Maryland Gas Tax Bill May Raise the Bar

One of the nation's most-watched and complex gas tax bills made significant progress in the House of Delegates. It retained one of its most significant parts, indexing the tax (and transit fares) to inflation, overcoming opposition by Republicans.

Maryland Governor Martin O'Malley, after much discussion with Democrats and Republicans, unveiled his six-part gas tax proposal on March 4 that, if passed, would become effective July 1. Maryland's 23.5-cent gas tax was last increased in 1992. The initial plan (PDF) includes:

  • Reducing the state excise tax by 5-cents, 
  • Indexing both the gasoline excise tax and Maryland Transit Administration administered fares to inflation to inflation
  • Applying a portion of the state sales tax to the wholesale price of gasoline. This portion will be 2% in 2013 and 4% in 2014.
  • Ensuring that revenues generated remain dedicated for transportation purposes

On March 20 the House of Delegates "gave the bill its preliminary approval", writes The Sun's transportation beat reporter, Michael Dresser. In addition to thwarting Republican efforts to drop the indexing, earlier in the week significant changes were made according to WBAL News, including:

  • Elimination of the 5-cent gas tax reduction
  • Halving the new wholesale gasoline sales tax to 1% on July 1 and 2% on 2015

If approved on the House's final vote, expected March 22, the bill advances to the state Senate.

Dresser writes that in its current form, "[t]he plan would increase taxes on gas by 3.8 cents a gallon July 1 and [would] add increments in subsequent years. By 2016, motorists could be paying about 39.5 cents a gallon — 16 cents higher than now."

Some have compared Gov. O'Malley's original proposal to VA Gov. Bob McDonnell's plan, also composed of many parts, that would have eliminated the state gas tax entirely, replacing it with an increased general sales tax.

O'Malley's proposal retains the "user fee" approach while McDonnell's eliminated it, though in it's final forma new 3.5 percent wholesale tax on motor fuels was added to replace the gasoline excise tax which was eliminated; the general sales tax increase was reduced, and $200 million of general fund money was diverted to transportation programs.

One ironic exception to the elimination of the "user fee" principle for transportation funding in Virginia: The bill "double(d) the annual $50 registration fee on electric vehicles and also appl[ies] it to hybrid cars and those that use alternative fuels," wrote Fredrick Kunkle of the Washington Post.

In contrast to both Maryland and Virginia, the Wyoming gas tax increase is straightforward: 10-cents per gallon on July 1.

Editor's Note: Maryland's House of Delegates voted to approve the increase by a margin of 78-56 on Friday.

Full Story: Gas tax increase advances in House of Delegates



Irvin Dawid's picture

Gas Tax Bill Approved

John Wagner of The Washington Post writes in the "Maryland Politics" section that gas tax measure passed on a vote of 76 to 63 on March 22. "It now moves to the Senate, where leaders have pledged to take action in the final two weeks of Maryland’s 90-day legislative session."

Interestingly, it was passage of neighboring VA Gov. McDonnell's transportation bill that may have prompted legislators to take action on O'Malley's bill as Maryland competes with Virginia for jobs. And I thought competition didn't apply to the public sector, least of all government itself! Well, on second thought, seems like some states do compete with other state who reduce or eliminate state income taxes, and then of course, there's the Walmart factor where municipalities compete with one another by offering tax breaks to big box stores.

But in this case - it was a healthy competition - good for raising needed transportation funding. It's taken over 20 years to raise the gas tax - or possibly even attempt to.

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