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For Immediate Release: February 22, 2011

THE FACTS REGARDING
THE MARYLAND TRANSPORTATION
FINANCING AND INFRASTRUCTURE ACT OF 2012

When was the last time the gas tax increased in Maryland?

Maryland’s gas tax was last increased in 1992 to 23.5 cents per gallon.  The amount of the gas tax today remains 23.5 cents per gallon.

Has the buying power of the state’s gas tax decreased over time?

Yes.  One dollar in 1992 is worth 62 cents today, a reduction of 38%.  While the cost of materials and labor has increased over time, Maryland’s ability to pay for needed transportation improvements has decreased 38%.

What is being proposed?

Under existing Maryland law, gasoline is exempt from the 6% state sales tax.  The proposal now before the General Assembly calls for a phased-in application of the sales tax on gasoline over three years, 2% each year through 2015.

When would this take effect?

If passed as proposed, the bill would take effect July 1, 2012.  Implementation of the first phase (the first 2% of the 6% sales tax) also would take effect July 1, 2012.

How much will a 6% gas tax add to the price of a gallon at the pump?

Based on current average gas price of $3.49 per gallon, this translates into an increase at the pump of    6 cents in the first year, 12 cents in the second year and 18 cents per gallon in the third year at which point the full 6% sales tax will be in effect.

Will the sales tax be applied to the price of a gallon of gas including federal and state gas taxes?

No, the sales tax is only applied to the retail price of a gallon of gasoline once the state gas tax (23.5 cents) and the federal gas tax (18.4 cents) have been subtracted.    

Here is an example of how the rate would be calculated at full implementation of the 6% sales tax.  The average retail price of gasoline is $3.49 per gallon based on the final quarter of 2011, according to the American Petroleum Institute.   After subtracting the 23.5 cents per gallon state gas tax and the 18.4 cents per gallon federal gas tax (total of 41.9 cents per gallon), the net retail price equals $3.07 per gallon.  Sales tax of 6% applied to $3.07 equals to 18.4 cents per gallon.


What is the impact, per vehicle of the 6% sales tax?

When the full 6% sales tax is phased in, the typical driver is projected to pay roughly $2.00 more per week, per vehicle. 

If the price of gas dramatically increases during the phase-in period will the sales tax on gas dramatically increase as well?

No.  A braking mechanism will be in place to slow down the phase-in of the sales tax if a dramatic fluctuation in the price of gas occurs.  If the price of gasoline in Year One were to increase by more than 15% over the prior year, the rate in Year Two would remain at 2%.  A similar approach will be used in each successive year until the full 6% is implemented.

Will there be any way to make sure that transportation money doesn’t get used for other needs?

The legislation now being considered by the 2012 General Assembly contains a series of measures to ensure transportation revenue is used solely for transportation purposes except only in the most dire circumstances, such as when a Governor declares a state of emergency as a result of a major catastrophe.  A transfer would require prior consultation with the Treasurer regarding its financial impact on the Transportation Trust Fund, as well as a three-fifths majority vote by two legislative financial committees before being considered by the full House and Senate.   The legislation also requires an automatic repayment within five years.

Some say the sales tax will be complicated to implement.  Is that correct?   

No.  The sales tax will be collected at the wholesale level just as the state gas tax is today.   

Where will Maryland’s gas tax rank among other states if the increase is implemented?

In the first year of the phased implementation of the sales tax, the amount Marylander’s pay in tax related to gasoline would increase from 23.5 cents - 30th in the nation to 29.5 cents - 18th in the nation.  This amount is still below the national average of 30.5 cents per gallon.

How many other states impose a sales tax on gasoline?

According to the American Petroleum Institute, 39 states apply a sales tax or some other form of tax to their gas tax.  Specifically, eight states apply the sales tax to gasoline.  They include:

California         Indiana
Florida             Michigan
Georgia           New York
Illinois             Virginia (Northern Virginia Transportation District)

What are the current total tax rates on gasoline in surrounding states and where do those states rank?

West Virginia            33.40 cents/gal        11th highest in the nation
Pennsylvania            32.30 cents/gal        15th highest in the nation
District of Columbia  23.50 cents/gal        29th highest in the nation
Delaware                 23.00 cents/gal        32nd highest in the nation
Virginia                    19.80 cents/gal        41st highest in the nation

Has all the money borrowed from the Transportation Trust Fund for non-transportation purposes been repaid to the Transportation Trust Fund?

