In Maryland, gas tax ‘holiday’ bill advances; lawmakers hope for lower prices at the pump

In Pennsylvania, a top Republican lawmaker is pushing his own plan

By: - March 17, 2022 3:55 pm

(Photo by Angela Breck/Maryland Matters)

By Bruce DePuyt

ANNAPOLIS, Md. — Maryland lawmakers gave tentative approval to a 30-day “holiday” from the state’s gas tax, setting the stage for a final vote in each chamber early Thursday. The measure is on track to reach Gov. Lawrence J. Hogan Jr.’s desk by Thursday afternoon.

The measures, Senate Bill 1010 and House Bill 1486, would temporarily eliminate the requirement that service station owners remit Maryland’s 36-cent-per-gallon gas levy to the Comptroller’s office. The pause would become effective with Hogan’s signature.

State leaders hope that station owners pass along the savings to consumers, though they concede that they lack the power to mandate that.

AAA reported on Wednesday that the average price of gasoline is $4.23 per gallon, down two cents from the day before. A month ago the price stood at $3.53. A year ago consumers could fill their tank for $2.84 per gallon.

In Pennsylvania, Senate President Pro Tempore Jake Corman, R-Centre, a GOP candidate for governor, has floated his own gas tax holiday proposal.

Corman said he’d pay for the tax reduction by using $500 million in federal American Rescue Plan funds to prop up the budget of the Pennsylvania State Police, whose budget partly comes from an account funded by the tax. The proposal also calls for a $650 million bond from the Pennsylvania Department of Transportation to pay for critical infrastructure projects during the tax holiday, the Capital-Star previously reported,

States have some flexibility for spending American Rescue Plan funding, but the money cannot be used as offsets of a reduction in net tax revenue, according to guidelines from the U.S. Treasury. The relief dollars also cannot be used for debt service or to replenish a rainy day fund. And “extraordinary contributions” to pension funds are prohibited.

“This offers a win-win for Pennsylvania families — lower prices at the pump in the short run and better roads and bridges to drive on in the years ahead,” Corman said in a statement. “It also buys critical time for lawmakers to determine how we can best meet our long-term infrastructure needs without relying so heavily on the gas tax in the future.”

Elizabeth Rementer, a spokesperson for Pennsylvania Gov. Tom Wolf, a Democrat, told the Capital-Star in an email that the administration “recognizes that increasing gas prices have an impact on all Pennsylvanians, especially those who are struggling.” She referenced the governors’ letter to Congress and referenced Wolf’s budget proposal as possible ways to provide direct relief to those in need.

“As far as a state gas tax holiday, it’s important to note that our gas tax is tied to funding fixing our roads and bridges through the Motor License Fund, and that funding is critical to ensuring the strength of our infrastructure,” Rementer said.

The Maryland measures were introduced after Russia invaded Ukraine, a move that caused the global price of crude oil to spike, sending pump prices skyward. Lawmakers in each chamber advanced the bills on a voice vote, without dissent.

The tax holiday gained momentum when the Board of Revenue Estimates projected that Maryland’s budget surplus is expected to be about $7.5 billion over the next two years. As 2022 is an election year in Maryland, all 188 seats in the General Assembly are up this fall, and voters will decide who shall serve as governor, comptroller and attorney general starting next year.

Comptroller Peter V.R. Franchot (D), a member of the board and a candidate for governor, called for a three-month pause in the state’s gas tax. He praised state leaders for coming together “at lightning speed” in support of the 30-day plan.

Republicans in the Senate sought to amend the tax-holiday measure to eliminate the provision in Maryland law that causes the gas tax to increase automatically, by the rate of inflation, each year. They said the legislature should consider each bump in the fuel tax on an annual basis instead.

“We never should have put an automatic gas-tax increase that went in perpetuity,” said Sen. Justin Ready (R-Carroll). “No increase in what we take from taxpayers should happen automatically.”

Democrats opposed the amendment. Even before Russia’s invasion, Senate President Bill Ferguson (D-Baltimore City) said, Maryland was suffering a drop in transportation revenue because cars are more fuel efficient and because more motorists are purchasing alternative-fuel vehicles.

He and Budget and Tax Committee Chairman Guy Guzzone (D-Howard) pledged that the legislature will take a deep dive into the state’s reliance on the gas tax, which is currently the leading source of revenue for the transportation trust fund.

“We don’t know what that answer will be for our roads, for our bridges, for our highways, for our transit systems, for our port, for our airport,” Ferguson said. “This is what funds the infrastructure of our economy.”

The amendment failed on a party-line vote after a brief discussion.

Hogan told reporters on Tuesday that Maryland will be working to thwart price-gouging by gas station owners.

The 30-day tax holiday will cost the state approximately $94 million, according to legislative analysts. Because of lower tax revenues, the state’s Transportation Trust Fund will reduce grants to local governments by about $8 million, so the net impact will be around $86 million.

Bruce DePuyt is a reporter for Maryland Matters, a sibling site of the Pennsylvania Capital-Star, where this story first appeared.

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