This legislative update was provided by:
Tom Hutchinson, Maryland State Delegate District 37B – March 28, 2025
To no one’s surprise, Maryland in the House of Delegates (or shall I say Democrats) have voted for what might be the most disastrous budget this state has ever seen. If you thought the tax burden couldn’t get any worse, think again. This budget is an all-out assault on Marylanders, with sky-high taxes eating away at our hard-earned income, and there’s no escape in sight. Welcome to the never-ending cycle of spending and taxing, a strategy that the Democrats cling to like a lifeline, regardless of how it affects all of us throughout the state. And here’s the kicker, their attempt to tax the wealthy is an assault on business owners and will prompt many of them to flee the state just as they did during the O’Malley administration when a previous tax on millionaires failed. Many will plan to pack up and move to friendlier states like Florida, while the rest of us are stuck holding the bag.
Let me make this crystal clear: we are all being taxed, regardless of whether you’re black, white, brown, rich, poor, old, or young. No one is immune from the economic destruction this budget will bring. It’s not just the businesses that are fleeing; it’s the people who will suffer for years to come.
“DO NOT COME TO MARYLAND—the Democratic Party sees you as an ATM machine.” Delegate Mark Fisher (R-Calvert County) didn’t mince words on the House floor during the debate. Delegate Wayne Hartman (R-Worcester, Wicomico) also stood on the House floor to give a warning that rings truer than ever: “Taxes have consequences, they deter behavior—why do we think they won’t deter businesses?” This is not just a slap in the face to businesses, it’s a full-on punch to the gut for everyone in Maryland.
As for the so-called “budget framework” announced by the Speaker of the House, Senate President, and Governor Moore at a press conference, it’s nothing but a Band-Aid on a bullet wound. The $3.3 billion deficit didn’t magically appear overnight; it was already there before Trump even took office, and it’s only gotten worse. The Budget Reconciliation and Financing Act (BRFA) of 2025 proposes over $1.6 billion in new state tax revenue, hitting residents and businesses alike. And with cost shifts to local governments, the real pain is just beginning.
Governor Wes Moore asserts that the budget’s tax measures will impact only 6% of Maryland residents. However, considering that many Marylanders purchase cars, use vending machines, or acquire tech services, these taxes could have a broader effect on both individuals and businesses.
The debate continued with HB352-Budget Reconciliation and Financing Act of 2025.This bill continues the tax cycle:
Income Tax ($344M):
-Repeal the Phase-in of the Standard Deduction
-Increase the Standard Deduction by 20% ($3,350/$6,700 for tax year 2025)
-Phase-out itemized deductions for Federal Adjusted Gross Income above $200,000 by applying a 7.5% phase-out factor
-Add two new tax brackets for taxable income between
· $500,001 and $1,000,000 (6.25%)
· $1,000,001 + (6.50%)
-Modify the child tax credit to phase out rather than having a cliff at $15,000
Capital Gains Surcharge ($367M, $229M GF, $138M TTF):
Establish a new 2% surcharge on capital gains income in excess of $350,000 with 1.25% to the General Fund and 0.75% to the Transportation Trust Fund (TTF)
Sports Wagering ($32M):
-Increase the tax rate from 15% to 20% with the increase going to the General Fund $32 M
Sales Tax ($497M):
-Establish a Sales Tax on data/IT services with a tax rate of 3.0%, and distribute the revenue to the General Fund $497M
Repeal Sales Tax Exemptions ($21M):
-Repeal exemption for sales of photographic and artistic material used in advertising
-Repeal exemption for sales of precious metal coins or bullion over $1,000 with exemption for sales at Baltimore City Convention Center $21 M
Cannabis Tax Rate ($39M):
Increase rate from 9% to 12%
Vending Machine Sales ($9M):
-Apply 6% sales tax to vending machine sales
Film Production Activity Tax Credit ($8M):
Reduce cap for fiscal 2026 from $20 M to $12 M
Local Income Tax:
-Increases the maximum local income tax rate from 3.2% to 3.3%
Transportation Revenue
Vehicle Excise Tax ($158M):
-Increase the excise tax on vehicles to 6.80%
Registration Fees ($51M):
-Accelerate from fiscal 2027 to fiscal 2026 the annual vehicle registration fee increases for Class A (passenger), Class M (multipurpose), and Class E (truck)
VEIP Fees ($20M):
-Increase the maximum fee to $30 (from $14)
Historic Tags ($9M):
-Limit definition to vehicles older than the 1999 model year rather than 20 years
Short-term Vehicle Rentals ($47M):
Repeal the excise tax exemption and establish an excise tax rate of 3.5%
Certificate of Title ($80M):
Double fees (for new/used vehicle to $200)
Transportation Trust Fund also receives portion of capital gains surcharge discussed above.
Maryland’s proposed 3% tax on IT services is already forcing businesses out of the state. With over 15,000 businesses and 100,000 jobs at risk, Republicans fought to remove this tax. Local businesses will be taxed while large, out-of-state prime contractors remain exempt, putting them at a massive disadvantage. Delegate Brian Crosby (D-St. Mary’s & Vice Chair of Economic Matters), a small business owner and subcontractor for Defense IT contracts, is relocating his company to Virginia, citing the tax as an existential threat. If Maryland continues to tax businesses out of existence, more jobs and companies will follow Crosby across state lines.
After a long debate, the Maryland House of Delegates approved the state’s $67 billion budget. Of the over 40 amendments proposed by Republicans, approximately 20 were adopted, I voted NO for the budget and BRFA.
“You cannot tax your way to prosperity.” — Delegate Jason Buckle, House Minority Leader
With only 10 days left in the 2025 General Session, the Senate still needs to vote on their version of the budget. However, I do not hold out much hope that much will change. I look forward to returning to the District once Session concludes Sine Die, on Monday, April 7th. Please plan to join me and the other members of the District 37 delegation at one of the many session recaps we will be holding throughout the District. Despite the dismal outlook of the budget, there were some positive actions that have taken place, and I look forward to sharing them with you.
