Are more taxes on the table for 2026? It’s unlikely

Maryland lawmakers are preparing to contend with a $1.2 billion budget deficit as the state continues to reel from funding cuts to state governments and the federal workforce. But, after a significant increase in taxes and fees seen last session, should residents brace for another hike?

According to newly elected House Speaker Joseline Peña-Melnyk, D-Anne Arundel and Prince George’s, the answer is no.

“I know taxes are not on the table, so we just need to figure out where those cuts will come from,” Peña-Melnyk said in an interview with The Daily Record Thursday. “I think it will be fair to say that everyone is going to have contribute.”

“It’s like in our own homes,” she continued. “You don’t have it, you can’t spend it.”

The 2026 legislative session begins Jan. 14. Gov. Wes Moore, a Democrat, has until Jan. 21 to introduce a balanced budget for the General Assembly to consider.

The Senate chamber will be the first to legislate the budget — and the $1.2 billion deficit — this year. Senate Budget and Taxation Committee Chair Guy Guzzone, D-Howard, said in an interview with The Daily Record that he is “extremely confident” that the General Assembly will be able to tackle the deficit and send a balanced budget to Moore “like we do every year.”

But it won’t come without new or yet-to-be-seen challenges, he said. 

“There are a lot of contributing factors — everything from inflation to tariffs,” Guzzone said. “I think the thing people don’t always recognize is that when prices go up and the impact of tariffs have an effect on their lives … it affects the overall cost of government.”

More from Eye on Annapolis: The Daily Record is publishing a series of stories previewing key topics, including the following, that are expected to be tackled by the General Assembly in the weeks leading up to the 2026 session. Energy DJS abuse lawsuits Juvenile Justice Attorney General’s Office Health Care Immigration Budget State Leadership

For the second year in a row, the General Assembly will have to contend with a structural budget deficit, though they have a much smaller hurdle to overcome.

During the 2025 legislative session, lawmakers were tasked with tying up a more than $3 billion deficit that was exacerbated by actions taken by President Donald Trump’s administration. On the session’s final day, the General Assembly sent a budget to Moore balanced by a series of cuts and the introduction or increase in new taxes and fees, including a tax on information technology services, poised to bring in approximately $1.6 billion.

At a meeting of the Board of Revenue Estimates in December, officials said they will likely not know how much money the IT tax brought in until it releases its new projections in March.

When the budget was passed along to Moore’s desk in April, lawmakers did so anticipating that there would be a $321 million surplus as they entered the 2026 legislative session. Fiscal analysts alerted members of the General Assembly’s Spending Affordability Committee in November that the surplus had morphed into a deficit of between $1.2 billion and $1.4 billion for fiscal year 2027, largely due to lowered revenue and higher rates of spending. 

But they also couldn’t ignore the impact decisions that Trump’s administration have had on Maryland’s bottom line.

“The main story, of course, for the Maryland economy here in 2025 relates to the federal government,” fiscal analyst Theresa M. Tuszynski said at the mid-November meeting, pointing to revisions to the tax code under Trump’s One, Big, Beautiful Bill and slashes to the federal workforce.

Maryland is still unraveling the true impact of Trump’s actions on the state.

On Wednesday, the Bureau of Labor Statistics estimated that Maryland lost 25,000 federal jobs last year, either through mass-firings and layoffs or deferred resignations offered by the president’s administration.

According to the comptroller’s office, Maryland annually receives $150 billion from the federal government through federal employee wage and retirement income, contracts, grants and direct payment spending. Marylanders employed by the federal government in defense and non-defense civilian positions net a total $26.9 billion in annual earnings. That figure excludes earnings from active-duty military personnel.

Federal jobs located in Maryland represent 6% of the state’s overall employment and 10% of overall wages.

While concerning, Comptroller Brooke Lierman, a Democrat, said Wednesday that the losses were anticipated and matched December projections from the Board of Revenue Estimates, when it was forecast that total General Fund revenues would be $26.7 billion for fiscal year 2026 — a 4.1% increase over actual revenue in fiscal year 2025.

Beyond the hit to Maryland’s workforce, Guzzone said there are a whole host of other federal actions to keep in mind, like cuts in funding made to SNAP and new rules to qualify for Medicaid coverage that will go into effect by the end of the year.

“There’s a whole host of things that have an impact on the overall budget and where we are today,” he said.

Asked if he is concerned that actions the Trump administration may take while the legislature is in session will have an impact on budget negotiations, Guzzone said “it’s unclear.”

“I think there are still things that may come,” he said.

Throughout the interim, Republicans have recoiled at Democratic finger-pointing toward the president, saying that the state is too reliant upon federal government spending.

“After passing the largest tax and fee increases in state history, Marylanders were told the budget was on solid ground. Instead, we’re staring down a $1.4 billion deficit,” Senate Minority Leader Steve Hershey, R-Upper Eastern Shore, said in a statement after the November Spending Affordability Committee meeting. “You can’t keep blaming Washington when the real problem is reckless spending right here at home.”

Flavio Hickel Jr, an assistant professor of political science at Washington College, said that Marylanders are likely to see those comments continue as the legislature looks to fiscal year 2027.

“It’s a convenient talking point for them to make, sure,” Hickel said. “In an ideal world, I think most states would want to be less reliant on the federal government, but it does often involve some really painful choices between, ‘Are we going to raise taxes on our residents or cut services for our residents?’ ”

The next meeting of the Board of Revenue estimates is March 11 — smack dab in the middle of negotiations. Projections made at that meeting will likely be pivotal in how the fiscal year 2027 budget will ultimately be balanced.

In the meantime, the General Assembly has already made budgetary commitments.

During a December meeting of the Spending Affordability Committee, lawmakers voted to adopt recommendations brought by the nonpartisan Department of Legislative Services to find $600 million in cuts, maintain $2.2 billion in the state’s Rainy Day Fund and keep a minimum General Fund balance of at least $100 million.

“Between the House and Senate and the governor, we’ll work together to have a balanced budget, as we always do,” said House Appropriations Committee Chair Ben Barnes, D-Anne Arundel and Prince George’s. “We’re all just worried about what the future impacts will hold. But what we do know is Maryland balances its budget every year.”