With Maryland motorists facing the largest state gas tax increase in a decade, two of the state’s top elected officials are looking to each other for a temporary way out.
Starting July 1, motorists can expect to pay nearly 43 cents in taxes on every gallon of gas, according to preliminary data from the state Office of the Comptroller. The 6.6-cent increase would be the largest since the passage of a law that tied future increases to inflation.
On Monday, the increase triggered letters from Republican Gov. Larry Hogan and Democratic Comptroller Peter Franchot. Each is looking to the other for help in pausing the tax hike.
“I know that you agree we should do more to give Marylanders a break from these punishing prices,” Hogan wrote in his letter. “That is why it is my hope that you will use every legal and regulatory power at your disposal to halt or minimize the impact of the accelerating gas taxes, and that you consider granting an extension for paying the taxes and removing penalties for unpaid tax, including the revocation of business licenses.”
It is not clear what power Franchot might have to delay or defer the impending increase.
Hogan, in his letter, referenced other actions Franchot has taken during the pandemic to ease burdens on individuals and businesses. In the recent past, Franchot has delayed collection of sales taxes, extended the deadline for filing individual income taxes three consecutive years, and pushed back deadlines for estimate tax payments.
“The Governor’s Office is misinterpreting state law,” said Susan O’Brien, a spokeswoman for Franchot. “There is no provision that allows the comptroller to unilaterally halt or suspend the automatic increase to the gas tax. Delaying motor fuel tax returns, as the governor seems to be suggesting, would have no impact on consumers who are suffering at the pump. It would only help Big Oil delay their tax payments.”
Franchot, in his response to Hogan, called on the governor to declare an economic state of emergency and “temporarily suspend the gas tax.”
The idea floated by Franchot, who is seeking the Democratic nomination for governor in 2022, also appears legally tenuous. The provisions appear to deal with how the governor might handle energy shortages but doesn’t specifically mention the ability to affect taxes. Aides to Franchot were unable to point to a specific provision that might apply.
Franchot lamented the failure by the governor and Democratic leaders of the General Assembly to reach an agreement to extend a temporary gas tax holiday.
“Absent any executive or legislative remedy — and without any legal or regulatory flexibility afforded to me by law, which my office is continuing to explore — Marylanders will unnecessarily be financially burdened at a time when so many are already struggling,” Franchot wrote. “Moments like these require an all-hands-on-deck approach, and I am committed to utilizing every legal and regulatory tool at my disposal to respond to this crisis.”
House Speaker Adrienne Jones was unavailable for comment. A spokesman for Senate President Bill Ferguson declined comment.
Even if such tools existed or Hogan could somehow impose an economic state of emergency, the increase would only be delayed, not stopped.
“We knew it was going to be a big one,” said Kirk McCauley, legislative director of the Washington-Maryland-Delaware Service Station and Auto Repair Association, which represents 700-800 members. “And supply is not getting better.”
The average cost of a gallon of gas in Maryland on Monday was more than $4.61 per gallon. Nationally, the cost is nearly $4.60 per gallon, according to AAA Mid-Atlantic.
“After consulting with state budget and transportation officials, I am confident that the state can absorb the financial impact of foregoing this ill-conceived and ill-timed tax increase,” wrote Hogan. “Given shaky oil markets, record inflation, and a skyrocketing cost of living, the continued surges in gas prices are inflicting more pain at the pump than Marylanders can bear. I am calling on you to take immediate action to provide much-needed relief, particularly as citizens of our state begin to plan their summer travels.”
Earlier this year, House and Senate Republicans mounted several attempts to end the inflation-driven automatic increase through bills and attempts to amend other legislation. The Senate also unsuccessfully attempted to force a separate bill out of committee that would have paused increases for two years because of rising inflation. The bill would have come before the full Senate had just one Democrat joined with 15 Republicans on a petition to bring it to a vote.
“Republicans provided solutions during the session,” said Sen. Bryan Simonaire, R-Anne Arundel and Senate minority leader. “They were outright rejected by the Democratic super-majority. It’s another example of how Democrats in the General Assembly are out of touch with average Marylanders.”
Franchot’s office is responsible for collecting motor fuel taxes.
In 2013, the legislature and then Gov. Martin O’Malley passed legislation that increased the state’s gas tax for the first time in two decades. Such increases are politically unpopular, so the law included automatic annual increases tied to the Consumer Price Index.
Each year, the Office of the Comptroller is required to set the new rate based on the annual rate of inflation. That new rate takes effect July 1.
Currently, the state’s excise tax on gas is about 36 cents per gallon.
An analysis by the Department of Legislative Services earlier this year projected an increase around 4%. That estimate came even as inflation was rising by 8% since December.
Earlier this year, Franchot called for a 90-day gas tax holiday. Hogan, Jones and Ferguson reached an agreement for a 30-day period.
The estimated $100 million hit to the state’s Transportation Trust Fund was offset by $100 million from the state’s record $7 billion budget surplus.
As the 90-day General Assembly session came to a close, legislative leaders had little interest in an extension.
The day before the holiday ended in mid-April, the price of a gallon of gas was $3.69 per gallon.