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Maryland Gov. Lawrence J. Hogan Jr. (R) and legislative leaders have reached a deal on a plan that would provide $1.86 billion in tax relief over the next five years and include funding for some legislative priorities in the next fiscal year budget.
The tax plan announced Monday afternoon would include a $1.55 billion reduction in taxes for retirees over the next five years. The tax benefit would be limited to retirees 65 and older who make less than $100,000 in retirement income, or couples earning less than $150,000 in retirement income.
According to the announcement from Hogan’s office, as a result of the deal, 80% of Maryland’s retirees would receive substantial tax relief.
The tax credit would be limited to $1,000 for an individual and $1,750 for a couple.
Also included in the tax deal are two top priorities of House Democrats. One is a state-level expansion of the federal Work Opportunity Tax Credit. That program would provide a tax credit to employers who hire workers who historically have trouble finding work, including veterans, people with disabilities, the long-term unemployed, those on state financial assistance programs, and people who have completed terms of incarceration.
The tax credit is expected to cost $195 million over the next five years.
The final component of the tax agreement is a collection of tax relief bills — dubbed “family budget boosters” by House Speaker Adrienne A. Jones (D-Baltimore County) — that would exempt medical, personal care and child care products from the state’s income tax, including diapers, car seats, baby bottles, dental hygiene products, diabetic care items and some medical products like thermometers, pulse oximeters, and medical-grade face masks. Those exemptions are expected to reduce state tax revenue by $115.6 million over the next five years.
“The House started this session with a clear goal of helping Marylanders left behind in the post-pandemic recovery,” Jones said in a statement. “This bipartisan agreement helps hundreds of thousands of seniors on fixed incomes who are struggling with inflation and puts families on a stronger footing as they buy necessities and pay for child care or college.”
Hogan characterized the tax cut package as the largest in state history.
“Cutting our state’s retirement taxes is something we have been trying to accomplish for seven years, and I want to thank the leaders of the General Assembly for working with us to get this done for Maryland’s seniors,” Hogan said in a statement. “This agreement will deliver on our promise to provide real, long-term relief for hard-working Marylanders dealing with inflation and higher prices, and help create more jobs and more opportunity to continue our strong recovery.”
Combined with the recently enacted gas tax suspension, lawmakers are poised to approve nearly $2 billion in tax relief this legislative session.
“The last two years of the pandemic have shown the cracks in our state’s civic infrastructure,” Senate President Bill Ferguson (D-Baltimore City) said in a statement. “As I’ve said since the beginning of the 2022 legislative session, everything we do must prioritize our state’s economy and the health of our residents. This historic agreement demonstrates that regardless of political party, leaders come together to deliver vital services and economic relief for families, seniors, and small businesses.”
In addition to the tax deal, Hogan introduced a supplemental budget on Monday that solidifies several legislative spending priorities, including an $800 million payment toward the Blueprint for Maryland’s Future education reform fund, expanding Medicaid dental coverage for adults, and spending more on child care and health care programs.
The increase is among several budget changes that legislative committees identified as top priorities earlier this month. After the Bureau of Revenue Estimates projected the state surplus would grow to about $7.5 billion over the next two years, lawmakers moved to “fence off” more than $1 billion in additional spending for the 2023 fiscal year.
Traditionally, when the legislature fences off funding, the governor chooses whether to release that money when the next fiscal year starts on July 1; the agreement with the Hogan administration cements the additional spending.
Lawmakers will still pursue fenced-off funding for other legislative priorities, including funding to expand abortion access in Maryland, establish a legal cannabis industry, and support a paid family and medical leave insurance program.
A conference committee of budget negotiators from the House and Senate are expected to begin hashing out final details on Tuesday.