Some Montgomery County Councilmembers voiced skepticism about County Executive Marc Elrich (D) proposal to increase the county’s income tax rate from 3.2% to 3.3% during a work session Monday morning, with most indicating they will vote against a tax hike.
“This is not an insignificant act, and it could easily have grave consequences for all of us,” councilmember Sidney Katz (D-Dist. 3) said during Monday’s meeting at the council’s chambers in Rockville.
Elrich introduced the proposal on April 22 after withdrawing his suggestion to increase the county’s property tax rate by 3.4%. He said an income tax increase would be a more equitable solution for county taxpayers than a property tax hike.
Both tax hike proposals were introduced to fully fund Montgomery County Public Schools’ (MCPS) $3.65 billion budget request for fiscal year 2026, which begins July 1. The MCPS spending is included in Elrich’s proposed $7.65 billion county operating budget that’s under consideration by the council.
With a new funding proposal introduced just weeks before the council is required to adopt a final budget plan, the council is on a tight timeline to decide about whether to adopt Elrich’s recommendation. The council is required to make a formal decision on Elrich’s proposal by May 15 if it is going to be implemented in fiscal year 2026. A council hearing is scheduled for May 13.
Councilmember Natali Fani-González (D-Dist. 6) criticized Elrich during Monday’s meeting for delivering the proposal with such a quick turnaround.
“Having the council solve this is irresponsible, especially when we do not have the data and we don’t have the numbers [to back up an increase],” she said.
Elrich said the new proposal was inspired by a change in state law that allows counties to increase the formerly mandated income tax rate of 3.2% to a maximum of 3.3%. The late introduction of the proposal was due in part to the General Assembly not deciding on the change until the last day of the session, April 7.
According to Elrich, the proposed income tax increase, coupled with the other revisions to the state’s tax code, is preliminarily estimated to generate between $70 million and $80 million for the county government in fiscal year 2026 and $60 million to $70 million annually thereafter.
However, county budget analysts are warning that the amount of potential revenue raised from such a tax could be unpredictable and that those numbers may not hold true.
“Our income tax is volatile, it’s more volatile than our property tax,” county Deputy Director for Budget and Policy Gene Smith told members of the council’s Government Operations and Fiscal Policy Committee during a meeting Thursday.
One of the aspects of Elrich’s proposal that was most controversial among councilmembers is a clause that includes retroactive tax collection. This means that if an income tax increase is passed, it will apply to all wages earned in tax year 2025, according to Smith.
According to council staff, due to the retroactive nature of the tax increase, most residents would have to pay the taxes back to the county when filing taxes and would not have had the funds withheld from their paycheck.
The council could technically wait to vote on a tax increase until July 1. However, in that case, they would not be able to retroactively collect taxes – that must be voted on by May 15 as part of Elrich’s proposal – and it would complicate budget deliberations if decisions had to be made without a full understanding of the county’s expected revenue.
Most councilmembers said that it is difficult to justify increasing taxes on county residents when thousands have been laid off from federal jobs and some economic experts predict a recession is on the horizon due to changes by President Donald Trump’s administration at the federal level.
“Given the federal government layoffs, some people will be paying taxes on jobs they don’t have any more [with the retroactive taxation],” councilmember Marilyn Balcombe (D-Dist. 2) said. “And I think that’s an issue.”
Councilmember Evan Glass (D-At-large) expressed a similar sentiment.
“The economic anxiety in our community, it’s palpable. I see it when I walk my dogs in the morning from neighbors who were first fired [from the federal government], and there’s a proposal to raise their taxes retroactively,” Glass said.
But not all councilmembers seemed opposed to a tax hike. Council Vice President Will Jawando (D-At-large) argued that the tax hike would mostly affect wealthy residents, who may experience tax cuts from the federal government based on Trump’s budget proposal.
“Why would we then put ourselves in the situation to say, well, let’s further cut the services residents need?” Jawando said.
Councilmember Kristin Mink (D-Dist. 5) said she had spoken to community members at a PTA meeting on Friday who said they were willing to support a tax increase if it meant county services would be fully funded.
“The room said, ‘we will chip in a little more.’ There was agreement,” Mink said. “And I found that very moving, because almost every hand was up in terms of being impacted by the federal [government changes].”
A vote on the proposed increase has not been scheduled.
