Maryland fuel tax on the way up ...waaaaay up

By Keith Goble, Land Line state legislative editor | Friday, May 17, 2013

Gov. Martin O’Malley signed a bill into law on Thursday, May 16, which could result in truckers and other drivers in Maryland paying about twice as much in state taxes at the fuel pump.

The governor signed a six-year, $4.4 billion transportation funding plan. The effort is touted to address a lack of new highway construction money available after 2017.

Initiated by the governor, HB1515 is expected to raise about $830 million annually for state and local road, bridge and transit work.

O’Malley said that the transportation bill will allow the state to continue to be competitive at attracting companies to invest, grow and create jobs.

“We have guaranteed a sustainable transportation funding source that will support more than 57,200 jobs, create a safer, more efficient transportation network, and spur economic development,” O’Malley said in released remarks.

Starting July 1, new revenue will be generated through a 1 percent sales tax applied to fuel purchases at the wholesale level. The change is expected to equate to a 3.8-cent-per-gallon rate increase for gas and diesel.

The sales tax rate will later rise to at least 3 percent. The tax will increase to 5 percent if Congress fails to act on legislation allowing states to tax Internet sales.

In addition, the state’s 23.5-cent-per-gallon excise tax on gas and 24.25-cent tax on diesel will be indexed to inflation, which allows for regular increases. The tax rate has remained unchanged since 1992.

When the taxes are fully implemented in 2017, state estimates show that the price at the pump will be about 40 cents per gallon – about 16 cents higher than the current rates.

If the Internet tax isn’t approved by federal lawmakers, the state’s tax rates will increase another 8 cents to nearly 48 cents per gallon.

The first round of projects announced that will benefit from the infusion include $125 million to build an Interstate 270 interchange at Watkins Mill Road in Montgomery County.

Also signed into law is a bill that is intended to protect the new revenue from raids to other budgets. Voters will get the final say.

SB829 seeks to setup a “lockbox” to secure transportation funds. In the past 30 years, the state’s Transportation Trust Fund has been raided a dozen times.

The proposed constitutional amendment would require the governor to declare a fiscal emergency and a three-fifths vote of each chamber of the General Assembly to divert funds away from transportation purposes.

The issue is slated to be included on the November 2014 ballot.

To view other legislative activities of interest for Maryland, click here.

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