After expressing a total lack of support for a property tax increase, County Councilmembers mulled over a proposed increase in the income tax rate during their work session Monday.
After a lengthy discussion, it seems like an income tax increase proposed by County Executive Marc Elrich also may not be enacted, at least not retroactive to January 1 of this year.
Elrich calls for a flat income tax increase from the current 3.2% to 3.3% effective retroactively. It would generate an estimated additional $75 million in revenue for the county. If the income tax is increased but not retroactively, the county would receive about $25 million.
However, as both County staff and Councilmembers pointed out, incomes will be very volatile in the current climate when many federal employees are being laid off.
“There are so many uncertainties right new.” said Councilmember Natali Fani-González during council’s work session Monday. “You have no idea what is happening,” she said, “We don’t have the data. We don’t have the numbers.”
The county must balance its budget. Not knowing what the income tax will bring in could result in problems, several Councilmembers noted.
“If the economy turns sour, we don’t get as much money as many expect,” said Councilmember Gabe Albornoz. If the county receives fewer dollars than it had been planning on, it might be forced to lay off employees. 80% of the county budget relates to salaries, he said.
“The volatility overall without our tax bracket is obviously what is keeping us all up at night,” Albornoz said.
Because people file for unemployment compensation where they work, some Montgomery County residents could be unemployed and receiving benefits from Virginia or Washington, D.C. In those cases, Montgomery County would not be informed.
“We know our tax base is going to go down” due to the changes made by the Trump Administration, said Councilmember Marilyn Balcombe.
Councilmember Evan Glass added, “Thousands of our neighbors have been fired by Elon Musk and now there is a proposal to increase their income tax retroactively. That is insane.”
“I have real concerns about swapping one tax increase for this tax increase,” said Councilmember Andrew Friedson.
Councilmember Dawn Luedtke agreed. “Read the audience. Everyone is anxious right now. Everyone is anxious, not just federal employees.” She added, “We are in a make-or-break moment when we’ve got to do the work” to curb expenses.
Councilmember Kristin Mink urged her colleagues to speak with residents. She attended a recent PTA meeting where everyone raised their hands when asked who has been affected by federal job cuts.
However, she said, the same crowd said they would “chip in a little more” if it meant fully funding schools.
And Councilmember Will Jawando said they should consider the very wealthy stand to have their federal taxes cut by Congress.
A public hearing is set for May 13.
Elrich originally proposed a $7.7 billion Fiscal Year (FY) 2025 operating budget. It includes an increase of $250 million in the county’s contribution to Montgomery County Public Schools, additional public safety measures and free Ride On bus service.
The council already has cut about $6 million from the budget but will have to cut millions more to balance revenues and expenditures. Budget hearings concerning specific departments will continue throughout the week.
