How did the State go from a $5B+ surplus left by Governor Larry Hogan to a $3B+ deficit in two short years?

Governor Wes Moore is addressing a $3B+ deficit in his FY2026 Budget with $1B in new revenues (tax and fee increases), $500M from the State’s Rainy Day Fund, and $2B in cuts and government efficiencies.

Go here to view the Fiscal Briefing prepared by the Department of Legislative Services.

NEW REVENUES  (taxes and fees)

• Imposes a new delivery tax -- adds a $0.75 fee to every online purchase that will automatically increase each year because the fee has been tied to the CPI (Consumer Price Index).
• Eliminates all itemized income tax deductions – qualifying medical and dental expenditures, home mortgage interest, real estate taxes, charitable contributions, forcing everyone to claim the standard deduction.
• Modifies the child tax credit to phase out benefits gradually.
• Doubles the vehicle emissions inspection fee -- from $14 to $30.
• Eliminates trade-in credit when calculating tax on a vehicle purchase over $15K.  Average trade-in value in Maryland of $20K = $1,200 tax increase.
• Accelerates increases in vehicle registration fees the General Assembly passed last year.
• Establishes an administrative fee for Marylanders who need to pay the higher vehicle registration fees in installments.
• Establishes a 4-year surcharge on capital gains income over $350K.
• Increases the income tax rate for the 3 lowest tax brackets and the 2 highest brackets.
• Increases the income tax rate on Maryland millionaires to 6.5% and imposes a 1% capital gains tax every time a stock or other security is sold.

Governor O’Malley’s 2008 Millionaires’ Tax increased the income tax on Maryland residents with incomes over $1M to 6.25%.  One year later: 30% drop in the number of millionaires with principal residence in Maryland -- predicted $106M income tax gain for the State became a realized loss of $257M. Another “exodus of the wealthiest” will create a hole in the State budget that those remaining will have to fill through higher taxes and fees – again!

• Lowers the point at which Maryland’s 16% estate tax is levied from $5M to $2M. It won’t take much to reach the $2M level when you consider the value of your home, vehicles, IRAs and 401Ks, pensions, and other assets.
• Doubles the tax on sports wagering -- from 15% to 30%.
• Increases the tax on table games at Maryland casinos -- from 20% to 25%.
• Increases the tax on cannabis sales -- from 9% to 15%.

Governor Moore is using taxes and fees to close a deficit largely attributable to budget-busting bills that the General Assembly has passed in recent years despite Republican opposition.  Below are just 3:

• Blueprint for Educational Excellence (Kirwan) has no dedicated funding source and will cost the State tens of Billions of dollars to implement. By the end of this decade, it is projected that the State deficit will be $6.5B, thanks in large part to the costs of the Blueprint.
• Climate Solutions Now Act had no cost analysis at the time it was passed and will cost the State over $1B a year to implement.
• Child Victims Act of 2023 vastly expanded the ability of those alleging child sex abuse to sue the State of Maryland as the employer of their alleged abusers. Recent disclosures projected the Act could cost the State over $3.1B.