$25 Minimum Wage, End To Tip Credit Would Put Pay Policy In Maryland Constitution

ANNAPOLIS, Md. — A proposal in Annapolis would not just raise Maryland’s minimum wage to $25 an hour — it would lock that wage into the state Constitution, eliminate the tip credit and permanently change how future lawmakers can respond to economic downturns.

House Bill 1229 and Senate Bill 886 would fundamentally restructure how wage policy operates in Maryland — embedding it into the state Constitution, eliminating the tip credit and tying future increases to inflation.

If enacted and approved by voters, the change would be difficult to reverse and would remove much of the General Assembly’s future flexibility over wage law.

The bills would add to Maryland’s Declaration of Rights that every person has a “fundamental right” to be paid at least the state minimum wage “without regard to tips,” and that the State may not “deny, burden, or abridge” that right unless justified by a “compelling State interest achieved by the least restrictive means.”

In constitutional law, “compelling interest” is the highest standard of judicial review. Laws affecting fundamental rights must pass strict scrutiny — a threshold rarely met.

That means future lawmakers could not simply adjust wage policy in response to recession, labor market shifts or sector-specific hardship without potentially facing constitutional challenges.

If approved by the General Assembly, the amendment would appear before voters on the November 2026 ballot.

Small employers — defined as 14 or fewer employees — would follow a slightly delayed schedule, reaching $25 by Jan. 1, 2032.

Beginning in 2033, the wage would increase automatically each year based on growth in the Consumer Price Index for the Washington–Arlington–Alexandria metropolitan region. If inflation declines or remains flat, wages would hold steady rather than decrease.

This indexing mechanism would remove the need for future legislative votes on cost-of-living increases.

Currently, employers may pay tipped workers a lower base wage, provided tips bring total earnings to at least the minimum wage.

Under the bills, the allowable tip credit would shrink annually beginning in 2027 and be eliminated entirely on Jan. 1, 2031. At that point, employers would be required to pay the full minimum wage regardless of tips earned.

Supporters argue the change would provide greater income stability for service workers. Critics contend it would alter longstanding compensation models in the restaurant and hospitality industries, where many tipped employees already earn well above minimum wage.

The bills also impose strict rules on restaurant service fees, requiring that service charges be distributed directly to employees who performed the service and prohibiting distribution to supervisors or managers.

House Bill 1479, known as the Maryland Raise the Wage Act, would increase the state minimum wage to $18 per hour by 2028 and index future increases to inflation — but without embedding the policy into the Maryland Constitution.

The bill also expands the definition of “small employer” to include businesses with up to 49 employees, providing a broader category of employers subject to the small-business wage schedule. Annual increases under HB 1479 would be capped at 5%, and while the Commissioner of Labor would calculate inflation adjustments, the increases could not be suspended.

Unlike HB 1229 and SB 886, HB 1479 does not eliminate the tip credit and does not propose a constitutional amendment.

The existence of competing proposals underscores the broader debate in Annapolis — not just about how high the minimum wage should rise, but how permanent and rigid Maryland’s wage structure should become.

A $25 minimum wage would likely trigger wage compression — narrowing pay gaps between entry-level workers and supervisors — prompting pressure for raises further up the wage scale. Businesses may respond by raising prices, reducing hiring, accelerating automation or adjusting staffing models.

For sectors with thin profit margins — including restaurants, childcare providers, retail shops and agricultural operations — the compressed timeline of increases could present adjustment challenges.

At the same time, labor advocates argue that higher wages increase consumer purchasing power and reduce reliance on public assistance, potentially benefiting local economies.

If voters approve the constitutional amendment in 2026, future changes would require another statewide referendum rather than a simple legislative majority.

In effect, Maryland would be constitutionalizing its minimum wage framework — transforming wage policy from a statutory matter subject to annual political negotiation into a voter-locked right.

The debate unfolding in Annapolis is therefore not only about $25 per hour.

It is about whether wage policy should remain a flexible legislative tool — or become a constitutional guarantee.

The House hearing on HB 1229 is scheduled for Feb. 26, with the Senate hearing on SB 886 set for March 11.

If lawmakers approve the constitutional amendment, Maryland voters would have the final say in November 2026.

Read the full House Bill 1229 below:

Read the full Senate Bill 886 below:

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