The Maryland General Assembly advanced a budget deal Thursday built on roughly $340 million in new taxes and fees, punctuating weeks of contentious intraparty debate among Democratic leaders.
The plan moved out of committee Thursday, clearing a path to final passage with only days remaining in the legislative session. Fiscal leaders from both chambers said the roughly $63 billion budget would restore funding for immediate transportation needs and fund the state’s signature education program, known as the Blueprint for Maryland’s Future, through fiscal 2027.
“I think it’s a pretty strong deal that both sides can be satisfied with,” said House Appropriations Committee Chairman Ben Barnes (D-Prince George’s). “It’s truly a compromise.”
House and Senate leaders put forward starkly different plans to address the state’s transportation and education costs. They struck a deal that avoided the biggest tax increases put forward but also left the long-term future of the Blueprint and some transportation projects unsettled, with House leaders saying they plan to keep pushing for substantial tax increases next year.
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The chambers agreed to raise new money for transportation projects by increasing fines for speeding in a work zone; increasing surcharges on plug-in electric and hybrid vehicles; increasing vehicle registration fees based on weight class; and adding a ride-hailing surcharge, in addition to other fee hikes.
Those increases will bring in an estimated $253.2 million in the first year, $275 million to $300 million in the second year, and up to $350 million annually by the third year and beyond. That money is earmarked for local road maintenance, public transit and projects that will ease the strain on the Baltimore beltway due to increased traffic following the collapse of the Francis Scott Key Bridge, among other initiatives.
Another $91 million will be raised for education expenses through a new tax on tobacco products, including a $1.25 increase tacked on to each pack of cigarettes. The sales tax on e-cigarettes and vapes will rise from 12 to 20 percent. Other tobacco products — but not cigars — will be taxed at 60 percent of the wholesale price, up from 53 percent.
The deal also increases vehicle registration costs by $23 annually, or $46 every two years, to fund the state’s shock trauma system, which provides medical care to people grievously injured in gun violence, car crashes, falls and other traumatic events.
Senate Budget and Taxation Committee Chairman Guy Guzzone (D-Howard) said that the deal upholds promises lawmakers have made to support ambitious transportation projects and a better education system for the state’s most vulnerable children.
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“We both recognize the importance and the desire to fulfill our commitments,” Guzzone said.
State lawmakers were split on how the state should cope with looming transportation and education costs that will require additional funding in the future. Those in the House originally wanted to raise $1.2 billion in tax, fee and toll increases to foot those bills. Senate leaders said now was not the time to substantially raise taxes on Maryland families still enduring an uncertain economic climate following the pandemic.
House Speaker Adrienne A. Jones (D-Baltimore County) and Senate President Bill Ferguson (D-Baltimore City) said in a joint statement that the agreement reached this week “keeps Maryland competitive and primed for economic growth in the year ahead.”
The deal follows pressure from Gov. Wes Moore (D), who publicly called on state legislators to work out a compromise following the collapse of the Key Bridge and the sudden closure of the Port of Baltimore, which is a major economic engine for the state. The governor put forward a $63.1 billion budget proposal in January that trimmed spending on transportation, private universities and community colleges, in addition to many smaller cuts.
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Moore did not take a position on the specific proposals put forward by each chamber, but he did say that he opposed substantial tax increases this year. On Wednesday, he welcomed the compromise announced by legislative leaders.
“This is going to give the people of our state the certainty that they need right now and that they deserve right now,” Moore said.
House Democrats last month proposed raising nearly $800 million more by legalizing and taxing online poker and increasing the tax burden for the wealthiest Marylanders and major corporations. Senate leaders opposed any substantial tax increases and took a hard position against both of those options.
House leaders had also proposed toll increases but dropped that bill after the Baltimore bridge collapsed last week, saying it wasn’t the right time to make demands of the state’s tolling agency.
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Barnes said the chambers still can’t agree on corporate tax increases or online gambling taxes, but added that House members probably would bring back those proposals in a future session.
Advocates with Fair Share Maryland, a coalition of labor, civil rights and civic advocacy organizations, said delaying tax increases another year would mean missing an opportunity to make the state’s tax code more equitable. The coalition supported the House proposal to increase corporate taxes.
“While the Maryland General Assembly is taking an important first step by addressing transportation needs, they failed to fully address revenue for other commitments to education, state workers, and the other state services that Marylanders rely on,” Benjamin Orr, president of the Maryland Center on Economic Policy, said on behalf of the coalition.
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Republican legislative leaders, who strongly opposed substantial tax increases, welcomed Wednesday’s compromise, which avoided the largest increases House Democrats had proposed.
“It is important to keep in mind that new revenues do not come from the government,” House Minority Leader Jason C. Buckel (R-Allegany) said in a statement. “Any tax or fee increase comes from the pocket of hard-working Marylanders.”
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