Montgomery County won’t adopt a new spending plan until spring, but debates over how to balance the budget amid slowing growth are already taking shape.

Most taxing authority rests with the governor and the legislature, so county policymakers — all of whom are Democrats — have only so many options for boosting revenue.

County Office of Management and Budget analysts recently reported that over the next six years, the county will bring in $854 million less than previously expected.

“We’ve been growing more slowly than our surrounding peers in Northern Virginia for quite some time now, particularly post-pandemic,” said Keith Waters, who studies the Greater Washington economy at George Mason University.

Among top elected officials, two camps have emerged since the updated revenue forecast. And the county’s business community appears to have aligned itself with one side in particular.

Rather than cut spending for government programs and services, County Executive Marc Elrich plans to propose, among other measures, rescinding tax breaks for housing developers and raising income taxes on the wealthy.

“I’ll be damned if you’re gonna cut services and food and shelter and continue to let developers build without paying property taxes,” he told The Banner.

County Council President Natali Fani-González, meanwhile, says she’s doing “everything in my power not to have a tax increase. That means that we’re gonna have to have cuts.”

To counteract declining growth, the county must expand its tax base by incentivizing new housing construction and helping companies hire more, Fani-González said.

Any talk of raising tax rates will be especially sensitive at a time when nearly one in four residents say the high cost of living is the issue they most want changed, according to an August survey of county residents by OpinionWorks LLC for The Banner.

What does this mean for next year?

Revenue is still expected to increase annually, but the recent write-down is already complicating budget planning.

For fiscal year 2027, which begins in July, the county is expected to receive $100 million less in tax revenue than previously projected.

Officials don’t necessarily have a gaping hole to fill — total revenue in the current fiscal year is expected to exceed $6.6 billion.

But they fear the decline may only worsen, in part because of the region’s high concentration of federal employees and contractors who’ve lost work because of the president’s mass layoffs, the consolidation and closure of federal agencies, and the recent record-setting federal shutdown.

The Elrich administration will spend the coming months drafting a budget for next fiscal year and then present it to the County Council in March.

Council members will review the plan, make changes and adopt a final budget by June 1.

Elrich said he doesn’t yet have a set plan for which tax breaks he’ll recommend rescinding, or a specific amount of tax revenue he’s looking to raise.

But he mentioned that he has “a few favorites” he’d like to roll back, including a policy council members passed this year that exempts developers from paying taxes for 20 years if they convert office space that’s at least half vacant into housing.

As he has in years past, Elrich also plans to propose raising the county’s income tax rate. He intends to target the increase to high earners, who he says have just received a “massive” tax cut under the One Big Beautiful Bill Act that Congress passed.

Waters, the George Mason economist, said concentrating tax hikes on the wealthy could drive some people from the county, albeit “a very small number.”

“Something about Montgomery County is that it has substitutes in Northern Virginia,” said Waters, a Montgomery County resident himself.

Fani-González, who sponsored the bill to incentivize the conversion of vacant office space, said Elrich is failing to see that such policies are exactly what the county needs to grow its tax base; when a developer converts empty office spaces into housing, it has the potential to bring in new residents and add tax revenue.

“He has this idea that’s totally backwards,” she said.

To close future spending gaps, she says, the county must stop tapping its reserves to pay for programs that require annual funding. It remains to be seen which programs may come under scrutiny.

Business leaders weigh in

Leaders in the business community have sided with the council president in the early budget debate.

Allie Williams, president and CEO of the Greater Bethesda Chamber of Commerce, said in a statement that “we strongly oppose any new or increased taxes and fees on businesses.”

He said that increasing the cost of doing business could make it more difficult for employers to hire, expand and invest in the county, and he added that cutting into already thin margins for small businesses could diminish services, raise prices for consumers and potentially shutter some shops.

Brian Levine, who leads governmental affairs for the Montgomery County Chamber of Commerce, said his organization will be pushing Elrich and County Council members to refrain from any tax increases, contending they will hurt the county’s competitiveness and make it less affordable.

“We’re in a fight for our lives here in Montgomery County to compete with surrounding jurisdictions,” he said.

Williams, of the Greater Bethesda Chamber, also urged caution.

He said that deep cuts to business assistance and education, which help attract and retain employers, would similarly harm growth, and he urged officials to “prioritize responsible fiscal management, public-private collaboration and innovative solutions.”

Angela Franco, president and CEO of the Montgomery County Chamber of Commerce, said spending increases have been too steep in recent decades. Between 2000 and 2024, the budget grew 55%, she said.

Franco would like to see officials focus investments on improving permitting processes and providing resources for small businesses to help the county grow.

“How do we make the government a little more efficient?” she said.