Maryland Governor Releases 2026 Budget Proposal
See all Insights

Maryland Governor Releases 2026 Budget Proposal

Brownstein Client Alert, Jan. 27, 2025

On Jan. 15, Gov. Wes Moore introduced to the Maryland General Assembly his fiscal year 2026 budget package. This $67.3 billion proposal, aiming to close the state’s nearly $3 billion budget gap, places a strong emphasis on fiscal responsibility while still making investments in education, public safety and economic development. The proposal also includes significant tax reforms, transportation initiatives and adjustments to the state’s landmark “Blueprint for Maryland’s Future” education plan. While the proposed income tax reform includes higher income taxes for wealthy Marylanders, the bill is being touted as a tax decrease for the majority of state earners.

 

Key Measures to Address the Budget Deficit:

  • Spending Reductions: $2 billion in spending cuts across state agencies.
  • Income Tax Adjustments: Higher rates for the top 18% of earners, including new brackets of 6.25% for incomes over $500,000 and 6.5% for those over $1 million.
  • Corporate Tax Reform: A gradual reduction of the corporate tax rate starting in fiscal year 2028 aiming to attract businesses.
  • Revenue Enhancements:
    • A $0.75 retail delivery fee on online orders from businesses with over $500,000 in annual retail sales.
    • Increased tax rates on table games and sports wagering.
    • Adjustments to vehicle fees, including raising emissions testing costs from $14 to $30 and limiting trade-in allowances for vehicles costing over $15,000.
    • Combined reporting for corporate income taxes.
    • An increase in the maximum standard deduction and the elimination of itemized deductions.

Education and the “Blueprint for Maryland’s Future”:

Ballooning costs associated with Maryland’s landmark education blueprint have been a talking point for state leaders in recent weeks as they have been working to explain the impending budget gap. Gov. Moore’s proposed budget includes a $550 million increase in K-12 education spending while adjusting the 10-year education reform plan to ensure long-term sustainability. These adjustments include:

  • Suspending the requirement that teachers spend no more than 60% of their time teaching.
  • Freezing funding for community schools at 2026 levels.
  • Modifying mandates to save $2.5 billion over five years while maintaining record investments in education.

 

Transportation Initiatives:

To counteract prior cuts to Maryland’s six-year transportation plan, the administration proposes raising $420 million annually in state funds, leveraging these funds to secure an additional $695 million in federal support. Planned initiatives include:

  • Advancing major projects such as improvements to I-81 and U.S. 15.
  • Resuming maintenance and safety upgrades, including bridge repairs and road resurfacing.
  • Continuing improvements to Baltimore’s light rail system and funding projects at the Port of Baltimore and BWI Thurgood Marshall Airport.

 

Legislative Considerations:

The governor’s budget proposal, including its new fees and tax changes, require passage by the Maryland General Assembly. The initial read is that Democratic lawmakers are expected to support many of these initiatives, emphasizing the importance of education and transportation funding, while Republicans are likely to oppose them with concerns about economic competitiveness, losing high-net-worth residents and the cumulative burden of new taxes and fees.

Please reach out to Greg Sileo, policy advisor, at gsileo@bhfs.com with any questions or lobbying needs in Annapolis.


This document is intended to provide you with general information regarding Gov. Wes Moore's proposed 2026 budget package. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.

Recent Insights