Governor Hogan Enacts Largest Tax Cut Package in Maryland State History
Due to unexpected economic growth and an infusion of federal stimulus money, Maryland legislators have been negotiating how best to invest an unprecedented $7.5 billion surplus back into the community. On Friday, April 1, 2022, Maryland Governor Larry Hogan signed into law the largest tax cut package in state history, which provides $1.86 billion in relief for individuals who are retiring, working families and small businesses.
The tax cut package will provide significant relief and jobs for many Marylanders and working families who may be struggling with increasing inflation. The tax relief measures include:
The Retirement Tax Elimination Act
The Retirement Tax Elimination Act is by far the largest part of the tax cut package and provides $1.55 billion in tax credits for Maryland retirees aged 65 and older. Specifically, it provides a $1,000 nonrefundable tax credit for individual retirees earning up to $100,000 in retirement income and a $1,750 nonrefundable tax credit for married couples who earn up to $150,000 in retirement income. Governor Hogan estimates this package will impact 80% of retirees in Maryland and will save those taxpayers $1.55 billion collectively.
The Work Opportunity Tax Credit
The Work Opportunity Tax Credit designates $195 million to employers that hire and retain employees from underserved populations who have faced significant barriers to employment, such as veterans, ex-felons, individuals on food-assistance programs and individuals who have been unemployed for a substantial amount of time. The federal program has existed for a long time and was formerly providing a maximum $9,600 tax credit for hiring an employee who faced a barrier to employment. With this new Maryland funding, the credit now increases by 50%, adding another $4,800 in state funding for a total credit of $14,400 per qualifying employee.
Family Budget Boosters
The Family Budget Boosters program provides $115.6 million in sales tax exemptions for qualifying baby and critical health care products. The program specifically lowers out-of-pocket expenses for qualifying items by 6%, with the goal of reducing expenses for working families who may be facing a financial burden as inflation continues to grow. Qualifying baby and health care products may include:
- Baby diapers
- Car seats
- Baby bottles
- Oral hygiene products
- Medical devices
- Diabetic care products
Other Relief Measures
The package also provides the following investments in the areas of childcare and education, healthcare, infrastructure and public and cyber safety:
Childcare and Education
- A record, one-time investment of $800 million in the Blueprint for Maryland’s Future, a landmark piece of legislation passed in 2021 that increases annual education funding incrementally over the span of 10 years
- Childcare and education-related assistance for families, students and educators, including expanded access to childcare, bonuses for public school employees and increased financial aid for students of higher education institutions
- Capital funds for school construction
Healthcare
- Support for Maryland’s world-class hospitals, nursing homes and assisted living facilities
- An expansion of Medicaid dental coverage for adults, in-home medical care services and autism services
Infrastructure
- Capital funds for affordable rental housing, state facility maintenance and local transportation infrastructure
Public and Cyber Safety
- Support for public safety and victims of crime
- Protection against the growing threat of cyber attacks
Additionally, the tax package funds the state’s Rainy Day Fund – a fund of revenue available for future recessions or other economic crises.