Fears of Trump-driven federal agency cuts spur talk of tax increases in Montgomery County
Montgomery County Executive Marc Elrich said his administration will begin evaluating the impact of potential cuts to federal agencies following the apparent reelection Tuesday of former President Donald Trump.
Trump’s victory over Democratic Vice President Kamala Harris has Elrich and others concerned that the Republican will use his second administration to implement a massive realignment of the federal government, which could dramatically impact Montgomery County’s budget and its residents.
“One of our very real concerns is the impact of this election on the local economy,” Elrich said Wednesday during a weekly meeting with reporters. “The defunding of some federal agencies and the possible movement of other agencies out of the D.C. area brings a serious threat of reduced revenue from displaced federal employees. This is a very real threat.”
That threat, if realized, may leave the county with few options — even for Elrich, an executive who has not been shy about opening discussions on raising taxes.
“I mean, the option that we would want to do is probably raise taxes to make up for lost revenues,” said Elrich. “The way we’re structured right now, the bulk of those taxes would land on residents, and we would have to walk a very fine line.”
Elrich acknowledged there is a hesitancy to raise taxes on residents as opposed to developers, an option he has backed..
“The ability to do this is going to pretty much lie on people’s recognition that if we aren’t willing to do some things, we may well lose services that we all value,” Elrich said. “So, there’s no easy answer to this. I wish I could just say, ‘I’ll turn this other switch on. The money will flow.’ If we could have done that, we would have done it a long time ago. So, there are going to be challenges. We’re going to have to deal with them.”
Maryland has more than 350,000 households that directly benefit from federal wages or retirement income, according to a 2023 report prepared by the Office of the Comptroller. The report, prepared ahead of a possible federal government shutdown that was averted, found that some sort of federal income, totaling about $31 billion, touches one in nine households in the region.
Montgomery County, like much of Maryland, is the beneficiary of a large amount of direct and indirect federal largesse.
A 2016 report by the Maryland Economic Development and Business Climate Commission led by Norman Augustine found that 8% of all jobs in Maryland are direct federal employment. The Augustine Commission report, commissioned by the General Assembly, found that one-third of the state’s economy at the time was rooted in direct federal jobs, contractors and grants and loans.
“Maryland has long been a beneficiary of jobs provided either directly by the federal government or indirectly by jobs created by firms and institutions working under federal contracts, loans, and grants,” the commission noted in its final report nearly a decade ago. “It is likely that our state will no longer be able to grow and prosper with the existing model. A far more vibrant commercial sector must be developed.”
Elrich said Wednesday that his county is less of a company town reliant on the federal government than it once was.
“I’d say we’re much less dependent than we were before, but it’s still a large number of people, large enough to make a dent in what we collect in income taxes and property taxes,” he said.
In Montgomery County, there are more than 48,000 federal jobs with an average weekly wage of nearly $2,900, according to the Bureau of Labor Statistics.
“If he does anything serious, like either shutting down those agencies or moving the agencies out of Washington, D.C., to basically a long distance from here, they will have an impact,” said Elrich.
The loss of employment could drive residents out of the county and also affect the housing market.
“It’s not like they’re going to step out of the federal government and get another equally well-paying job,” Elrich said. “If they leave, then their housing becomes available. But if there aren’t people here with the income sufficient to pay for the housing, we may well wind up with a bunch of houses that don’t move or people who own the houses who are unable to move the houses on the market and have to make some really difficult decisions.”
Elrich said changes promised by Trump could “seriously impact” the county’s budget.
“We’re going to do an assessment, because we need to think about, as we go into the budget, where our greatest vulnerabilities are and we’ll look at what we think the impacts would be on the state,” Elrich said.
“We should be able to figure out which agencies are targeted. You can kind of guess … probably CDC and NIH, FDA. There’s a whole bunch of things that are going to be on the chopping block. So, but Department of Education, how can you forget that?” he said.
Trump, in a July campaign video, promised immediate actions that would affect federal agencies and employees. The moves, he said, would “dismantle the deep state” and target what he said were corrupt bureaucrats.
Trump vowed to immediately reissue his 2020 executive order reclassifying tens of thousands of federal jobs, a move that would let him treat those federal employees as political appointees that could be fired at will. Trump said the order would allow him to “remove rogue bureaucrats,” and he would “wield that power very aggressively.”
Trump issued the executive order in the waning days of his first term, but President Joseph Biden withdrew it soon after being sworn in.
Restoration of that executive order is part of Project 2025, a road map of conservative actions for the first six months of a Republican presidency developed by the Heritage Foundation. Trump has denied knowledge of the plan, but The New York Times reported in October that leaders of the foundation have close ties to Trump.
Similarly, Trump said he would dismantle the federal Department of Education — another component of the Project 2025 — and move “parts of the sprawling federal bureaucracy to new locations outside the Washington swamp.” During his first term, Trump moved the Bureau of Land Management to Colorado.
“As many as 100,000 government positions could be moved out — and I mean immediately — of Washington to places filled with patriots who love America,” Trump said in that July video.
A report published Wednesday by Government Executive highlighted what it called “sweeping changes” to federal agencies and employees if Trump moves forward with implementing his plans.
Elrich said Wednesday that the county is moving forward with planning for the coming fiscal year.
“At this moment, we’re planning a budget based on what we know now, but it’s possible, as the new administration plans unfold, we could face further reduction in resources, and we’re going to have to make changes in the budget,” he said.
– This story was updated on Nov. 15 to correct the number of federal workers in Montgomery County to more than 48,000 in the 14th paragraph.