Maryland Gov. Larry Hogan and legislative leaders announced Thursday they plan to lift the state’s gas tax for 30 days to blunt fuel prices that have surged past $4 per gallon, as other states eye similar measures.
“At this time of global uncertainty due to Russian aggression, we are working with our legislative partners on an emergency suspension of the gas tax to help with the pain at the pump,” Hogan said in a statement.
State leaders responding to constituents squeezed by inflation and soaring prices are grasping for solutions and some governors have called on Washington to temporarily drop the federal gas tax. But such rollbacks could also undercut recent gains made in transportation funding through the long-sought infrastructure law signed by President Biden in November.
Michigan’s Republican-controlled House voted Wednesday to eliminate it’s 27.2 cents per gallon tax on gas, diesel and alternative fuels for six months. That would save drivers $725 million, but short counties, cities and villages hundreds of millions of dollars worth of transportation funds, according to the state legislature.
Nationwide, an average gallon of gas reached $4.32 on Thursday, up 84 cents from a month ago, according to AAA, as demand continued to outstrip supply and Russia’s war in Ukraine has sent prices higher still.
The National Conference of State Legislatures said at least 15 other state legislatures — California, Colorado, Florida, Idaho, Illinois, Indiana, Maine, Minnesota, Missouri, New York, Ohio, Pennsylvania, Rhode Island, Tennessee and Washington — are also discussing enacting a gas tax holiday, reduction or freeze at the state level.
Prices climbed 7.9% in February, compared with last year, with war in Ukraine likely to push inflation even higher
Maryland leaders pitched the emergency relief as they learned the state’s already historic surplus was projected to grow, reaching $7.6 billion by the end of 2023. The gas tax generates roughly $50 million for state transportation projects every two weeks.
“This swift action will help ease the financial burden on everyday Marylanders while keeping the pressure on Vladimir Putin and the Russian oligarchs who have enabled him,” Senate President Bill Ferguson (D-Baltimore City) and House Speaker Adrienne A. Jones (D-Baltimore County) said in a joint statement.
“We look forward to working with the Governor in the coming days to relieve the pressure on Marylanders’ pocketbooks while ensuring our long-term fiscal health,” they said.
A spokesman for Hogan said he has agreed to the 30-day deal.
State regulators have no power to directly reduce prices at the pump, but officials can exempt gas station owners from having to remit the tax, according to the Maryland comptroller’s office. That, officials hope, would prompt gas station owners to lower their prices to compete.
“This conflict that Vladimir Putin initiated has caused gas prices to skyrocket at a time when many Maryland families are already struggling to balance their household budgets,” Comptroller Peter Franchot (D) said after forecasters on Thursday announced Maryland had $1.6 billion more than expected to spend.
“Our residents shouldn’t shoulder the brunt of Putin’s criminal actions and efforts of the free world to stop the bloodshed and destruction that Putin is causing in Ukraine,” he said.
Franchot, the state’s chief financial officer, was the first Maryland leader to call Thursday for a gas tax suspension. He proposed suspending it for three months.
Advocates of the move in Michigan said families need immediate relief for the soaring prices.
“Michigan has billions of dollars in surplus revenue available and one of the nation’s highest state fuel taxes. The solution here isn’t complicated,” said Speaker of the House Jason Wentworth (R) in a statement.
But Michigan Rep. Padma Kuppa (D), arguing against the bill in the House on Wednesday, said slashing $750 million “without filling the gap is not fiscally responsible. We need to invest in Michigan so that people come here. We need to fix the damn roads.”
The Michigan bill includes a prohibition on “anyone other than an end user from being enriched” by the temporary tax cut, according to a House legislative analysis, “although in practice it is unknown how this provision would be identified or enforced.”
Earlier this week, a half-dozen governors, called on Congress to suspend the federal gas tax of 18.4 cents per gallon through the end of the year.
They included Michigan’s governor, Gretchen Whitmer (D), as well as those from Colorado, Minnesota, New Mexico, Pennsylvania and Wisconsin.
“Money saved at the pump translates into dollars back in consumers’ pockets for groceries, childcare, rent, and more,” they wrote to top congressional Democrats and Republicans on Tuesday, offering support for legislation, which has been introduced in the House and Senate.
The governors argued that the Highway Trust Fund, which uses gas tax revenue to fund road and transit projects nationwide, could be replenished by the U.S. Treasury and noted the large increase in road and bridge spending in the new infrastructure law.
But Beth Osborne, director of the group Transportation for America, which emphasizes environmental and road safety concerns, said cutting the gas tax would not guarantee savings for Americans and could stymie job creation connected with transportation projects.
Oil companies might not lower prices after taxes are cut, leaving consumers no better off, Osborne said. “Also it makes it hard to create jobs when you are giving up the funding needed for transportation projects.”
Whitmer’s office did not immediately say whether the governor would support the proposed Michigan gas tax cut.