Tension is growing between supporters and opponents of Montgomery County Executive Marc Elrich (D)’s proposed income tax increase as the County Council nears Thursday’s deadline to vote on the proposal.
As Elrich continues to publicly defend his controversial proposal to raise the county’s income tax rate from 3.2% to 3.3%, the Greater Capital Area Association of REALTORS (GCAAR) is running an ad campaign opposing the tax increase.
Through social media ads and mailed flyers, the organization is encouraging county residents to urge their councilmembers to vote “no” on the proposed tax hike.
“GCAAR launched its campaign to ensure there is an active effort against unnecessary tax increases in the county. Our goal is to inform the community of what is at stake and ensure their voices are heard on this important issue,” the organization said in an email statement to Bethesda Today on Friday.
The proposed income tax increase is part of Elrich’s recommended $7.65 billion county operating budget plan for fiscal year 2026, which begins July 1. The spending plan represents a substantial increase of 7.4% from the county’s current $7.1 billion operating budget.
The council’s decision on the tax proposal will determine whether Elrich’s budget proposal will need to be reduced. The council must vote on a final county operating budget by June 1.
Elrich originally proposed a 3.4% property tax rate increase to fund Montgomery County Public Schools’ (MCPS) $3.65 billion operating budget request for fiscal year 2026 but replaced that idea last month with the income tax proposal. GCAAR’s statement claims that through its ad campaign, “hundreds of residents have sent over 1,400 emails to their county councilmembers opposing the tax hikes” by clicking a link to send emails.
“While other jurisdictions are cutting taxes or holding the line to aid their residents’ hardships, Montgomery County is trying to make our community less affordable and less friendly for economic development,” the statement says.
With a new funding proposal introduced just weeks before councilmembers are required to adopt a final budget plan, the council is on a tight timeline to decide whether to adopt Elrich’s recommendation. The council is required to make a formal decision on Elrich’s tax proposal by Thursday if a tax increase is to be implemented in fiscal year 2026. The council is currently slated to take action on the proposal Wednesday. A public hearing on the potential tax hike is scheduled for Tuesday.
After a week of work sessions on the budget, most councilmembers seem unlikely to favor passing the tax increase. The quick turnaround has become a salient point among the proposal’s opponents, who say it’s not appropriate to rush such a major decision. County budget analysts have also warned councilmembers that the amount of potential revenue that can be raised from an income tax hike could be unpredictable.
“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 May 1 meeting.
Smith said this means the council can’t reliably use income tax revenue projections to balance the budget. Several councilmembers have also expressed concerns that it would not be responsible to raise taxes on 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.
Councilmember Natali Fani-González (D-Dist. 6) criticized Elrich during a May 5 council meeting for delivering the proposal with so little time left for deliberation.
“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.
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, which corresponds with the calendar year, according to Smith.
According to council staff, the retroactive nature of the tax increase means most residents would have to pay the taxes to the county when filing taxes that most likely would not have been withheld from their paychecks.
“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 at the May 5 meeting. “And I think that’s an issue.”
But a few councilmembers have shared support for a tax hike, saying it’s necessary to fund the full budget request from MCPS. Council Vice President Will Jawando (D-At-large), who also chairs the council’s Education and Culture Committee, has been most vocal about fully supporting the school system’s request.
Jawando joined Elrich as a guest during his weekly media briefing Wednesday to help the county executive defend his tax proposal.
“This is ultimately about equipping our public schools to meet the steepest rise in student need in a generation,” Jawando said.
The council’s Education and Culture Committee voted last week to recommend the council fully fund the MCPS budget request, although members expressed concern about what a tax increase would mean for county residents.
While all councilmembers agree that the council will fund the school system at more than the state and federally mandated “maintenance of effort” – meaning more than the county is required to spend for each pupil – for the coming fiscal year, some councilmembers including Jawando don’t think that’s enough.
“The teachers … are maxed. There’s not enough. They need support, and so much of this education budget is going to help,” Jawando said. “This is us trying to catch up the system, trying to catch up to documented needs. These are not enhancements.”
Elrich criticized councilmembers who oppose the tax proposal but voted recently to pass legislation allowing tax breaks for some developers that create workforce housing units. Elrich had vetoed the bill, but the council overrode his decision in a 9-2 vote on April 29.
“Nobody wants to increase taxes. But it was only a week ago they voted for a massive developer giveaway,” Elrich said. “At a time when you’re thinking about the limitations on the county’s resources, and what are we going to do with more limited resources? Doing this adds nothing to the county’s economy. Housing is generated by demand.”
The council’s decision on the tax proposal will determine whether Elrich’s budget proposal will need to be reduced. The council must vote on a final county operating budget by June 1.
