The Frederick County Chamber of Commerce is actively monitoring the ongoing debate surrounding Governor Wes Moore’s budget proposal, as well as the subsequent discussions within the House Appropriations Committee and the Senate Budget and Taxation Committee. Over the years, we have seen firsthand how state budget decisions directly affect local businesses, and this year is no exception.
Maryland’s Looming Fiscal Challenges
Maryland is facing a significant fiscal challenge—a nearly $3 billion structural deficit in the coming year. Simply put, without spending reductions or tax increases, the state will fall nearly $3 billion short of its current budgeting needs.
The origins of this deficit are a point of debate. Former Governor Larry Hogan attributes the shortfall to increased spending by the Moore Administration, arguing that his tenure left the state with a surplus due to disciplined fiscal management and tax cuts that fueled economic growth. Governor Moore, on the other hand, points to historic spending growth under the Hogan Administration, including the use of federal COVID-19 relief funds for recurring expenses—an approach that created ongoing financial obligations even after those funds were depleted.
In addition, the passage of the Blueprint for Maryland’s Future, a sweeping education reform plan, has contributed to the budget challenge. While the initial years were funded, long-term funding solutions remain unresolved.
Regardless of how we got here, the reality is that significant financial decisions must now be made surrounding Maryland’s financial future.
The Governor’s Budget Proposal and Legislative Response
Governor Moore’s submitted his budget proposal in January, and it includes a combination of spending reductions and tax increases. These include delays in the Blueprint’s implementation and increases in various taxes, fees, and service charges.
Legislative leadership in the House and Senate have expressed differing views on how to address the shortfall. House Speaker Adrienne Jones has signaled a strong commitment to protecting programs like the Blueprint, suggesting that tax increases may be necessary to maintain key investments. As a result, you can expect the House to pursue tax increases. Senate President Bill Ferguson, while also concerned about education funding, has indicated a willingness to consider additional spending cuts to avoid too many additional tax increases.
One of the most significant tax proposals under consideration comes from House Majority Leader David Moon (D-Montgomery County). Last year, he introduced legislation to expand the sales tax to include professional and personal services. While that proposal was ultimately withdrawn due to strong opposition, he has now introduced a revised version that would apply sales tax to “business-to-business” services—including legal, consulting, accounting, and other professional services. This measure could generate over $1 billion in new revenue but would place additional financial strain on businesses.
Impact on Small Businesses and Advocacy Efforts
Recognizing the potential impact on our members, the Frederick County Chamber of Commerce mobilized a strong advocacy effort. More than 80 small business members contacted state legislators to express their concerns about the proposed service tax. As a result, the bill was pulled from consideration—at least temporarily.
However, the idea remains very much alive and is now being viewed as a preferred alternative to deeper spending cuts. In addition, other policy proposals—such as another minimum wage increase, exemption of tips from wage calculation, higher Unemployment Insurance contributions, and increased Family & Medical Leave Insurance obligations—are contributing to an increasingly uncertain short term future for our business community.
We’re Fighting for You
The Chamber remains committed to advocating on behalf of the Frederick County business community. We will continue tracking these critical budget and policy discussions, ensuring that your voice is heard in Annapolis. As the legislative session progresses, we will provide timely updates and opportunities for engagement.
Stay informed. Stay engaged. We’re here to support you! If you have any questions or wish to discuss this topic further, please contact President & CEO, Rick Weldon at rweldon@frederickchamber.org
Frederick Chamber Insights is a news outlet of the Frederick County Chamber of Commerce. For more information about membership, programs and initiatives, please visit our website.