Chesapeake State intent on raising fuel taxes

| 4/8/2003

Maryland lawmakers are looking for more fuel tax revenue to patch a gaping hole in the state's budget.

Reported estimates put this year's budget deficit at more than $500 million, with another $1.2 billion shortfall predicted for 2004.

Local newspaper reports say Republican Gov.-elect Robert L. Ehrlich Jr. would consider approving a 5-cent increase in fuel taxes. The Legislature may take him up on his offer if they pass even one of a couple of proposals for a fuel tax increase.

HB1163 and SB758 would increase the motor fuel tax on diesel by 10 cents per gallon, from 24.5 cents to 34.5 cents. The same increase would raise the tax on gasoline from 23.5 cents to 33.5 cents per gallon.

With an effective date of Jan. 1, 2004, the tax increase would net the state $139.7 million for its Transportation Trust Fund in the 2004 fiscal year and $282.2 million in 2005.

HB910 would increase the motor fuel tax by 5 cents per gallon and the sales tax by 1 percent for 2004 and 2005. This tax increase is combined with a provision to increase the state's highest income tax bracket by 0.05 percent to 4.8 percent and lowers the exemption for taxpayers and their dependents to $2,100 for tax years 2003 and 2004.

HB1020 would impose a sales and use tax on the sale of motor fuel and would alter the distribution of existing tax revenue between the general fund and the Transportation Trust Fund. Under the bill's provisions, the sellers of motor fuel will prepay the sales tax at a rate of 7 cents per gallon for 2004, with the rate being adjusted annually based on the average retail price of fuel for the prior calendar year.