Maryland governor calls for applying sales tax on fuel

By Keith Goble, Land Line state legislative editor | 2/7/2012

A plan by Gov. Martin O’Malley to raise money for road and transit projects in Maryland could soon result in truckers and motorists paying an extra 18 cents per gallon at the fuel pump.

The governor has announced he will ask lawmakers to apply the state’s 6 percent sales tax on fuel purchases to help address transportation needs.

A blue-ribbon commission on transportation funding announced during the fall that the state needs an additional $875 million annually to address infrastructure needs. The panel estimated that imposing a 6 percent sales tax would add $613 million a year – about three-quarters of the amount needed.

The state’s fuel tax rates have remained unchanged for 20 years. The tax rate for diesel has since held at 24.25 cents per gallon, and the tax for gas has been 23.5 cents per gallon.

During his State of the State speech O’Malley said Maryland has some of the worst traffic in America. He said something must be done now to reverse their course.

“We pay a heavy price in terms of the time we spend idling in bumper-to-bumper traffic. … With a growing population and aging infrastructure, we might soon pay an even steeper price,” O’Malley told a joint session of the General Assembly.

The governor said he wants the sales tax phased in annually during the next three years in increments of 2 percent. At that rate, the tax would increase 6 cents the first year.

A key benefit for the governor is that fluctuations in fuel prices would affect the sales tax collected.

Also included in the governor’s plan is a “braking mechanism” to limit the amount of a tax increase if prices spike.

Intended to boost support for his plan, O’Malley said he is in favor of making sure revenue generated from the sales tax is used for its intended purpose.

“We should also enhance protections in the law to better safeguard these new investments in the trust fund,” O’Malley said during his remarks.

The protection is welcomed by truckers and others who have grown accustomed to diversions in the state.

In the past 30 years, the transportation trust fund has been raided a dozen times, totaling about $670 million. The state’s general fund has been used to reimburse the transportation account for all but about $220 million.

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