O'Malley proposes six percent sales tax on gas

Last Monday, during his monthly appearance of "Ask the Governor" on WTOP, Governor Martin O'Malley proposed a six percent sales tax on gasoline in addition to the existing tax on gas, currently set at 23 cents per gallon. Under O'Malley's proposition, the gas tax would no longer be exempt from state sales tax, which would increase by two percent each year for the next three years. O'Malley stated that funds generated from the added tax would go toward statewide road and transportation improvement.

Unlike the current flat tax on gas, O'Malley's proposition states that the tax will increase and decrease with the price of gas. However, the combined three year increase in price per gallon could total 18 cents or more, making Maryland's total profit on gasoline over 41 cents a gallon. This would be among the highest tax profits on gas in the country. According to O'Malley, if Maryland indexed the gas tax in the mid-1990s, the state would have an additional $4 billion in its budget.In a recent Washington Post poll, opposition to the Governor's proposed bill has reached over 70 percent. During the monthly "Ask the Governor," O'Malley acknowledged that his legislation would not be popular but held that it was necessary and economically responsible. "None of us likes this, but the cost of doing nothing is greater, and to do nothing is irresponsible," he said in a recent press conference.

Speaking with "Ask the Governor" host Mark Segraves, the governor further assured the public that there would be a way to limit sales tax if a large spike in gas prices occurred. There would also be a lock box to prevent the state from dipping into transportation funds, as it has in the past, to cover other spending.

Seven other states including Virginia support a gasoline tax, but Virginia's total gas tax is about 20 cents per gallon, less than half of O'Malley's suggested price increase. According to a recent press conference, though Maryland would collect the tax from gasoline wholesalers, Maryland Comptroller Peter Franchot warned that a sales tax would probably add costs for gas retailers, too.

Beyond this six percent sales tax, O'Malley has proposed many other tax and fee increases, particularly on six-figure earners and homeowners, to close the state's budget shortfalls and to increase spending on environmental projects. According to a recent Washington Post study, voters are split on these initiatives, but most oppose raising the price of gasoline in any way.