Posted on 02/24/25
| News Source: FOX45
ANNAPOLIS, Md. (WBFF) — Feb. 24, 2025 - Questions about the practicality of Gov. Wes Moore’s budget proposal, dubbed the ‘Growth Agenda,’ continue to increase as the Maryland General Assembly heads into its closing half of the 2025 legislative session.
Dr. Darius Irani, chief economist for the Regional Economic Studies Institute at Towson University, spoke with Spotlight on Maryland on Saturday about the governor’s $67.3 billion budget plan.
There are certainly some pieces in there that I think would help Maryland,” Dr. Irani said. “I think one of the challenges Maryland has faced throughout is oftentimes, the first tool that we will pull out of the toolbox is the tax.”
Gov. Moore’s budget calls for $1 billion in new revenue, or tax increases, to close the state’s ballooning $3 billion deficit. The budget proposal aims to reduce spending by $2 billion by combining direct cuts with identifying what the Moore administration defines as government efficiencies.
The governor's budget package calls for expanding the business tax in exchange for lowering the state’s corporate tax by 0.26%. Called “waters edge” combined reporting, this effort would allow the state to tax business income earned in other states if the company also does business in Maryland. This initiative would potentially allow the state to tax billions in previously untaxable business revenue earned elsewhere.
“[T]he reform curtails the ability of large corporations to engage in tax avoidance and broadens Maryland’s corporate income tax base,” Gov. Moore’s budget proposal says. “With a broader tax base, Maryland can cut its corporate income tax rate as revenue materializes in future years.”
Dr. Irani questioned if this effort would generate the governor’s desired result of business growth in the state.
I hate to say it, but Maryland’s old moniker was ‘if you can dream it, we can tax it,’” Dr. Irani said. “I think under Gov. Hogan, we worked very closely to get that away. I think we are seeing some resurgence of that now.”
Gov. Moore's proposal restructures the state's personal income tax tiers, creating two new brackets for those earning above $500,000 annually. The proposed highest bracket is designed for residents with above $1 million in annual taxable income.
“Many business owners might say, ‘great,’ with the lower corporate tax rate but also realize, because they are a pass-through entity, they’re about to pay a higher personal tax rate because they’re paid above a certain amount,” Dr. Irani said.
“It’s a bit of give with one hand and take with another,” Dr. Irani added.
Eric Luedtke, senior policy advisor to Gov. Moore, told Spotlight on Maryland that the governor’s corporate tax rate reduction from 8.25% to 7.99% is historic.
[I]t’s the first decrease in the Maryland corporate income tax rate in many years, and we think that will attract significant new business investment in the state,” Luedtke said. “What the governor is trying to do with this budget is really jumpstart the economy through these more targeted investments, not just in the economy agenda, but in things like workforce and apprenticeships, and our infrastructure.”
Spotlight on Maryland asked Dr. Irani if the governor should be more aggressive in cutting the corporate tax rate. The Maryland Economic Council has called for reducing corporate taxes to 5% by late 2024 to enhance the state's financial health.
“This move by the governor to perhaps lower the corporate tax rate is perhaps just the start. Perhaps subsequent decreases, hopefully, will stimulate some businesses coming into Maryland or at least make us competitive,” Dr. Irani said. “[It] is a good sign, but if you go to 50-basis-points or 75-basis-points, people might say, ‘Alright, he’s serious.’”
“Part of this is recognizing that if you want to play varsity ball, you got to come to the game prepared. Part of this is the way out of our tax revenue problem,” Dr. Irani added.
Luedtke told Spotlight on Maryland that the governor’s office has received inquiries from businesses in quantum computing and cybersecurity who are interested in relocating to the state since Moore announced his Growth Agenda. PwrQ is one technology company that has announced relocating 160 new jobs to Maryland.
“Maryland’s great strength is, and always has been, its extraordinarily talented workforce,” Luedtke said. “Companies all over America want access to that workforce and the investments we are making.”
Meanwhile, Dr. Irani said that the governor and the Maryland General Assembly must focus on deeper tax cuts to avoid the risk of widening the state's financial crisis.
“We have done taxes like peanut butter,” Dr. Irani said. “We spread it across and say ‘voila.’ Perhaps we need to think about strategically taxing or start charging user fees for using certain things."
State lawmakers must approve a balanced budget before the end of their 90-day session, aimed to conclude in early April. The state’s deficit issues could worsen on March 9 when the Maryland Board of Revenue Estimates is set to release its revenue projections.
“We’re losing population; businesses are going elsewhere,” Dr. Irani said. “If we don’t figure out how to retain and grow, both households and businesses, it’s going to be a tough slog ahead for us.”