Maryland Governor Martin O’Malley recently unveiled his plan to raise and reform his state’s gasoline tax. Local TV stations predictably responded by interviewing drivers unhappy with the high price of gas, while (also predictably) failing to explain that Maryland’s gas taxes are not to blame for those high prices.
A new chart from our partner organization, the Institute on Taxation and Economic Policy (ITEP) shows that Maryland’s flat gas tax has long been declining as inflation has chipped away at its value. If the legislature does not act on the Governor’s recommendation, ITEP projects that by 2014 Maryland’s gas tax rate will reach its lowest (inflation adjusted) level in 91 years. Only in 1922 and 1923 did Maryland levy a lower gas tax.
Moreover, the gas tax increase proposed by the Governor is actually very modest. The plan (which would tie the gas tax to both inflation and gas prices) would result in roughly a 9 cent increase by 2014. That’s significantly less than the nearly 16 cent increase that ITEP found would be needed to return Maryland’s gas tax to its purchasing power as of 1992, when it was last raised. Taking an even longer-term perspective, ITEP finds that Maryland’s inflation-adjusted gas tax rate has historically averaged 41.1 cents per gallon. If the Governor’s plan is enacted, the inflation-adjusted rate over the next decade would average just 31 cents.