Gov. Wes Moore — pitching his tax reform proposal directly to lawmakers on Thursday — framed his plan almost entirely as a salve to President Donald Trump and the torrent of executive actions that the Democratic governor believes could cripple Maryland’s economy.

“Marylanders are being squeezed by rising prices, from the cost of groceries to the cost of energy, and policies that we’re seeing from D.C. are only making things worse,” Moore said, pointing to the president’s plans to extend federal tax cuts enacted under his first term and the hit to the state’s tax base from the firing of federal workers. “We need to make sure that our people are protected and can get tax relief at a time of economic uncertainty.”

The governor — who has testified each session only on his top priority bills — said during a joint hearing with members of the House of Delegates that his plan to raise $1 billion in new tax revenue to help resolve a $3 billion deficit is designed to give most filers a modest tax cut and encourage business growth.

Republicans and business groups that make up the loudest opposition to Moore’s budget, meanwhile, continued to say Thursday it’s Moore’s tax plan that will put the squeeze on Marylanders.

“I can say with absolute certainty these tax proposals will harm the very businesses Maryland claims it wants to attract and keep,” Kimberly Prescott, who owns a human resources consulting firm based in Columbia, said at a Chamber of Commerce event before the hearing.

Moore did not directly face tough questions during the hearing. But Republicans and some Democrats targeted their concerns to his top advisers as more than 100 others signed up to testify over several hours.

The testimony ranged from local officials asking about costs shifting to their own, already-tight budgets to advocates and lobbyists upset about tax hikes or spending cuts to state programs.

“Why are mental health services disproportionately targeted?” Damian Lang, a lobbyist for the nonprofit organization Sheppard Pratt, asked regarding a “drastic” 70% cut to school mental health services provided through the Blueprint for Maryland’s Future.

What’s in the budget?

While Moore proposed resolving most of the deficit with spending cuts, his testimony Thursday centered on the tax reforms.

His plan would increase the tax rate for people making more than $500,000, consolidate the tax brackets for lower earners, eliminate the option for itemized deductions, double the standard deduction and add a 1% surcharge on capital gains income over $350,000. It would also impose a 75-cent fee on online deliveries and increase the taxes on cannabis products, table games and sports gambling. About two-thirds of taxpayers would see an average $173 decrease in their tax burden while one in five would see an average increase of $1,458, according to an analysis by the Maryland Board of Revenue Estimates.

Using the 2023 tax year as a guide, roughly 12,400 taxpayers who reported earning more than $1 million would pay an additional $20,800, according to BRE.

House Minority Leader Jason Buckel, in one of the few moments of pointed questions direct at Moore, asked the governor whether he disagreed with the revenue board’s additional analysis that one-quarter of filers who make between $75,000 and $100,000, as well as one-third of those making between $100,000 and $200,000, would see a tax increase. Those increases would be primarily for the minority of filers who used itemized deductions rather than the standard deduction.

In a press conference before the hearing, Republicans were more forceful — with Senate Minority Leader Steve Hershey calling the budget “a bad deal for Marylanders” that would “increase the cost of living for Maryland families that are already struggling.”

“Before looking to Maryland families and businesses for a bailout, Democrats in Annapolis need to cut spending,” Hershey said.

Moore, in the hearing, did not reject the analysis showing some in the middle class could pay more. He said he decided to propose eliminating itemized deductions because it would make Maryland more competitive with neighboring states and it would benefit the most taxpayers.

“My fidelity is to those goals but not necessarily to the tactics,” he said, stressing to both Republican and Democratic leaders that he’s willing to work with them on adjusting the details.

Pushback from all sides

Moore’s advisers responded similarly when Democrats questioned them about elements that could harm their districts.

Del. Malcolm Ruff, a Baltimore Democrat, said changes to local tax collections could result in a $40 million loss to the city over the next five years. Another Democrat from the city, Del. Mark Edelson, said another change — the phasing out of state-backed enterprise zone tax credits — could mean a $100 million hit to Baltimore over a decade.

“This administration has made such unbelievable investments in the city of Baltimore and I would hate to see us walk back some of those investments as a result of not being able to fully fund this program,” Edelson said.

Eric Luedtke, a senior policy adviser to the governor, said the administration is open to talking about those tax credits and other changes before the budget is finalized in early April.

More intense pushback on the enterprise zone tax credits came from the state’s biggest lobbying force for businesses..

Mary Kane, the president and CEO of the Maryland Chamber of Commerce, said the combination of phasing out those tax credits, expanding corporate taxes through a method known as combined reporting and increasing personal income taxes — which some businesses use instead of the corporate rate — “could do serious harm to Maryland’s business community.”

Kane and others have applauded Moore for stressing that the core of Maryland’s budget problem is its poor economic growth. But they say his strategies for improving it are not enough.

“Our state is debating tax proposals that threaten to push Maryland in the wrong direction, an approach that is short-sighted and will only make things worse,” Kane said.

Moore was scheduled to testify again Friday as the Senate similarly vets his plan publicly before negotiating a final version at the end of March.

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