By Adam Pagnucco.
Last week, the county council passed an income tax plan that it calls progressive. County Executive Marc Elrich calls it regressive.
Who is right?
To answer that question, let’s understand the two elements of the plan.
The first element is a change in income tax rate structure. Currently, the county levies a flat 3.2% tax rate on Maryland taxable income. Under the council’s plan, the rates would change to 2.7% on the first $50,000 of income, 3.0% on income from $50,001 through $150,000 and 3.3% on income above $150,000.
The second element is the abolition of the Income Tax Offset Credit (ITOC), which is currently a flat $692 credit applied to property tax bills of owner-occupied residences. As of 2024, the ITOC was received by more than 192,000 households.
Supporters of the plan like to emphasize the new tax brackets. Opponents prefer to discuss the loss of the homeowner tax credit. But to measure the total impact of the plan, these two elements must be evaluated together.
I see three impacts on taxpayers in this plan.
Impact on Renters
According to the U.S. Census Bureau, renters accounted for 31% of the county’s population in 2024. The Census Bureau also estimates median household income at $176,952 for homeowners and $87,316 for renters in 2024.
Renters don’t get the ITOC so they are affected only by the changed income tax rates. Because of the new brackets, all renters with incomes below $600,000 would get a tax cut and it would top out at $450 for those making $150,000 per year.
Verdict: Because renters make less than homeowners on average and nearly all of them are getting a tax cut, this is a progressive feature of the plan.
Impact on Homeowners
When comparing the county’s tax expenditure data and U.S. Census data, roughly three-quarters of homeowners collect the ITOC. That means roughly 52% of the county’s population resides in owner-occupied residences receiving the ITOC. This section analyzes the tax impact on this group.
The chart below shows the net tax increase in absolute dollars by Maryland taxable income of homeowner in $25,000 increments up to $500,000. Note that this combines the impacts of the new tax brackets and the loss of the ITOC.
In terms of absolute dollars, the distribution of tax impact is K shaped. Homeowners at the top and bottom of the distribution pay the most while those in the middle ($150,000) pay the least.
But that’s not the end of the story. The chart below shows the tax hike’s percentage of income for each $25,000 increment. Again, this combines the impacts of the new tax brackets and the loss of the ITOC.
This chart reveals a central truth: several hundred dollars is WAY more important for a low income homeowner than a wealthy homeowner. Rich people are barely going to feel this, but low income folks will struggle.
Verdict: Because low income homeowners are disproportionately hurt by losing the ITOC, this is a regressive feature of the plan.
Impact on Commercial Property Owners
According to the county’s 2025 Annual Comprehensive Financial Report, commercial property accounts for 23% of the county’s real property assessable base. Because commercial property owners don’t receive the ITOC, their property tax bills will not be affected by the council’s income tax changes.
Commercial properties are a varied lot, ranging from huge office buildings down to gas stations and laundromats. They’re not easy to characterize as a group. However, let’s recognize that low income people tend to not have the financial capital to own commercial property. And the list of the county’s largest property owners which appears in the report linked above has some very wealthy names on it.
The county’s top commercial property owners are a well-heeled group.
Verdict: Failure to include high-value commercial properties is a regressive feature of the plan.
Final Verdict
It’s too simple to call this plan progressive or regressive because it includes features of both distributions. That won’t stop supporters and opponents from emphasizing one part of it or another to suit their purposes. However, its heavy impact on low income homeowners is disturbing. The council really should have worked harder to limit that part of the plan before passing it.