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Franchot calls for removal of inflation link for state gas tax

Bryan P. Sears//June 23, 2022

Franchot calls for removal of inflation link for state gas tax

By Bryan P. Sears

//June 23, 2022

“We should tweak (the gas tax law) by decoupling ourselves,” said Franchot. “It’s a bad thing. No one anticipated this kind of inflation.” (The Daily Record/Bryan P. Sears)

Maryland should repeal a 2013 law that links automatic gas tax increases to inflation and other factors, according to the state’s top tax collector, who is also a candidate for governor.

Maryland is a week away from an 18% increase in the state gas tax based on a formula set in 2013. Comptroller Peter Franchot said Thursday that automatic increases tied to inflation and other factors should end.

“We should tweak (the gas tax law) by decoupling ourselves,” said Franchot. “It’s a bad thing. No one anticipated this kind of inflation.”

“It’s the only tax that is coupled to inflation,” he said.

Franchot stood under a northwest Baltimore gas station canopy declaring quick action was needed to soften the effects of a recession gripping the state.

“We’re in it,” said Franchot, speaking to reporters after his prepared remarks. “It’s started. It’s here. We’re going to have significant damage done to employment and to wages.”

The average income in the northwest Baltimore neighborhood near Lochearn is $39,000. Franchot said those residents will spend 20% of their income on gas.

Franchot said he made his pronouncement based on inflation that is rising and that the Federal Reserve is “elephant stomping” it with increases in the interest rate.

Franchot softened that pronouncement slightly when reminded by a reporter that a recession is defined by two consecutive quarters of declines in the gross domestic product.

“OK,” he said. “So maybe the technical definition is in progress.”

He said a temporary pause on the gas tax coupled with $2,000 “emergency survival checks” to 475,000 people earning less than $50,000 would slow the recession in Maryland.

The General Assembly passed legislation in 2013 that raised the gas tax for the first time in more than two decades. Such an increase had been tried before but had no public support.

So, when the bill passed nearly a decade ago, the Democratic majority legislature created a formula to provide increases with no more votes.

One portion of that formula links future increases to the cost of inflation. That rate does not decrease in years when there is negative inflation.

The second component adds a sales tax based on the average price of a gallon of gas in the previous 12 months. That portion goes up and down based on the average price.

In a week, the state will increase the state portion of the gas tax from 36.1-cents to 42.7-cents per gallon.

Franchot said as governor he would seek to decouple the tax “immediately.”

Republicans have called for such a change in other sessions, including earlier this year.

Franchot downplayed the discomfort lawmakers in his own party might feel at being asked to make the change. Democrats in the legislature are remaining largely silent on the issue.

“It’s the right thing to do and they know it, particularly given this inflation rate that is skyrocketing,” he said.

Meanwhile, inflation and gas prices continue to exert pressure on personal and business finances as the 2022 primary and general election season forges ahead.

This week Democratic President Joseph Biden called for a 90-day reprieve of the federal 18-cent gas tax. Some members of his own party have rejected it as gimmicky or potentially damaging to a federal transportation fund.

In Maryland, Franchot and Republican Gov. Larry Hogan both renewed their calls this week for another gas tax holiday.

“With the pain at the pump only getting worse, Congress should act immediately to suspend the federal gas tax,” said Hogan, adding that he would immediately sign state legislation passed in a special session.

“There is no reason why we cannot come together and get this done before the July 4th holiday to provide much-needed relief for the crushing costs burdening families and businesses,” he said.

Unlike the one that ended in April, the new holiday would directly tie into Biden’s proposal and could reduce the cost of a regular gallon at the pump by nearly 61 cents.

“Right now we’re dealing with a lack of political will,” said Franchot.

House Speaker Adrienne Jones and Senate President Bill Ferguson continue to reject the idea.

“The Maryland General Assembly already did exactly what President Biden is proposing at the federal level: implemented a temporary pause on the state gas tax while backfilling our Transportation Trust Fund to ensure maintenance of our roads and bridges,” the pair said in a joint statement.

Ferguson and Jones blamed the increases on the Russian invasion of Ukraine and “corporate greed” of oil companies.

“We hope to see Congress follow Maryland’s lead and give all Americans a respite from increasing prices at the pump,” they said in their statement.” 


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