O’Malley proposes 6% sales tax on gas

Maryland Gov. Martin O’Malley said Monday that he would ask lawmakers to approve an unprecedented tax increase on gasoline, applying for the first time Maryland’s 6 percent sales tax to every gallon of gas to raise billions of dollars for road and transit projects.

The sales tax would be phased in annually in increments of 2 percent at the wholesale level, meaning that a gallon of gas that now costs $3.48 at the pump would increase 6 cents.

If the price of gas rises or falls, the sales tax amount would also. Combined, the three-year increase per gallon could total 18 cents or more, making Maryland’s combined levy on gasoline more than 41 cents a gallon and among the highest in the country.

O’Malley (D) made the announcement during his monthly appearance on WTOP’s “Ask the Governor” and declined to comment further later in the day at his only scheduled public event in Annapolis. During the radio program, O’Malley said his full proposal would be sent to the legislature within days and acknowledged it would not be popular. But he urged lawmakers to consider whether it was “a good way to go.”

Marylanders have to decide, O’Malley said, if “what all of us are paying right now in terms of idling in traffic congestion, time away from family, time away from work, that all of that is more expensive in the longer term than making this investment in transportation.”

A new Washington Post poll, however, indicates O’Malley’s proposal could be his most unpopular effort of the year and draw opposition from a broad swath of voters and lawmakers.

O’Malley has proposed an array of other tax and fee increases, including on six-figure earners and homeowners, to close the state’s budget shortfall and to increase spending on environmental projects.

Voters are split on those initiatives, but raising the price of gasoline was a non-starter for most.

Fewer than half surveyed last week by The Washington Post supported even a 5 cent increase in the state’s 23.5-cent-per-gallon flat tax.

When asked how they felt about an increase of 10 cents per gallon or more to fund additional road and transit work, opposition swelled above 70 percent and across a range of income levels.

“The governor is walking into the biggest nightmare of working-class families,” said Senate Republican leader E.J. Pipkin (Queen Anne’s). “With this new gas tax, the citizens of Maryland will be paying premium and getting regular. . . . Add that to his other proposed tax increases, and I don’t see how Maryland is attractive to businesses — the governor’s stated goal.”

Several Democrats in the General Assembly said they wanted to wait and see O’Malley’s proposal before taking a position. House Speaker Michael E. Busch (D-Anne Arundel) said any discussion of raising the gas tax would have to come after the legislature agrees on a plan to close the state’s roughly $1 billion shortfall.

The governor’s spending plan includes other controversial measures, including shifting a share of teacher pension costs to counties, which counties say they can’t afford.

The governor’s proposal to add sales tax to gasoline would raise even more from fuel than a recommended 15 cent gas-tax increase proposed over the summer by a commission that O’Malley and the legislature established. The commission, however, did not contemplate how the state would pay for many big-ticket projects, including a proposed light-rail line connecting Montgomery and Prince George’s counties.

The commission and other proponents of increased transportation spending have for years said Maryland faces an unfunded backlog of many billions of dollars in projects.

Those estimates come from lists counties submit annually to the state seeking funding. According to the state’s transportation department, just the No. 1 projects for each of Maryland’s 23 counties and Baltimore total up to more than $12 billion — or more than the state plans to spend on transportation over the next six years combined.

In their entirety, the letters suggest Maryland transportation officials’ wish lists total more than $40 billion.

The state collects $738 million annually from its gas tax. O’Malley’s proposal would raise almost an additional $600 million annually. The sales tax would be applied to gasoline, diesel and special fuels, such as ethanol, methanol and propane. Jet fuel would be exempt.

The state would collect the tax from gasoline wholesalers, but Maryland Comptroller Peter Franchot (D) warned that a sales tax would probably add costs for gas retailers, too.

Seven other states, including Virginia, collect sales tax on gasoline, however, Virginia’s total gas tax is just over 20 cents per gallon, or less than half of what Maryland’s would be after the increase.

Speaking with WTOP host Mark Segraves, O’Malley attempted to frame his proposal as “repealing” an exemption that kept the sales tax from being applied to gas, and he said his legislation would include a way to limit the sales tax from rising too much if gas prices spike.

Asked by Segraves, O’Malley said he also would be open to a “lock box” measure to prevent the state from dipping into transportation funds, as it has in the past, to cover other spending.

Aaron Davis covers D.C. government and politics for The Post and wants to hear your story about how D.C. works — or how it doesn’t.
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