Maryland residents are facing a wave of new tax proposals and increases introduced this year under Governor Wes Moore’s administration. Aimed at addressing a projected $3 billion budget deficit for fiscal year 2026, these changes have sparked debate across the state.

While the governor frames these measures as part of a “pro-growth agenda” to bolster the economy, critics argue they place an undue burden on Marylanders, from small businesses to working families. Here’s a breakdown of the key tax changes introduced in 2025 and their potential impact.

Governor Moore’s fiscal 2026 budget proposal, unveiled in January 2025, includes approximately $1 billion in new and redirected revenues. This comes alongside $2 billion in spending cuts, bringing the total operating budget to $67.3 billion—a modest 1% increase from the previous year. The tax reforms are designed to simplify the tax code, make it fairer, and promote economic growth, according to the administration. However, the specifics of these changes have raised eyebrows.

The new tax will focus on a 2% tax for small businesses including consulting, photography, printing, entertainment, services, and more.

One of the most significant shifts is a restructuring of Maryland’s income tax system.

The plan compresses the lowest four tax brackets into fewer tiers while introducing two new high-income brackets: a 6.25% rate for individuals earning over $500,000 (or $600,000 for married couples) and a 6.5% rate for those earning over $1 million (or $1.2 million for couples).

Additionally, a temporary 1% surtax on capital gains applies to households with federal adjusted gross income exceeding $350,000, set to expire in four years. This targets high earners, with estimates suggesting 80% of the revenue from these changes will come from the top 1% of households, who earn an average of over $2 million annually.

On the flip side, the proposal doubles the state’s standard deduction—from $2,700 to $5,400 for single filers and from $5,450 to $10,900 for joint filers—while eliminating itemized deductions. This shift is expected to benefit about 65% of Maryland taxpayers, particularly low- and middle-income households, with an average tax cut of $173. However, critics note that the loss of itemized deductions could hit some middle-class families harder, especially those who rely on deductions for charitable contributions or mortgage interest.

Businesses aren’t spared in this overhaul. A proposed $1 billion tax on professional services—targeting accountants, IT firms, PR agencies, and more—has drawn sharp criticism for its potential to “crush small businesses and drive jobs out of Maryland,” as voiced in posts on X.

Meanwhile, the corporate tax rate is slated for a slight reduction, from 8.25% to 7.99% by fiscal 2028, contingent on closing a loophole through “combined reporting.” This would require corporations and their out-of-state affiliates to file a single return, a move 28 other states already employ to prevent profit-shifting.

To fund transportation upgrades, including a $21.2 billion plan for fiscal years 2025–2030, Marylanders will see new fees. A 75-cent tax on retail deliveries (for companies earning over $500,000 annually) has been proposed, alongside a hike in vehicle inspection fees from $14 to $30, effective a year earlier than planned. The vehicle trade-in allowance is also being lowered, increasing costs for car buyers. These measures aim to raise $420 million annually starting in fiscal 2026, but they’ve been labeled as regressive by opponents, hitting everyday consumers regardless of income.

Maryland, the only state with both an estate and inheritance tax, is tweaking its approach. The inheritance tax will be eliminated, a move praised by some as relief for grieving families. However, this is offset by lowering the estate tax exemption threshold from $5 million to $2 million, meaning larger estates will face higher taxes. Agricultural properties remain exempt, but this shift is expected to generate significant revenue from the wealthiest households.

The budget also increases taxes on recreational vices. The sports betting tax will double from 15% to 30%, casino table game taxes will rise from 15% to 20%, and the recreational cannabis tax will jump from 9% to 15% by fiscal 2028. These hikes target discretionary spending but could dampen growth in these emerging industries.

Beyond the governor’s budget, other tax ideas are floating through the Maryland legislature as of early March 2025. Posts on X and media reports highlight proposals like a soda tax, a snack tax (think chips and pretzels), and a full penny increase in the property tax rate. A plan to double the transfer tax on properties worth over $1 million and eliminate the state’s back-to-school tax-free shopping week has also drawn ire. While these measures aren’t yet law, they signal a broader push to boost revenue amid stagnant economic forecasts.

Maryland’s tax competitiveness has long been a sore spot, ranking 46th on the 2025 State Tax Competitiveness Index by the Tax Foundation. The state’s progressive income tax, high local rates (up to 3.2%, with proposals to allow up to 3.7% by 2026), and unique digital advertising tax already make it an outlier. The new measures come as the state grapples with a post-pandemic economic reset, low labor participation rates, and a projected budget gap that could balloon to $6 billion by 2030 without action.

Supporters argue these changes are progressive, with the wealthiest bearing the brunt while most residents see cuts or no change. Critics, including the House Freedom Caucus and voices on X, call it a “deceptive scheme” that shifts burdens onto average families through fees and indirect costs. They point to 338 tax and fee increases since Moore took office as evidence of overreach.

As of now, these tax changes are part of a proposed budget navigating the Maryland General Assembly. Legislative debates are heating up, with the House and Senate showing differing appetites for tax hikes versus spending cuts. The Board of Revenue Estimates’ recent downgrade of fiscal 2025 projections by $134.9 million adds urgency to the discussion. Residents can expect final decisions by mid-2025, with many changes taking effect in fiscal 2026 (starting July 1, 2025).

For Marylanders, 2025 marks a pivotal year. Whether these taxes spur growth or stifle it remains to be seen, but one thing is clear: the cost of living in the Old Line State is on the rise, and the debate over fairness and economic strategy is far from over. Stay tuned as the situation evolves, and keep an eye on your wallet—or your snack stash.