Maryland delegates approve tax modifications including capital gains and cannabis rates

The Maryland General Assembly's Ways and Means Committee made significant strides in tax legislation during their March 20, 2025, session, with key votes on several high-impact items.

Item 79, which introduces a surcharge on capital gains for individuals with adjusted gross incomes over $358,000, passed despite opposition from several delegates. Delegate Belmarque's motion to modify the item was approved, indicating a shift in the state's approach to taxing higher earners.

Another major decision was made regarding corporate taxation. Item 80, which phases in a reduction of the corporate income tax over two years while adopting combined reporting, also passed. This modification, proposed by Delegate Felmark, will not change tax rates but will implement water's edge combined reporting starting in 2028, a move aimed at increasing tax fairness among corporations.

The committee also voted to increase the tax rate on cannabis sales from 9% to 15%, although a modification to set it at 12% was adopted. This reflects the state's ongoing adjustments to its cannabis tax framework as the market evolves.

In a notable financial maneuver, Item 91 authorizes a transfer from the Maryland Innovation Investment Tax Credit to the general fund, which passed despite dissent from several delegates. This move is expected to bolster the state's budget in the coming fiscal years.

The committee rejected a recommendation to repeal the tax-free period for back-to-school shopping (Item 112) and also voted against repealing the sales tax exemption for precious metals (Item 113), although they did modify it to include an exception for events at the Baltimore City Convention Center.

Overall, the session highlighted a proactive approach to tax reform, with a focus on balancing revenue generation while addressing the needs of various stakeholders in Maryland. The implications of these decisions will likely resonate throughout the state as they take effect in the coming years.