Yes.  Since 1984, $540 million has been transferred from the Transportation Trust Fund to the General Fund.   During that same period of time, a total of $544 million has been transferred from the General Fund to the Trust Fund as repayment or as part of the independent funding plan enacted by the General Assembly for the Intercounty Connector.  

How does the amount of money generated by the 6% sales tax on gasoline compare with what was recommended by the Blue Ribbon Commission?

The Blue Ribbon Commission recommended a series of potential increases using various fees and taxes to reach its recommended level of $870 million annually, including a phased-in 15 cent increase in the state gas tax.  

The current proposal is more streamlined and simpler for consumers to follow and is less of a burden on the taxpayer.  By focusing solely on the application of the sales tax on gasoline, this proposal generates $613 million annually for transportation.  While it adds an estimated 18 cents to the retail price of a gallon of gasoline, it does not subject taxpayers to a variety of other transportation-related fees that would increase the financial burden on motorists even more.  The estimated 18 cents is based on applying the 6% sales tax to the average retail price of gasoline minus the federal and state gas taxes. 

What has taken place regarding transportation aid to counties, municipalities and Baltimore City?

It is important to make the distinction between the transfer of dollars between the Trust Fund and the General Fund versus what has taken place regarding local transportation aid to counties, municipalities and Baltimore City.  The State provides local transportation aid just like the state provides local aid for education, school construction or public safety.  As budgets became tighter in recent years, state leadership was faced with the difficult decision of what local aid to reduce as part of the overall effort to balance the state budget, as required by law.  Going back to as early as 2003, the difficult decision was made by leadership to reduce local transportation aid while opting to maintain the flow of other types of aid to the counties, municipalities and Baltimore City. 

Does this proposal provide any ability to restore local transportation aid to counties, municipalities and Baltimore City?

Yes.  The proposal would establish a Local Transportation Infrastructure Aid Account where the counties, municipalities and Baltimore City would share a portion of the revenue generated by the application of the 6% sales tax on gasoline.  Twenty percent of the revenue generated by the sales tax would go to local governments.  This amount is in addition to the level of funding provided from existing transportation aid, known as Highway User Revenues, which will continue.  Combined, existing Highway User Revenues and the new Local Transportation Infrastructure Aid funding will restore local funding closer to the level provided in 2008 -- the year when state support for local transportation needs reached the highest level in Maryland history.

Why does the state need more money for transportation improvements?

Since 2008, except for a handful of projects made possible as a result of the infusion of federal dollars from the American Recovery and Reinvestment Act, Maryland has not been able to break ground on any major transportation improvements, all while its citizens face some of the worst traffic congestion in the nation.  

Maintaining the state’s existing roads, bridges, transit, port and airport is Maryland’s top priority.  It is only after this existing system preservation need has been met that the state dedicates any dollars remaining to new projects intended to improve or expand the transportation network.  The state’s ability to do so has been dramatically reduced due to the national economic downturn and its impact on revenues that support transportation.  Maryland now has a backlog of projects needed to address congestion or to support economic development.  Simply building the top priority project as identified by the each of the 23 counties and Baltimore City would cost roughly $12 billion.   
With any new funding, Maryland will continue to implement a balanced approach in the selection of priority projects that would address all transportation needs, including:  roads, bridges, transit, port and airport.  The top priority projects as identified by the 23 counties and Baltimore City demonstrate the varied needs across the State. The projects can be found here:

http://www.governor.maryland.gov/transportationprojectsmap.html

Why is an increase in transportation funding necessary when tolls were recently raised?

When it comes to funding, Maryland’s toll facilities are entirely separate from the rest of the state’s transportation network.   The Hatem, Nice, Key and Bay bridges, the Baltimore Harbor tunnels, the Kennedy Highway along I-95 and the ICC are owned and operated by the independent Maryland Transportation Authority (MDTA).  All of these facilities are supported solely by the toll revenue that they generate.  Tolls cover the cost of constructing, operating and maintaining these eight facilities.  The MDTA receives no funding from the state Transportation Trust Fund.  Conversely, the Transportation Trust Fund receives no revenue from the MDTA’s toll facilities.    

The recent toll increase was required to pay for prior decisions made as far back as 2005 to fund needed rehabilitation of existing MDTA facilities, some of which are up to 70 years old, and simultaneously construct two major transportation projects (I-95 express toll lanes north of Baltimore and the ICC).

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