ANNAPOLIS, Md. – Maryland’s fiscal landscape faces a significant shift as the Comptroller’s Office projects a $189.3 million reduction in general fund revenue over the next two fiscal years due to recent federal tax law changes. The Bureau of Revenue Estimates detailed these findings in its 60-Day Report, released on September 5, 2025, analyzing the impact of P.L 119-21, known as the One Big Beautiful Bill Act (OBBB). The report estimates a $117.9 million shortfall in fiscal year 2026, followed by a $71.4 million decrease in fiscal year 2027, driven by the federal legislation’s extensions and modifications to tax provisions.
The OBBB, which extends key elements of the 2017 Tax Cuts and Jobs Act (TCJA), introduces new tax benefits and alters existing ones, creating ripple effects for state revenue systems. Maryland, like many states, aligns portions of its tax code with federal law, meaning changes at the federal level can directly impact state revenues. To mitigate the most significant losses, Maryland will automatically decouple from certain OBBB provisions for tax year 2025 that are projected to reduce state revenues by $5 million or more in fiscal year 2026. These provisions include changes to research and experimental expenses, new qualified production property depreciation under Section 168(n), and adjustments to the business interest deduction limitation.
Comptroller Brooke E. Lierman emphasized the challenges posed by these changes, stating, “Recent tax code changes, as well as federal retrenchment and grant cancellations, have created complexity and uncertainty for taxpayers. While we cannot eliminate this complexity, we remain committed to helping Maryland navigate these challenges. The data in this report will help policymakers and all residents understand how these changes will shape Maryland’s fiscal future.” The report aims to provide clarity for both taxpayers and legislators as they grapple with the implications of federal policy shifts.
The decoupling decision for tax year 2025 is automatic under Maryland law, but any further decoupling beyond 2025 will require action from the Maryland General Assembly during its 2026 legislative session. Lawmakers will need to weigh the benefits of maintaining alignment with federal tax codes against the potential revenue losses. The Bureau of Revenue Estimates, led by Director Robert Rehrmann, prepared the report under a tight timeline to inform these decisions. Rehrmann noted, “I am proud of the Bureau of Revenue Estimates team for putting in the extra work to complete such a complex and thorough analysis in a short time. Our analysis reflects our commitment to provide clear, timely, and nonpartisan insights needed for policymakers to make informed tax policy decisions.”
Maryland’s approach to revenue forecasting relies on consensus estimates, incorporating the latest economic data and analyses of both state and national trends. The 60-Day Report will feed into the Maryland Board of Revenue Estimates’ upcoming general fund forecast, set for a vote on September 25, 2025. This forecast will refine projections for fiscal years 2026 and 2027, offering policymakers a clearer picture of the state’s financial trajectory.
The revenue reduction stems from the OBBB’s extension of TCJA provisions, which lower federal tax liabilities for businesses and individuals, reducing the taxable income reported to the state. For instance, modifications to business interest deductions and new depreciation rules under Section 168(n) allow businesses to reduce their federal taxable income, which in turn lowers Maryland’s income tax collections. The state’s decision to decouple from these provisions in 2025 aims to preserve revenue, but the long-term strategy remains under discussion.
As Maryland prepares for the 2026 legislative session, the Comptroller’s Office is positioning itself as a resource for navigating these complexities. The 60-Day Report serves as a critical tool, offering data-driven insights to guide tax policy decisions. With the Board of Revenue Estimates’ next meeting approaching, stakeholders across the state will be watching closely to see how these projections shape Maryland’s fiscal priorities.
