Maryland lawmakers are on their way to closing a massive state budget gap — the largest since the Great Recession — by raising a slew of taxes and fees and cutting government spending.

Maryland General Assembly leaders finished budget negotiations Friday night, setting up final approval votes as the adjournment of their annual session looms on Monday.

Democrats said they made difficult decisions in tough economic times, and they patted themselves on the back for working together — compared to division down the road in Washington, D.C.

The budget agreement is “a testament to when we work together,” said Del. Ben Barnes, chair of the House of Delegates Appropriations Committee, as the deal was sealed.

“We’ve been through a lot to get here,” added Sen. Guy Guzzone, chair of the Senate Budget and Taxation Committee.

The deal will hit the pocketbooks of Marylanders and the balance sheets of businesses to raise $1.6 billion as part of the budget-balancing equation.

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Here are some of the key ways the state will raise money for the $67 billion budget:

• Increasing income tax rates on individual earnings above $500,000 to 6.25% (up from 5.75%) and above $1 million to 6.5% (up from 5.75%).
• Adding a 2% surcharge on capital gains for filers with more than $350,000 of income, with a portion of the money funding transportation.
• Establishing a 3% tax on information technology and data services, generating nearly $500 million. The tax does not apply to mobile phone service.
• Limiting how many deductions taxpayers making more than $200,000 can itemize on their tax return.
• Increasing the excise tax on vehicles to 6.5%, from 6%.
• Applying the 6% sales tax on vending machine sales.
• Increasing taxes on cannabis sales, to 12% from 9%.
• Increasing the tax on sports betting, to 20% from 15%.
• Creating a $5 fee on each new tire sold, with the money funding transportation.

There are also an array of cuts to planned spending across state departments and agencies. Money from some programs is being transferred to the state’s general fund, and some proposed new employee positions are being nixed.

Even Gov. Wes Moore saw one of his own priorities fall before the budget tax: The ENOUGH Act, a program he initiated that sends grants to neighborhoods with high concentrations of child poverty, is getting millions less in funding than the governor had hoped.

People with developmental and intellectual disabilities made a late, but ultimately unsuccessful, fight against the state reversing course on a planned 1% rate increase to their service providers.

Throughout the budget process, Republican lawmakers sought steeper budget cuts than the approximately $2 billion that Democratic leaders negotiated and wrote into the budget. But the Republican budget-cutting amendments all fell by the wayside on lopsided, largely party-line votes in both chambers.

The governor and lawmakers entered this season of budgeting facing an approximately $3 billion gap between revenues and expenses, driven by the drying up of COVID-era relief money and a lagging economy that wasn’t producing enough tax money to match planned spending.

The budget picture worsened as President Donald Trump’s administration began laying off federal workers, whose lost salaries will mean even less tax money going into state coffers.

Back in January, Moore proposed closing the budget gap with a combination of increased taxes and spending cuts.

But in the course of negotiations, some of his ideas fell by the wayside, including a 75-cent fee on deliveries like Amazon and GrubHub and lowering the corporate tax rate while enacting a corporate tax reform known as combined reporting. Moore also lost out on his proposal to eliminate the ability for taxpayers to itemize deductions on their tax returns, while also doubling the standard deduction. (In the end, the standard deduction will increase by 20%.)

And a high-profile proposal from some lawmakers to create a new, 3% tax on services that businesses sell to each other ended up morphing into the 2.5% fee on IT and data services that both businesses and consumers are likely to pay.

The final details of the budget were worked out in conference committees, with delegates and senators sitting around a rectangle of conference tables on Thursday and Friday afternoons.

Though the conference committees have bipartisan representation, it was mostly Guzzone, Barnes and a few other Democrats who did all the talking, quietly going item-by-item and agreeing to the actions that one side or the other had taken.

Reporters and lobbyists in the back of the room craned their necks to try to make out what they were saying over the rustle of papers listing the differences.

There’s a chance lawmakers could end up back at the negotiating table again, should President Donald Trump or the Republican-led Congress wreak havoc on the state’s budget. Already, the state has seen its projected revenues slide as thousands of federal workers lose their jobs through the Trump administration’s slashing of agencies. And Republicans are looking for ways to cut spending to fund federal tax cuts.

If federal funding to the state budget drops by $1 billion, the state budget will require the governor to engage with lawmakers on solutions.

“The idea simply is: As we move forward, when things may be happening to us from Washington, we’ll be getting prepared and ready, having discussions and understanding exactly all the impacts,” Guzzone said in an interview.

The budget also revises an existing provision that would limit spending on the Blueprint for Maryland’s Future education plan, should money coming into the state’s general fund drop by a certain amount. Lawmakers are still negotiating multiple changes to the Blueprint plan through a separate bill — work that may continue through Monday’s final day of the legislative session.

As of now, the state budget is balanced with a small amount of money projected to be left over, and ample reserves in the Rainy Day Fund.

That, Barnes said, “is a miracle, given where we were at the beginning of session, and then what happened with the revenue write-down.”

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