Temporary suspension of Maryland gas tax expiring, but debate continues

The end is nigh for Maryland’s gas tax holiday.

For nearly a month, the state has foregone the collection of its 36-cent per gallon tax. That all ends around midnight Saturday when dealers reimpose the full tax and prices lower than the national average disappear, jarring motorists back to reality.

Kirk McCauley, legislative director of the Washington-Maryland-Delaware Service Station and Auto Repair Association, said the temporary pause worked well for his 700-800 members.

“The customers have been happy, and that makes our dealers happy,” McCauley said.

There were no complaints about stations not dropping prices, he said.

“In Maryland, once the gas tax pause was implemented, we did see immediate decreases in the price of gas,” said Ragina Ali, spokeswoman for AAA Mid-Atlantic.

Motorists will see the prices jump Easter Sunday as stations reinstitute the tax at midnight Saturday.

The average price of a gallon of gas in Maryland was $3.69 Thursday, according to AAA Mid-Atlantic. Reimposing the tax on Sunday could push that average to around $4 per gallon. Some areas could see localized higher prices.

“When it goes back up to $4 a gallon, that’s then it will really hit home,” McCauley said. “We’ll get a lot of ‘wish it could have lasted longer’ comments,” McCauley said. “Who wouldn’t want to see it go longer?”

Comptroller Peter Franchot called in March for a 90-day moratorium. Within hours, the General Assembly and Gov. Larry Hogan announced they had agreed to a 30-day pause.

Legislation rocketed through the House and Senate. Hogan signed it into law a week after Franchot first floated it.

Senate President Bill Ferguson told reporters earlier this week that international pressures on oil prices require a more national solution.

“We were not going to be able to solve that problem,” he said. “We were going to provide temporary relief, and we knew it was only going to be temporary relief and at some point (the price) would adjust.”

In addition to international pressures, supply chain issues, gas production and demand also play a role in the cost.

In Maryland, demand for gas is also up after a more restrictive period of the pandemic.

In January, motorists in Maryland purchased nearly 233.4 million taxable gallons of fuel, according to the most recent numbers available from the Office of the Comptroller. That amount is a 20% increase over the same month in 2021.

The estimated cost of the forbearance is $100 million for a 30-day period. The actual costs will not be known for some time, a spokesman for the comptroller’s office said.

And while the governor lauds $100 million “put back into the pockets” of Marylanders, the real benefit may only be political.

A motorist fully filling a 15-gallon gas tank would likely have only saved $22 over the 30-day period.

The proceeds from the tax funnel directly to a state trust fund for roads, highways and transportation projects. Lawmakers backfilled the lost revenue with $100 million from a $7.5 billion surplus.

Both Franchot and Hogan called for an extension. Del. Brenda Thiam, R-Washington County, unsuccessfully attempted last week to amend an extension into a related bill. The House rejected that attempt.

“There was no appetite on (Democrats’) side,” Hogan said.

“We were open to extending it further,” Hogan said in a meeting with reporters on Monday. “We do have the ability to do more. There was a proposal the Republicans introduced, and they shot it down.”

In the summer, the amount of the tax is likely to increase. In 2013, the legislature and then-Gov. Martin O’Malley passed the first gas tax increase in 20 years. That legislation contained a provision for an automatic annual increase tied to the annual rate of inflation.

Ferguson said that was meant to help pay for the cost of roads and other projects.

“The whole idea is that when inflation goes up, so does the cost of doing maintenance and financing new projects,” he said.

“It’s not as though government pays a different price to do projects” than the private sector, Ferguson said.

But the provision was also political. Numerous attempts had been made to raise the tax on gas in the previous two decades. Those attempts failed because they were politically unpopular.

Since 2013, the tax on a gallon of gas has increased 46% to its current rate.

That same law passed in 2013 caps the inflation-related increase to 8% in any given year. At the time, lawmakers said it was almost unthinkable that the state would ever see such an increase.

The federal Bureau of Labor Statistics announced Tuesday that inflation grew by 8.5% over the same time a year ago. The report raises the specter of an automatic increase at the maximum amount come July 1.

House and Senate Republicans unsuccessfully attempted to end the automatic increase or impose a two-year moratorium on it.

“Gas is going to go up again, with that CPI it’s going to go up automatically, without a vote every year, it goes up,” said Sen. Bryan Simonaire, R-Anne Arundel County and top Senate Republican. “And we said let’s stop that and make legislators vote if they think they have a case to raise the tax.”