Effects of Increasing the Gas Tax

About a year ago, I wrote a blog post discussing pros and cons related to Governor O'Malley's proposed gas tax increase bill.  Just today, the State House passed a revised bill. This bill would increase the gas tax higher initially. If the bill gets passed into law, it will be the first increase of the gas tax since 1992 in the state of Maryland. 

Starting July 1st the tax would increase by 3.8 cents per gallon. As of today that would make a regular gallon of gas be $3.61. As we all know the price per gallon of gas will not be the same price as it is now. One cause is the summer blend of gasoline is more expensive to make. 

The bill that was proposed by O'Malley initially increase the gas tax by 2 cents starting this summer Next summer (Summer 2014) would increase the tax by another 7 cents and another 7 cents increase in Summer 2015. The increase in 2015 will only be enacted if Congress does not allow states taxing online purchases. If the online tax does not enacted, that means Maryland could see a total increase by 16 cents over 3 years. 

The house modified the bill. They approved a 3 cents starting this summer. They stated that the initial higher increase would decrease the increase over the remainder of the increases.  When the increases are fully in effect, sometime 2016, the total revenue the state could see $600 million. By 2018, the gas tax could be as high as 42.7 cents. The total increase would make Maryland with the 5th highest gas tax in the nation. 

Maryland's neighbor, Virginia, recently passed an $880 million, transportation package. The commonwealth's package would change the gas tax. The legislation would decrease the 17.5 gas tax and change it to a 3.5% tax on gasoline and 6% tax on diesel at the wholesale level. The bill expects Congress to pass legislation allowing states to allow them to tax online sales. 

Maryland and Virginia are in competition for the next FBI headquarters.  One might think that bettering Maryland road could be the key for Maryland to obtain the guarantee for the new FBI headquarters in Prince George's county. 

For me, I see both pros and cons in the increase of the gas tax. Increasing the tax gas will allow the state to increase the capacity and create better roads in the DC/Baltimore Metro area. On the same hand, it would put a dent in consumers’ wallets. In 2011 American households spent about 8.4 percent ($4,000) of their income on gasoline.  The gas hike would increase the amount paid towards gasoline per American household substantially. 

Only time will tell if the Maryland Legislative body and Governor makes House Bill 1515 will become law or be defeated in the legislation session.