Montgomery County Executive Marc Elrich (D) announced Wednesday he plans to withdraw his proposed 3.4% property tax rate increase for fiscal year 2026 and replace it with a proposal to increase the county’s income tax rate from 3.2% to 3.3%.
Elrich’s initial property tax proposal was intended to fully fund Montgomery County Public Schools’ (MCPS) $3.65 billion budget request for fiscal year 2026, which begins July 1. He said that changing to an income tax increase instead would be a more equitable solution for county taxpayers.
“This change will allow us to continue to fund both MCPS and vital County services, while mitigating the impact on individuals who might find themselves without employment because of recent action by the Federal government,” Elrich wrote in a Tuesday letter to County Council President Kate Stewart (D-Dist. 4).
In the letter, Elrich explained the proposed change was due to legislation passed by the 2025 Maryland General Assembly that allows counties to increase the formerly mandated income tax rate of 3.2% to a maximum of 3.3%. Elrich said this move is “more progressive” than his property tax hike proposal.
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. In his letter, Elrich said he would be sending the council his new proposal and other changes to his proposed $7.65 billion county operating budget in the coming days.
Stewart told Bethesda Today in an interview Wednesday that Elrich had not sent information about his proposed changes beyond the letter, and that the council also was not provided with details about how the estimated tax revenue was determined.
Elrich released his recommended county operating budget plan for the upcoming fiscal year on March 14. The spending plan represents an increase of 7.4% from the county’s current $7.1 billion operating budget. The council is reviewing Elrich’s proposal and is expected to approve a final budget in mid-May.
In addition to his recommended income tax hike, Elrich also is proposing some tax relief for eligible residents. He’s suggesting the county’s Income Tax Offset Credit for eligible homeowners be increased $60: from $692 to $752 “to provide meaningful relief to homeowners who may be experiencing higher overall bills due to various budget adjustments this fiscal year.”
Elrich is also proposing the county increase its match of the state’s Refundable Earned Income Tax Credit from 56% to 65% percent.
Elrich presses council to move forward with proposal
During a virtual press briefing on Wednesday, Elrich said funding his proposed operating budget will not be possible unless the council votes to pass his proposed income tax increase.
“I’m hoping that the majority of council members are amenable to this. I mean, there is no way to fund the things we need to do in the budget if we don’t do this,” Elrich said. “The worst cuts you could make are certainly to the school system, but everything else would wind up coming out of social services, environmental programs. And I’m really concerned.”
When asked by a reporter if he’d shared the idea of switching to an income tax increase with councilmembers, Elrich said he’d floated the idea to Stewart.
“We thought it would be fair, and she didn’t say ‘great,’ and she didn’t say ‘horrible.’ She basically was happy,” Elrich said.
But Stewart shared a different perspective when asked by Bethesda Today about the exchange.
“The county executive should know better than to ever speak on behalf of someone, particularly a woman elected official,” Stewart said. “We have the potential to increase our income tax. But we need to think about that very carefully. Our residents are really feeling the stress of what is happening right now in the country. We have seen taxes go up at the state level.”
Stewart told Bethesda Today that she had told Elrich that there was not enough council support to pass a property tax rate increase. Councilmembers Andrew Friedson (D-Dist.1), Evan Glass (D-At-large) and Laurie-Anne Sayles (D-At-large) had all publicly released statements saying they didn’t support the initial proposal to increase the property tax rate.
“So many of our residents are impacted directly and indirectly by the cruel and haphazard decisions that are being made by the federal government in terms of layoffs and firings and other things,” Stewart said. “We know that our [property] assessments in the county have gone up quite dramatically. Even the thought of increasing property taxes was something that many of us had very strong doubts about.”
Stewart said Elrich’s new proposal will be considered by the council. A date has not been officially set for its introduction or for a public hearing. Stewart said the council will have to balance the pressures facing residents with adequately funding the county’s programming and services.
“We need to make sure that we’re providing the services they need across the board, whether that’s for our school system or our health and human services, and we need to continue to plan for the future,” Stewart said.
County Chief Administrative Officer Rich Madaleno defended Elrich’s new proposal during Wednesday’s media briefing.
“People have to recognize that … if their federal taxes are going to come way down, increasing 0.01% for their income tax [is] in order to keep up all these services — public education, public safety, public health, all the other amazing things that we do each and every day to keep this one of the most desirable locations to live on the planet,” Madaleno said.