Md. Republicans renew push to eliminate gas tax hikes triggered by inflation

ANNAPOLIS — Maryland Republicans are again pushing to eliminate an automatic increase in the state’s gas tax tied to inflation.

As it was last year, the repeal is one of the top priorities for Senate Republicans in the 2023 session.

“Over the past year our working families across the state have been struggling with this economy due to rapid inflation, especially at the grocery store and at the gas station,” said Sen. Jason Gallion, R-Cecil and Harford and sponsor of the bill. “I believe that if the gas tax rate needs to be adjusted, it should be done by the legislature annually with an up-or-down vote to be able to adequately assess the state of the economy and its effects on the taxpayers.”

Only one of the Senate’s 13 Republicans is not listed as a sponsor of the bill. None of the Senate’s 34 Democrats has signed onto the repeal bill.

In 2013, the legislature raised the gas tax for the first time in more than two decades.

Typically, such efforts meet with strong public opposition. The bill passed a decade ago sought to avoid the controversy by tying future annual increases to inflation and making it automatic.

Part of the formula links increases to inflation over a 12-month period that ends each April 30. That rate does not decrease in the event of negative inflation. The law caps the the inflation-related increase at 8%.

Last year, the gasoline tax, driven by some of the highest inflation in 40 years, increased the state’s levy from 36.1 cents to 42.7 cents per gallon starting July 1.

“I think if nothing else, it kind of underscores the inherent shortcomings of tying anything to (inflation),” said Mike O’Halloran, representing state motor fuel dealers.

Tying automatic increases to inflation is expected to come up again this session as lawmakers consider accelerating the increase in the state’s minimum wage to $15 per hour. Some, including Democratic Gov. Wes Moore, want to impose automatic annual increases tied to inflation.

O’Halloran said repealing the gas tax link to inflation would allow the legislature “to really look at not just motor fields, but perhaps tax structure overall.”

Another 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 2020 and 2021, when COVID-19 drove prices down because of a sharp drop in usage, the sales tax portion of the rate actually decreased slightly.

The revenue from the gas tax goes into a dedicated transportation trust fund that was also created in the 2013 legislation.

Nine states, including Maryland, tie gas tax increases to inflation.

This July, those rates will likely increase again, driven by inflation that in December fell to 6.5%. The average annual gas price may also be affected to some degree by the unusually high prices of last summer.

Those prices last year resulted in a 30-day tax holiday for motorists.

Efforts by Republicans to repeal the automatic increases last year failed as Democrats pointed to a need to pay for highway projects that were also getting more expensive because of inflation and other factors.