DUNDALK, Md. (WBFF) — Gov. Wes Moore’s budget proposal could elevate the personal income tax rate for the state’s highest earners to one of the highest in the region, a recent policy study finds.
An analysis by the Tax Foundation, conducted after Gov. Moore released his 2026 budget proposal last week, showed that the revised income tax rates could elevate the combined tax rate for the wealthiest Marylanders to 10.7%.
“In total, high earners (individuals with an adjusted gross income of $1 million or more) living in counties with a 3.2% percent local income tax should expect their combined state marginal tax rate to reach 10.70% for some income,” the Tax Foundation’s report said. “This includes the state’s top rate of 6.5%, the local rate of 3.2% and the 1% capital gains surtax.”
The governor’s income tax plan, unveiled as part of his announced multi-pillar approach, would position Maryland’s combined income tax rate for its top earners as the second highest among its five bordering states. Only Washington, D.C., would have a slightly higher combined income tax rate.
During an interview with Spotlight on Maryland at the Boulevard Diner in Dundalk on Saturday morning, Sen. Johnny Ray Salling, R-Baltimore County, said middle-class residents and small business owners will face the greatest impact of Gov. Moore’s income tax plan.
You can say it’s a tax break for the low-income and the middle class,” Sen. Salling said. “The unemployment rate will go up, businesses will lose overall and Maryland will lose at the same time.”
Gov. Moore said his budget and tax plan aims to implement meaningful spending cuts and improve government efficiencies. He added that solely reducing spending would not resolve the state’s structural budget issues and that increased revenues were needed.
“The people that really will be taking on the lion’s share of the increase will be people making over $700,000,” Gov. Moore said when announcing his income tax vision.
Gov. Moore’s income tax plan aims to raise taxes on Marylanders earning over $500,000 annually from 5.75% to 6.25%. Tax brackets for married couples filing jointly will also be adjusted. Households with incomes of $600,000 or more will experience an increase in their income tax rate by the same increment if the Maryland General Assembly approves the governor’s plan.
Sen. Salling said that professionals such as physicians, business owners, corporate executives, and financial services employees will be immediately affected if Gov. Moore’s tax restructuring becomes law. The lawmaker further noted that blue-collar taxpayers, including independent contractors, will likely move into the higher tax brackets and face an increase.
“Maryland has a spending problem, we know that,” Sen. Salling said. “That’s why they want to tax. Tax and spend.”
Tyrone Keys, an expert in financial services and real estate, told Spotlight on Maryland that the governor’s plan will add to mounting financial pressure on households, likely prompting some residents to rethink their long-term living arrangements.
If Maryland is going to be the largest taxer of income, then it is going to be one heck of an attraction to other states,” Keys said. “Especially the surrounding states.”
In December, Spotlight on Maryland spoke with Dr. Daraius Irani, chief economist at the Regional Economic Studies Institute at Towson University, regarding the state’s fiscal health. The economist said the corporate tax rate, along with other fees and taxes higher than those in neighboring states, is a primary reason Maryland’s economy lags in the region.
“We have to look at our competition, what’s around us, why are they doing better and why are we doing as bad,” said Dr. Irani in December. “[P]art of it is, people argue, it is costly due to taxes.”
Meanwhile, Keys said he is alarmed at Gov. Moore’s suggestion that his tax plan ensures that all Marylanders are paying their fair share.
“That kind of rhetoric is used in such a disingenuous way,” Keys said. “It’s used to mask the fact that the middle class is being increasingly burdened with ever-increasing taxes and fees. I encourage people to start adding up the percentage of their income they are paying now and what you will pay if the governor gets his way.”
Gov. Moore’s budget also calls for reducing student debt relief, charging a mandatory 75-cent fee on deliveries for services like Amazon and UberEats and increasing the cannabis tax rate from 9% to 15%.
Debate on the state’s income tax comes as BGE estimated early this year that customers will see an average increase of 11% in their monthly utility bills. The Baltimore Board of Estimates also approved a city water bill hike on Wednesday, averaging $40 monthly for customers. This increase coincides with Spotlight on Maryland’s report that property tax assessments for 2025 will see an average double-digit rise.
“We really need to start identifying areas where we can cut back because this is unsustainable,” Keys said.
The governor’s office did not acknowledge or answer requests for comment.
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