Maryland’s revenue picture improved by nearly $250 million over two years, buoyed largely by a factor that cannot be anticipated — people dying.
The numbers released Wednesday by the Board of Revenue Estimates show a tale of two budget years: A $355.7 million increase in taxes expected to be collected this year, offset by a $108.1 million reduction in fiscal 2027.
Those estimates include a significant reduction in what the state can expect to collect from an IT and data services tax passed last year. Analysts say that tax is likely to raise only about a quarter of the $500 million promised when it was passed last year.
“The forecast remains broadly consistent with December’s, which is a good thing,” said Comptroller Brooke Lierman. “Really, it reflects stability in our forecasting.”
The forecast raised its revenue estimates for the current fiscal year by about $355.7 million from the levels predicted in December, an increase Lierman characterized as “modest.”
Gains in overall income tax collections are offset by declines in sales taxes, including a nearly $300 million decrease in a new IT and data sales tax. But sales taxes on other goods increased, reflecting the high costs of goods and utilities for businesses that were driven by inflation and tariffs.
“What’s important to understand about today’s forecast is where this revenue is coming from,” said Senate Minority Leader Stephen S. Hershey Jr. (R-Upper Shore). “Much of the additional revenue appears to be driven by higher taxes Marylanders are already paying, not by meaningful economic growth in our state.”
What could not be expected was a bump in estate tax collections. In December, the board revised its estimate upward after collecting more than $87 million in additional estate and inheritance taxes.
Since then, another $260 million in estate taxes has been paid.
“So, I think we’re at a record level,” said board Director Robert Rehrmann during a Wednesday afternoon briefing for the House Appropriations Committee.
Without that record bump, the revenue forecast for the current year would have increased by $95 million. The new projections more than double the $227.3 million in estate and inheritance taxes collected in fiscal 2025.
Rehrmann said there are several reasons to be cautious when it comes to forecasting revenues in the coming year.
“While our economy has proven resilient, and we should feel positive and good about that, economic and federal headwinds remain,” Lierman said, adding, “they really reiterate the need…. for a cautious outlook.”
Among those is a slowing of the labor market nationally. Not only is the number of new jobs decreasing almost monthly, but Rehrmann noted that revisions to past months are also showing fewer jobs than initially estimated.
Another area of concern is what he referred to as risk, including the war with Iran that is driving up gas prices. On Wednesday, the price of a gallon of regular gas averaged $3.52 in Maryland, up from $3.12 a week ago and an average of $2.96 a month ago, according to AAA.
“Two weeks ago, at the State of the Union, we heard about how wonderful gas prices are,” Treasurer Dereck Davis said. “Now we see how wonderful they are…. So, it shouldn’t be lost on any of us that no matter what the picture is today, every day is a new day, and it brings new challenges, and the picture can flip.”
The board’s March revenue forecasts are the last before the General Assembly puts the finishing touches on a proposed fiscal 2027 budget, a $70 billion spending plan that erases a projected $1.5 billion shortfall between estimated revenues and expected spending.
The plan proposed by Gov. Wes Moore (D) uses fund balance transfers and swaps cash for bonds. It contains no new taxes or fees. A Senate version of the plan is not expected to add new taxes or fees.
The Senate Budget and Taxation Committee is scheduled to finalize its version of the budget on Friday, and the package could be in the House by the end of next week.
But the budget proposal, and the new revenue estimates, do little to offset the coming fiscal storm — more than $13 billion in projected combined shortfalls spread over the following four years.
“The massive tax hikes the governor and Democratic supermajority pushed through last session were just enough to let them squeak through this election year,” House Minority Whip Del. Jesse T. Pippy (R-Frederick) said in a statement. “The real reckoning will come next year, when even with all these taxes, we are still facing major deficits. What will they say to our taxpayers then?”
The board also issued a significant reduction in projected IT and data sales tax collections. The tax, passed in a budget compromise last year, was expected to bring in nearly $500 million. But through the first half of fiscal 2026, tax collection data showed just $35 million in payments from 2,900 companies.
Lierman said, with two quarters of payments in, she and the board “are very confident in this new estimate that has been adopted. There will continue to be some uptake, of course, and there will continue to be new contracts being written by companies that will add to this. But we are confident with where we are right now.”
Rehrmann said the board expects the tax will bring in an estimated $220 million in fiscal 2027. That amount is still less than half the initial projection by legislative analysts.
House Minority Leader Del. Jason Buckel (R-Allegany) said the tax “was not a long-term fix” and declared it a failure.
“That comes as no surprise to me, or to our Caucus members, as we warned of this very thing last year,” Buckel said in a statement Wednesday. “The tech tax has succeeded only in depressing the tech economy and stunting business growth in Maryland, but it has failed in raising revenue. Before we leave Annapolis this year, we should seriously consider repealing it.”
About three dozen companies are responsible for paying 60% of the total collections so far, according to a review of records and confirmed by the comptroller’s office.
“There’s 38 companies paying 63% of that tax,” said Sen. Katie Fry Hester (D-Howard and Montgomery).
House and Senate fiscal leaders this week said it was not clear if companies were shifting work or relocating outside of Maryland to avoid the IT tax. Hester said an exodus, especially for the subset of companies paying the largest portions, is not impossible.
“I probably know half of those companies, and they’re mobile, so they could easily just walk,” Hester said.