Hogan Lobs Gas Tax Hike Hot Potato At Peter Franchot

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Without the Comptroller’s Action, Maryland’s Gas Tax Rises on July 1st

Governor Larry Hogan has called on Peter Franchot to immediately take steps to halt or minimize the impact of the legislative gas tax increase that the Comptroller’s office is scheduled to announce in the coming days.

Under legislation passed by the General Assembly in 2013, the Comptroller announces gas tax increases on or before June 1 of each year that take effect on July 1. The Comptroller’s Office calculates the tax increase based on the consumer price index.

Marylanders are already heavily taxed at the pump. Motorists face a federal tax of 18.4 cents per gallon, in addition to Maryland taxes of 36.10 cents per gallon. This reflects a state increase of 13 cents/gallon since the passage in 2013 of the annual CPI increase.  

Earlier this year, Senate Republicans proposed SB 337, which would have repealed the 2013 requirement that the gas tax rates be hiked annually by the inflation rate.  This repeal effort failed in Committee. According to the bill’s Fiscal Note: “Transportation Trust Fund (TTF) revenues [would] decrease by $37.5 million in FY 2023 due to repeal of the indexing of motor fuel tax rates.”  The note also says that the “Maryland Department of Transportation (MDOT) expenditures would not be directly affected.” [i]   The revenue loss would represent one-half of 1 percent of the state’s projected $7.6 billion surplus. [ii]

Among the candidates for Governor, Kelly Schulz has already made an issue out of the “inflation tax” – noting on her website that “under Martin O’Malley, they indexed the gas tax to inflation. So when inflation is out of control and rising so are our gas taxes – making life more unaffordable than it already is.”[iii] However, as near as I can determine from their websites, none of the other candidates for Governor have raised the issue.

“This tax increase, while hardship-inducing for Marylanders at any time, is simply unconscionable at this moment when gas prices are already at their highest level in recorded history amid a period of prolonged inflation and economic uncertainty,” writes Governor Hogan in his letter to Franchot.  “I know that you agree we should do more to give Marylanders a break from these punishing prices. That is why it is my hope that you will use every legal and regulatory power at your disposal to halt or minimize the impact of the accelerating gas taxes, and that you consider granting an extension for paying the taxes and removing penalties for unpaid tax, including the revocation of business licenses.”

In the letter, the Governor notes that the Comptroller has been a strong advocate for protecting Marylanders from rising gas prices, and points out that in the past, the Comptroller has taken actions to protect Marylanders from impending tax deadlines and burdens. In January of this year, for example, Comptroller Franchot extended the individual income tax filing and payment due date for the third consecutive year, as well as the individual estimated tax payment due dates, to give “breathing room” to Marylanders who were struggling financially.

Preventing Maryland’s Gas Tax hike on July 1st represents a concrete response to the substantial inflation spikes Americans are now suffering from.

Governor Hogan’s letter to Comptroller Franchot, the full text is below: [iv]

Dear Comptroller Franchot,

It is my understanding that you will soon announce large increases to Maryland’s motor fuel tax. This tax increase, while hardship-inducing for Marylanders at any time, is simply unconscionable at this moment when gas prices are already at their highest level in recorded history amid a period of prolonged inflation and economic uncertainty. 

I know that you agree we should do more to give Marylanders a break from these punishing prices. That is why it is my hope that you will use every legal and regulatory power at your disposal to halt or minimize the impact of the accelerating gas taxes, and that you consider granting an extension for paying the taxes and removing penalties for unpaid tax, including the revocation of business licenses. This would be in line with similar actions you have recently taken when you perceive various state laws to be too burdensome on Marylanders; for example, in January of this year, you extended the individual income tax filing and payment due date for the third consecutive year, as well as the individual estimated tax payment due dates, to give “breathing room” to Marylanders who were struggling financially.

In 2015, I proposed legislation to permanently suspend increases to the gas tax, which was unfortunately and shortsightedly rejected by the General Assembly. It was even more unfortunate when the General Assembly failed to pass legislation to prevent further increases to the gas tax during the 2022 session—well into the current inflation crisis—despite proposed bills to repeal a portion of the tax (SB0337 and HB0144) and to suspend the increases through 2024 (HB1191 and SB0737). 

These failures make it incumbent on your office to step up and take action to help struggling Marylanders. After consulting with state budget and transportation officials, I am confident that the state can absorb the financial impact of foregoing this ill-conceived and ill-timed tax increase. Given shaky oil markets, record inflation, and a skyrocketing cost of living, the continued surges in gas prices are inflicting more pain at the pump than Marylanders can bear. I am calling on you to take immediate action to provide much-needed relief, particularly as citizens of our state begin to plan their summer travels.

Sincerely,

Larry Hogan
Governor


[i] Text: https://mgaleg.maryland.gov/2022RS/bills/sb/sb0337F.pdf

Fiscal note https://mgaleg.maryland.gov/2022RS/fnotes/bil_0007/sb0337.pdf

Details: https://mgaleg.maryland.gov/mgawebsite/Legislation/Details/sb0337

[ii] https://www.washingtonpost.com/dc-md-va/2022/03/10/maryland-surplus-tax-cuts-spending/

[iii] https://www.kellyschulzforgovernor.com/issues-2/

[iv] Gas-Tax-Franchot-Letter.pdf (maryland.gov);   https://governor.maryland.gov/wp-content/uploads/2022/05/Gas-Tax-Franchot-Letter.pdf

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