As part of an initiative to narrow Maryland's persistent structural deficit, this year exceeding $1.1 billion, both the Governor's office and various state legislators have proposed several sweeping income tax increases that, if passed, will affect hundreds of thousands of Maryland households. In this policy update, we provide an overview of these proposed tax increases, explaining their mechanisms and offering estimates of potential effects.

In the wake of strong opposition to the Governor's plan to extend the state's 6 percent sales tax to gasoline (in addition to the state and federal excise taxes already imposed on gasoline), many media outlets have reported that legislative attention is shifting away from the gas tax increase and towards income tax increases. To some extent this is true; however, both the gas tax increase and income tax increase form part of the Governor's overall approach to the state's fiscal situation: that is, the Administration does not view an income tax increase as a substitute for a gas tax increase. Rather, the two are designed to go hand-in-hand.