A bill that sets up a possible 20-cent increase in the state’s gas tax will hit the governor’s desk for his signature shortly after session ends Monday, and the tax increase will hit gas pumps in July.
The General Assembly on Friday, March 29, gave final approval for a bill that will apply a possible 5 percent sales tax to the wholesale price of gasoline and will tie the current 23.5-cent excise tax to inflation, meaning it will likely go up each year.
The sales tax on wholesale fuel will be phased in, and its net effect on gas prices will depend on the price of fuel, but a state legislative analysis predicts the following increases:
— 4-cent increase July 1, 2013, to 27.5 cents
— 4-cent increase Jan. 1, 2015 to 31.5 cents
— 4-cent increase July 1, 2015 to 35.5 cents
— 3.5-cent increase Jan. 1, 2016 to 39 cents
— 3.5-cent increase July 1, 2016 to 42.5 cents
By fiscal 2018, the gas tax is predicted to total 44.6 cents.
The estimates assume that gas prices will rise by 3 percent each year, and inflation will rise by 2 percent each year.
The Department of Transportation is required to report on the effect of the indexing in 2019 and to recommend whether to continue.
Another provision would divert some of the revenue from online sales tax to the Transportation Trust Fund if Congress passes legislation allowing states to apply tax to Internet sales. If such legislation is approved, the extra 2 percent in January and July 2016 will not go into effect.
All told, the state is expected to bring in about $4 billion in revenue from the hike during the next six years, or about $800 million each year once fully implemented.
The bill — the product of a compromise between Gov. Martin O’Malley (D), Senate President Thomas V. Mike Miller Jr. (D-Dist 26) of Chesapeake Beach and House Speaker Michael E. Busch (D-Dist. 30) of Annapolis — opened a fault line between urban and rural legislators.
Rural legislators have contended that too much of the state’s transportation dollars have gone to mass transit projects, while only 8 percent of Marylanders use public transportation, yet more projects are planned, including the light-rail Purple Line from Bethesda to New Carrollton and the Red Line in Baltimore.
Proponents of the bill said increasing funds for transportation is a matter of competition; by decreasing congestion and providing infrastructure for businesses, Maryland will remain competitive with Virginia, which also passed transportation funding legislation this year. Opponents claim more Marylanders will go to neighboring states for their fuel.
A constitutional amendment that also passed the chamber would strengthen the proposed “lockbox” provision, prohibiting the governor from moving transportation funds to other programs or parts of the budget.
Under the proposal, which has not yet been discussed in the House and is currently languishing in the House Rules and Executive Nominations Committee, the two chambers would have to approve a diversion of transportation funds by a three-fifths majority vote.
A constitutional amendment requires voter approval.