The budget includes at least $2.3 billion in cuts, which Moore described as $500 million more than his original proposal and the most significant cuts to state government in 16 years.
While it will raise income taxes on the highest earners, it will lower or mean no change to taxes for 94% of Marylanders, Moore said. That’s also more than the two-thirds of Marylanders he originally targeted for a modest $173 tax cut, though the governor did not specify how much the cut would be under the latest plan. Other taxes proposed by the governor or Democratic lawmakers this year — like a new 75-cent fee on retail deliveries purchased online a new 2.5% tax on a larger area of business-to-business services — are not in the final plan.
The replacement for those previous revenue options will be a 3% tax on data and information technology services. Moore said that would include large website and cloud computing providers like Wix and Amazon Web Services. Both he and Senate President Bill Ferguson pitched it as a modernization of Maryland’s tax code.
“This reform package will help us to bring our tax code into the 21st century,” Moore said. “It means the majority of Marylanders can keep a little more in their pocket even as we here in Annapolis tighten our belts.”
Officials did not immediately identify the $2.3 billion in cuts, though House Appropriations Chairman Ben Barnes said they did not include at least one controversial proposed cut impacting the Developmental Disabilities Administration.
Additional details were set to be released Thursday while others will be worked out during the final two weeks of the legislative session.
HOW WE GOT HERE
At the session’s start, Moore, introduced a budget with a proposed $2 billion in cuts and $1 billion in tax increases and shifts.
Lawmakers had warned about the likelihood of more cuts, and some top Democratic lawmakers had floated the idea of creating a new tax on business-to-business services and sugary beverages.
Addressing the press on Monday, Moore saidhe would not approve a “broad” tax on business business services, and that a tax on sugary drinks would not end up in the final budget proposal.
Members of the Moore administration provided vague details of what the governor meant by “broad” Monday, saying that it could apply to services that independent consumers pay for, as well, and that conversations about the final policy, including the percentage point of the tax, were ongoing with House and Senate leadership.
In a statement released Wednesday, Senate Minority Leader Steve Hershey, an Eastern Shore Republican, said he had heard about what the new business-to-business service tax may entail, including the focus on IT and data consulting services.
He said Moore is “trying to spin this as a win.”
“This move directly targets the very industries such as Technology, Cybersecurity, AI and Quantum, he claims to be prioritizing for Maryland’s economic growth. What’s more concerning is that this change will have a catastrophic effect on the small, minority, women and veteran-owned businesses that are predominantly subcontracting programs and operate on slim margins to begin with,” Hershey said. “How do we grow our economy if we stifle innovation instead of driving efficiencies in government by relying on these industries?”
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