Apply the sales tax to gas

[This post has been updated and revised for accuracy]

On Monday, Governor O’Malley unveiled his plan to improve Maryland’s roads, bridges, and transit systems by making the first changes in the state’s gas tax in two decades. .  The Maryland gas tax has been 23.5 cents per gallon since 1992, but its purchasing power has declined dramatically over the last twenty years, to the point where it now approaches that of the 1920s.  With this decline in value, it’s clear why Maryland’s transportation system is in serious financial trouble today.

The governor’s plan addresses this problem by phasing out the sales tax exemption for fuel over three years, while continuing the 23.5 cent per gallon tax.  

Maryland State Fuel Tax
	Current Tax Rate	Proposed Tax Rate	Proposed Tax  per gallon *	Difference per gallon
First year	23.5 cents	23.5 cents plus 2%	29.7 cents	6.2 cents
Second year	23.5 cents	23.5 cents plus 4%	35.8 cents	12.3 cents
Third year	23.5 cents	23.5 cents plus 6%	42 cents	18.5 cents
* Assumes average price of regular gasoline is stable at $3.50 per gallon [which includes 18.4 cents in federal gas tax and 23.5 cents in state gas tax].  AAA makes available data on current state average gas prices.

Good transportation is one of the foundations of a healthy economy, and we need to raise the gas tax to make job-creating investments in better transit, roads, and bridges.  At the same time, applying the sales tax to gas will cost working Marylanders more, and we need to take that into account.  Pairing this change in the gas tax with strategic investments in public transportation, as well as asking wealthier Marylanders to pay their fair share of costs for vital services, are good places to start.