ANNAPOLIS — Gov. Martin O’Malley on Thursday plans to sign legislation that will make a gallon of gas 4 cents more expensive this summer, starting a phased-in tax increase expected to ultimately generate nearly $700 million for transportation projects.
O’Malley will join with House of Delegates Speaker Michael E. Busch, D-Anne Arundel, and Senate President Thomas V. Mike Miller Jr., D-Calvert and Prince George’s, to sign the transportation funding bill and comprehensive gun control legislation passed by the General Assembly this year, in addition to nearly 300 other unsigned bills.
But while the gun control bill appears headed for a legal challenge, the transportation funding legislation — House Bill 1515 — is expected to go into effect on June 1, immediately imposing a 3 percent tax on wholesale gasoline purchases and tying Maryland’s 23.5-cent excise tax on fuel to inflation as measured by the Consumer Price Index.
The excise tax would then be increased each year depending on the rate of growth — it cannot decrease.
The increased gas tax is described as a necessary evil by some politicians and business advocates, who point to the cost of oppressive traffic around Baltimore and Washington. In 2012, Baltimore had the nation’s 17th-worst and Washington had the ninth-worst traffic congestion, according to a study released in April by INRIX, a traffic data collection company.
Leif A. Dormsjo, acting deputy secretary of the Maryland Department of Transportation, said last month that some of the money raised from the gas tax increase could be used to add highway lanes in order to alleviate some of that congestion.
Much of the money is also expected to be spent on mass transit, such as the Purple Line in Montgomery and Prince George’s counties, the Corridor Cities Transitway bus rapid transit line in upper Montgomery County and the Red Line in Baltimore.
For the light rail lines, the state is seeking companies who might be interested in entering into a public-private partnership with the state to build and maintain the system. Lt. Gov. Anthony G. Brown — who last week officially announced his candidacy for governor — hosted a transportation industry forum Wednesday morning to discuss the Purple Line project and plans to hold a similar meeting on June 10 in Baltimore for the Red Line.
Brown said he expects the new transportation revenue stream will create 57,000 construction jobs as Maryland’s roads, highways, bridges and mass transit receive upgrades.
“Today’s turnout demonstrates the commitment of the business community to work with the public sector to build the Purple Line and start creating more good-paying jobs in Maryland,” Brown said in a statement. “After passing our public-private partnerships legislation and the Transportation Investment Act this session, we are making progress on putting Marylanders to work building a transportation network that will spur new economic development opportunities, unite our communities and create thousands of new jobs.”
That does not come without cost, however. Gas prices could rise by up to 20 cents a gallon by 2016 because of the new tax structure unless Congress takes action that helps states collect taxes from Internet purchases.
The U.S. Senate has passed the Marketplace Fairness Act, which would require online retailers to collect state sales tax from their customers. President Barack Obama supports the legislation, but it could possibly face a difficult path through the House of Representatives.
Technically, consumers are supposed to self-report Internet purchases from websites such as eBay or Amazon.com, but few do. Maryland Comptroller Peter Franchot expects passage of the federal legislation would put an extra $173 million into state coffers each year.
If Maryland does start seeing Internet sales tax revenue, the wholesale tax on gasoline would remain at 3 percent. But without passage of that bill, the wholesale tax is scheduled to rise to 5 percent by summer 2016, resulting in the 20-cent-per-gallon increase.
Regardless, Maryland is expected to pull in $665 million in fiscal year 2018 once the tax increase is fully phased in, providing relief for a Transportation Trust Fund that state fiscal analysts reported last fall would be out of money for new construction projects by summer 2017.