax increase in the history of the state, including a new tax on computer and IT services, which is the very industry we’re trying to get more of in the state,” Ready said. “There’s an income tax increase on the so-called high earners, and yeah, they are high earners, but they also are incredibly mobile that we’ve seen in our state’s history. It doesn’t take much for folks to just transport themselves when they’re making several $100,000 or over a million dollars a year.”
Despite criticism, Democratic lawmakers defended the tax increases as essential for Maryland’s long-term stability. Senate Budget and Taxation Chair Guy Guzzone, a Democrat from Howard County, said the focus must remain on lasting investments.
“We can’t do everything government can’t, but we need to do what we can do to make this state a better place,” Guzzone said. “Healthcare matters. Education matters. Those things matter, and we are sending the message that they continue to matter.”
The House and Senate hope to finalize a compromise and send the budget to the governor by the end of the week.
Last year during the 2024 Gen Assy Session, Marylanders saw increases in, and creation of, 338 fees and taxes due to the looming structural budget deficit back then. While individually incremental, cumulatively it generated a fair amount of revenue. We also know that ultimately these fees and tax increases found their way down to increases in the cost of doing business, and ultimately impacted the prices consumers pay for products and services.
Here we are watching the 2025 Gen Assy Session doing the same thing all over again.
CEO Magazine just a few months ago came out with their latest survey for the 2024 best & worst states for business. We are a few days away from Sine Die and we can thank the Maryland Gen Assy for Maryland not only having:
the 5th highest gas tax in the nation, which is automatically increased via CPI, and not very business friendly;
the 5th highest minimum wage in the nation, which is not very business friendly, but justified as Maryland is …
the 5th highest cost-of-living state in the nation, which is also not very business friendly;
but Maryland is ranked by CEO Magazine as being the 35th worst state for business.
We have a Legislator proposing raising the minimum wage from $15/hr to $20/hr because it is SO EXPENSIVE to live in Maryland. DUH! Take a look in a mirror, why don’t you! Legislators CREATED the high-cost-of-living in Maryland, which by all metrics is only getting higher. It would seem the 2025 Gen Assy is doing everything it can for Maryland to be ranked #1 in the Nation for having the highest-cost-of-living in the nation.
Regards Maryland being ranked 35th worst state for business, well, this is not the first time Maryland has ranked poorly in a ‘best & worst states for business’ ranking, as similar rankings have been published by Forbes, CNBC and Wallet-Hub.
Business owners and decision making managers read these rankings. They are knowledgeable and have spread sheets full of other decision-making data and metrics, which impact their state viability check-off list and ultimately their decisions on where to move a business, expand a business, start a business. This latest ranking does not, obviously, help Maryland’s situation.
CEO Magazine’s ranking of the best-to-worst states in our Econ Dev region:
5th – North Carolina*
10th – South Carolina*
12th – Virginia
15th – Delaware
31st – Pennsylvania
34th – West Virginia
35th – Maryland
47th – New Jersey
[*I include NC & SC because of their $7.25 minimum wage, which is justified given their cost of living. NC & SC are Econ Dev magnets and not that far away.]
CEO Magazine’s ranking of the best-to-worst states along the I-95 corridor from Maine to Florida:
2nd – Florida
5th – North Carolina
7th – Georgia
10th – South Carolina
12th – Virginia
15th – Delaware
24th – New Hampshire
31st – Pennsylvania
33rd – Maine
35th – Maryland
36th – Rhode Island
42nd – Connecticut
45th – Massachusetts
47th – New Jersey
49th – New York
If you, as a business owner or decision making manager, were thinking about moving your business to, expanding your business to, or starting a new business in the Mid-Atlantic region, where would you put it?
Let’s expand that to thinking about moving your business, expanding your business, or starting a new business along the I-95 corridor, where would you put it?
Applying common sense and logic to the data, and with an acute sense for the obvious, Maryland would not make it to your short list of states to be considered.
The 2025 Gen Assy, lead by Senate President Ferguson and House Speaker Jones, in concert with Sen. Guzzone and Del. Barnes, have dug the hole Maryland is in deeper.
Maryland has been a spend and tax State for decades, legislating into being a number of very expensive unfunded mandates, the elephant in the room right now being The Blueprint/Kirwan education plan.
The Maryland Gen Assy needs to reduce spending even more, start living within the State’s means, not raise or create fees and taxes to balance our budget, or issue I-OWE-YOU when taking taxpayer dollars from dedicated lock-boxes, all the while becoming more business friendly.