Maryland motorists will have to dig a little deeper at the gas pump starting July 1.
The state tax rate of a gallon of gas will increase to 47 cents per gallon, an increase of more than 10% compared to the current rate. Over the last two years, the rate has increased by 30% due to inflation and surging fuel prices.
Owners of diesel-powered vehicles will experience a similar increase with the state gas tax increasing from nearly 43.5 cents per gallon to nearly 47.8 cents per gallon on July 1. Over the last two years, the state tax on diesel has increased by more than 29%.
“The fact that in a Maryland economy that Governor Moore himself has recognized isn’t performing well, Democratic leaders are OK with allowing large automatic tax raises to occur that will cost the average Maryland family hundreds of dollars per year and raise costs and prices for many small businesses is beyond disappointing,” said House Minority Leader Jason C. Buckel (R-Allegany).
The increase that takes effect July 1 would add about 65 cents to the fill-up of a 15-gallon gas tank, or about $33.54 more in additional state gas taxes on an annual basis. In all, motorists with that same weekly fill-up would pay more than $366 annually in state fuel taxes.
Revenue generated by the tax goes into a dedicated fund used to pay for statewide roads and highways projects. Democrats have warned of a coming reckoning as changing driving habits will likely render the trust fund and the gas tax less effective at paying for projects.
Additionally, Gov. Wes Moore (D) in March announced Maryland would require all new car sales in the state to be electric vehicles by 2035.
A spokesman for Moore did not immediately comment on the tax increase.
“You can’t be the party of the middle class if you keep promoting radical environmental policies that raise taxes and the cost of living,” said Buckel. “Everyone can’t afford a Tesla, or wants to live next to a Metro stop. For the millions of Marylanders who need to use their standard, gas-powered cars to go to work and feed their families, Maryland Democrats just raised your taxes.”
The increase also gives Maryland the distinction of having the fourth highest gas tax in the U.S. behind California, Pennsylvania and Washington state. The tax is the second highest in the Mid-Atlantic.
Information regarding the tax increase was published on the state comptroller’s website this week. A letter was sent to Moore, Senate President Bill Ferguson (D-Baltimore City) and House Speaker Adrienne A. Jones (D-Baltimore County) informing them of the July 1 increase.
In the letter, Robert J. Rehrmann, director of the Board of Revenue Estimates, said the increase was driven almost equally by inflation and the average price of a gallon of gas over the last year.
Inflation rose 7.1% between May 2022 and April 2023 — just shy of the 8% limit built into a decade-old law. That increased the per gallon state surcharge by 2.1 cents per gallon.
Rehrmann said high motor fuel prices — based on the average price of a gallon of gas — added another 2.2 cents to the state tax.
The increase is on top of the federal tax of 18.3 cents per gallon for regular fuel and 23.4 cents per gallon for diesel. Those tax rates have remained in place since 1993.
By law, the comptroller’s office must set the new state gas tax rate by June 1. It’s based on a formula that takes into account the annual rate of inflation as well as the average cost of a gallon of gas over a year.
“The Comptroller understands the ongoing challenges presented by inflation and has made every effort to provide this notice as early possible. We will continue to perform the duties assigned to our office in a way that supports Marylanders and allows the maximum possible time to account for any changes in the tax code,” Tim Zink, a spokesperson for Comptroller Brooke E. Lierman (D) said in a statement Wednesday.
Maryland’s motor fuel tax has been tied to inflation since 2013. That year, the legislature passed the first increase in the tax in more than two decades.
Lawmakers that year, in an effort to avoid future votes on a politically charged tax, linked future increases to a calculation of annual inflation. At the time, sharp rises in inflation were few and far between.
Last year, that trend ended as gas prices rose at the pump and inflation increased to levels not seen in four decades. The result was a 6.7 cents per gallon increase.
Republicans in the legislature over the last couple of years have unsuccessfully mounted efforts to repeal the automatic increase tied to inflation. In March, Republicans in the Senate unsuccessfully attempted to decouple inflation from the gas tax by offering an amendment to legislation that removed the inflationary calculation on automatic transit fare increases.
“Senate Republicans provided an opportunity to offer relief to Maryland motorists by offering a floor amendment to repeal the automatic annual gas tax increase,” said Minority Leader Stephen S. Hershey Jr. (R-Upper Shore). “However, Democrat leadership squashed that, refusing to take accountability for their propensity to increase taxes. Maryland motorists deserve transparency on the taxes imposed on them.”
This story has been updated with more details about the tax hike and reaction from elected officials.