O'Malley proposes 6 percent increase in gas prices

Gov. Martin O'Malley will propose an extension of Maryland's 6 percent sales tax to gasoline to raise money for the state's depleted Transportation Trust Fund, a measure that would add roughly 18 cents to the price per gallon over three years, the administration says.

By choosing the sales tax as a vehicle for raising transportation money, the governor is rejecting an increase in the traditional motor fuel tax, which calculates the tax on a per-gallon basis. Maryland's gas tax has remained level at 23.5 cents a gallon since 1992.

O'Malley outlined his plans Monday in an interview with WTOP in Washington. He told station listeners that the traditional tax is outdated and that a percentage tax would more effectively raise funds to invest in transportation infrastructure.

The governor's proposal calls for a three-year phase-in period under which the gasoline sales tax would go from 2 percent, to 4 percent to 6 percent. O'Malley spokesman Rick Abbruzzese said the proposal would also include a capping mechanism to limit the amount of the tax increase if prices spike. Abbruzzese said the administration is still working out details of how that cap would work.

Abbruzzese said the sales tax would be applied at the wholesale level and thus built into the price at the pump – much like the current per-gallon tax.

A blue-ribbon commission on transportation funding estimated last year that applying the 6 percent sales tax to gasoline would raise $613 million for transportation – getting the state most of the way toward the $875 million the panel said was needed to address a backlog of transportation projects.

The commission had recommended a 15-cent increase in the traditional gas tax – phased in over three years, coupled with other revenue-raising measures. But O'Malley chose the other strategy, under which revenues would presumably increase or decrease with the price of fuel – up to the amount of the cap.

Abbruzzese said the sales tax extension, which he described as a phase-out of the current exemption of gasoline from that levy, would be the only large-scale revenue-raiser the governor would propose. Specifically, he said, O'Malley does not plan to propose an increase in the vehicle registration fee.

Such a package would leave the state short of the full amount recommended by the commission, but Abbruzzese said the governor believes the amount is sufficient for now.

"This is somewhere in the middle but it's what he believes in a reasonable, balanced approach," he said.