Maryland’s latest revenue forecast shows short-term losses and long-term gains under the new federal tax law — but with serious risks for both the State and county governments.
Maryland Comptroller Brooke Lierman released the Bureau of Revenue Estimates’ (BRE) 60-day report on the One Big Beautiful Bill Act (OBBB).
As required by law, the report outlines provisions of OBBB that directly affect Maryland’s personal and corporate income tax revenues, providing policymakers, businesses, and residents with a clear understanding of how federal changes shape government finances.
At the midpoint of what Comptroller Lierman calls the most tumultuous decade for revenues in a generation, Maryland faces several cross-currents at once. Federal policy changes have cost thousands of Marylanders their jobs and cast doubt on grant and contract dollars that hospitals, universities, and nonprofits depend on.
At the same time, new State tax laws add more complexity and volatility, particularly for high-income taxpayers. Together, these forces make revenue forecasting even more uncertain, with real consequences for State and county budgets.
Personal Income Tax: Losses Up Front, Gains Later — With Big Risks
According to the BRE analysis, the outlook turns negative across the board in FY26. The State’s general fund drops by nearly $118 million when accounting for both direct impacts and assumptions built into the budget.
Special funds, including the Transportation Trust Fund (TTF) and higher education accounts, fall by another $17 million. Counties lose about $11 million in local income tax revenues.
By FY27, the picture improves. Counties gain about $62 million in new income tax revenues, while the State begins to recover ground. That growth continues steadily, with counties up more than $100 million annually by FY31 and the State’s general fund rising by $132 million.
Note: Counties should not view these projected gains as “new” money. The Bureau of Revenue Estimates measures the changes against a baseline where the federal Tax Cuts and Jobs Act expired in 2025. This scenario would have sharply reduced local income tax revenues. By extending many TCJA provisions, OBBB avoids that revenue cliff.
As such, while the numbers in the out-years appear favorable, they reflect more minor losses than counties would have faced if the TCJA had not been extended, not a windfall compared to recent years.
Volatility in the Forecast
Those projections, however, rest on shaky ground. Maryland relies heavily on high-income filers, whose earnings fluctuate with market conditions and who are most affected by surtaxes, capital gains volatility, and new limits on deductions. That exposure complicates long-term planning for both the State and counties, especially when layered on top of shrinking federal funds and recent State cost shifts.
For State leaders, this means budgeting around sharp year-to-year swings. For counties, which depend on PIT as their second-largest revenue source, local budgets must absorb short-term losses in FY26 while preparing for uncertain gains in the years that follow.
Federal Retrenchment Compounds Risks
The report places OBBB’s tax impacts in the context of shrinking federal support. Maryland already faces cutbacks to opioid treatment grants, education aid, and infrastructure programs. Federal contracts and grants — long a pillar of Maryland’s economy — now carry more uncertainty than ever.
A potential federal government shutdown this fall could further disrupt revenue streams and delay payments that counties and local institutions rely on for their operations.
For counties, the combined effect is troubling. As federal support retracts, local responsibilities only expand. Core services must extend further, just as income tax revenues become increasingly uncertain, leaving counties with greater obligations and fewer reliable resources.
The Bottom Line
The BRE report highlights the continued narrowness of Maryland’s revenue base and its vulnerability to fluctuations in high-income taxpayer contributions and potential federal retrenchment. OBBB’s tax changes add another layer of uncertainty, with early losses for both counties and the State before flipping to projected gains later in the decade.
The projections indicate that early losses will give way to growth later in the decade. However, the numbers come with wide margins of uncertainty, tied to the volatility of high-income taxpayers, federal cutbacks, and shifting economic conditions. For counties, that means the revenue picture remains unsettled, even as the forecast trends upward.
Stay tuned to Conduit Street for more information.
Useful Links
Maryland Comptroller: One Big Beautiful Bill 60-Day Report
Previous Conduit Street Coverage: Congress Returns With Shutdown Deadline Looming
Previous Conduit Street Coverage: Moody’s Chief Economist: Maryland at High Risk of Recession
