This article was republished with permission from WTOP’s news partners at Maryland Matters. Read the story at Maryland Matters.
Maryland motorists will face an increase in the state gas tax rate starting next month, but whether they notice the change is another thing entirely.
New tax rates released Monday by the Office of the Comptroller set the new tax rate on gasoline at 46.6 cents per gallon, a net increase of six-tenths of a penny more than this year’s rate, and the first increase after two year of slight declines. The tax is in addition to the federal tax on gas of 18.4 cents a gallon.
Robert Rehrmann, the director of the Board of Revenue Estimates, said the overall increase this year was not driven by the war with Iran.
“Although Middle East geopolitical shocks triggered a spike in gasoline prices beginning in early March, the average price over the full 12-month determination period was lower than the prior year,” Rehrmann wrote in his report.
The new rate is now one-tenth of a penny lower than it was in July 2023, when the tax jumped by 7 cents per gallon. The latest increase amounts to an additional six cents in taxes on 10 gallons of regular gas.
Rehrmann cautioned that the full effects of the conflict, which have seen gas prices climb well above $4 per gallon, may yet be seen.
“Global oil markets are unpredictable, but any sustained increase in gasoline prices will be reflected in next year’s determination,” Rehrmann wrote.
One week ago, the national average was $4.507 per gallon for regular, according to AAA, and $4.416 in Maryland.
On Monday, the average retail price of a gallon of regular gas in Maryland was $4.17 per gallon — $1.12 more than a year ago.
“Global oil markets are unpredictable, but any sustained increase in gasoline prices will be reflected in next year’s determination,” according to AAA.
By law, the comptroller must set and announce the new rate by June 1, to take effect on the July 1 start of the fiscal year.
Maryland’s gas tax includes two components — the Consumer Price Index and pre-tax prices on gasoline.
In 2013, lawmakers passed legislation coupling a portion of the gasoline tax to inflation. That portion of the tax is based on the Consumer Price Index for the preceding year. By law, that portion of the tax rate can only increase. It is capped at 8%.
The second component applies a sales and use tax to the wholesale price of gas. That portion of the tax rate fluctuates with the average wholesale price.
Annual inflation of 2.8% added nine-tenths of a penny to the state gas tax this year. That was offset by three-tenths of a penny drop attributed to slightly lower wholesale prices over the 12-month period ending in April.
In 2023, the gas tax jumped by 7 cents per gallon driven by an annual inflation rate of 7.1% coupled with higher wholesale prices for gas.
Since 2023, the state has experienced two years of slight decreases.
In 2024, the state’s portion of the gas tax dropped nine-tenths of a penny to 46.10 cents per gallon. Last year, the rate dropped to an even 46 cents per gallon.
Decreases in fiscal years 2021 and 2022 were caused by lower fuel prices during the pandemic, when fuel demand waned as more people worked from home and traveled less.
In each instance, the decreases were attributed to wholesale gas prices offsetting increases from inflation.
Republicans in the House and Senate mount a nearly annual offensive to end automatic inflation-driven gas tax increases. This year was no different.
“This latest increase reveals a fundamental flaw in Maryland’s gas tax equation – that in some of the most difficult economic times, this tax will increase because of the automatic formulas the Democratic majority pushed through a decade ago,” House Minority Whip Del. Jesse Pippy (R-Frederick) said in a statement Monday.
“Marylanders are struggling with high gas prices. While we cannot control federal policy in the Middle East, we can control Maryland’s tax policy here at home,” said Pippy, who called it “unconscionable that Maryland’s Democratic majority has put a system in place that will increase the burden on Marylanders.
“While I am certain there will be those who downplay this increase, when taken in combination with more than 300 tax and fee increases over the last four years, including the largest tax increase in Maryland’s history, this is unaffordable and unsustainable for Maryland’s families and businesses,” his statement said.
Republicans vowed a renewed push to end the automatic increase if the legislature returns for a special session this summer to take up legislation on congressional redistricting.
