HB 133 would substantially lower Maryland’s state tax rates across both income and sales taxes. On the income tax side, it replaces the current graduated individual income tax brackets with a flat 3% rate for individuals and joint filers with federal adjusted gross income above $10,000, lowers the corporate income tax rate from 8.25% to 3%, and changes the tax on net capital gains to a 3% add-on rate. The bill also creates a limited exemption for the first $10,000 of net capital gains for taxpayers age 65 or older, while preserving several existing exclusions for certain primary residences, retirement assets, farming assets, conservation land, business property, and nonprofit affordable housing.
On the sales and use tax side, the bill broadly reduces the general rate to 3% and applies that lower rate to many special categories as well, including alcoholic beverages, dyed diesel fuel sold by marinas, mandatory gratuities for large groups, and cannabis. It also lowers the cap on combined local admissions and amusement tax plus sales tax rates from 11% to 8%. The bill repeals the separate sales tax on certain data and information technology services and software publishing services, and removes several related provisions tied to those services. It also revises definitions and sourcing rules for digital products and taxable services, and keeps or restates exemptions for custom computer software and optional software maintenance contracts.
The bill’s impact on state law would be wide-ranging because it rewrites core provisions of the Tax-General Article and repeals multiple existing sections. It would significantly reduce state revenue collections by cutting the individual and corporate income tax rates, lowering the sales tax rate, and eliminating taxes on certain digital and technology services. It would also alter how sales tax is computed for vending machine sales, short-term vehicle rentals, peer-to-peer car sharing, manufactured homes, modular buildings, and other specified transactions, while changing the distribution of sales tax revenue to the General Fund and other dedicated funds.
The general sentiment reflected in the available record is limited because there are no committee transcripts or recorded votes in the provided materials. Based on the bill’s structure and sponsor list, it appears to be a pro-tax-cut measure intended to reduce the tax burden on individuals, businesses, and consumers. The inclusion of a senior capital gains exemption and broad rate reductions suggests an emphasis on tax relief rather than targeted tax increases or enforcement changes.
The main points of contention likely center on fiscal impact and distributional effects. Supporters would likely favor the across-the-board rate reductions, repeal of taxes on digital and software services, and the senior capital gains exemption, while opponents may argue that the bill would sharply reduce state revenue and could affect funding for education, transportation, and other public services. The repeal of higher-rate treatment for certain digital services and the broad 3% sales tax rate may also draw debate over whether the bill disproportionately benefits higher-income taxpayers and corporations relative to the revenue loss it creates.
HB 133 would amend the Tax-General Article to replace Maryland’s current graduated individual income tax structure with a flat 3% rate for most filers above a low-income threshold, reduce the corporate income tax rate to 3%, and increase the tax on net capital gains to a 3% add-on rate while exempting the first $10,000 of net capital gains for taxpayers age 65 or older. It would also lower the general sales and use tax rate to 3%, reduce or standardize several special sales tax rates, repeal the sales tax on certain data, information technology, and software publishing services, and revise related sourcing, computation, and distribution provisions affecting vendors, digital products, and specified industries and transactions.
The available record shows no committee testimony or votes, so there is no documented floor or committee sentiment to summarize. The bill itself is clearly framed as a tax-reduction measure, indicating a generally pro-tax-cut posture from its sponsors. Its design suggests support from taxpayers and businesses seeking lower rates, but likely concern from those focused on state revenue stability and funding for public programs.
The likely contention is between supporters of broad tax relief and opponents concerned about revenue losses and budget impacts. Specific flashpoints include the elimination of the graduated income tax, the reduction of the corporate rate, the lower sales tax rate on a wide range of goods and services, and the repeal of the sales tax on certain technology services. The senior capital gains exemption may also prompt debate over whether the bill appropriately targets relief or creates uneven treatment among taxpayers, while the changes to digital-service taxation and local tax caps may concern local governments and affected industries.