Montgomery County Council passes progressive income tax plan

In the lead-up to a June primary, the Montgomery Council Council Wednesday narrowly approved a progressive income tax hike.

The plan passed 6-5 following a heated debate over whether the council should increase taxes amid rising unemployment and inflation.

The current income tax rate for all residents is 3.2%. Under the new tax rates, residents making more than $150,000 annually will pay a 3.3% income tax — a 0.1% bump.

Income taxes will decrease for residents making $150,000 or less annually. Those making $50,000 or less annually will pay 2.7%, and those making $50,001 to $150,000 will pay 3%.

All three council members who are running for county executive — Evan Glass, Andrew Friedson and Will Jawando — voted against the progressive income tax increase. Kristen Mink and Laurie-Anne Sayles also voted against the proposal.

Council President Natali Fani-González, Vice President Marilyn Balcombe and members Shebra Evans, Sidney Katz, Dawn Luedtke and Kate Stewart voted in favor.

“Numbers don’t lie. We’re not here playing politics,” Fani-González said of who would benefit from the progressive tax plan. “We’re giving a break to people.”

Jawando, one of the most vocal opponents of the plan, argued that the county should find another way to fill a $113 million budget deficit. He said he feels that only “those who can readily bear the cost” should be impacted by an income tax increase.

“Households across the county are being squeezed by inflation, by federal job losses, by gas prices that we did not anticipate three months ago,” Jawando said.

The new tax plan will eliminate the county’s income tax offset credit, which is currently set at $692. Homeowners who claim their home as their principal residence are eligible for the credit. The elimination of the credit will offset some of the revenue losses from the graduated income tax.

Stewart said the newly adopted tax plan would benefit more county residents than the current policy. According to Stewart, 35% to 40% of county residents are renters and ineligible for the current tax credit. She said that about 75% of county residents will receive a tax break under the new plan, citing county data.

“I just want to be clear on who this is benefiting,” she said. “It does come at a cost for us in our revenue. But I think given where we are as a country, as a county, and seeing the divide in wealth, that this is our opportunity to actually look at how we do progressive taxing.”

County Executive Marc Elrich denounced the new plan as “regressive.”

“I cannot stress this enough — the Council’s action only raises taxes on homeowners,” Elrich said Friday. “Commercial properties are untouched under the Council plan — homeowners absorb the entire cost.”

Elrich in March recommended an $8 billion operating budget that calls for a roughly 6% property tax hike and a 0.1% income tax increase. Most council members voiced concerns that his plan would overly burden residents impacted by job cuts and rising prices, inspiring the progressive tax plan.

This is a developing story and will be updated.