A monthlong suspension of the state’s 36-cent fuel tax became law Friday, with final votes by the General Assembly and Republican Gov. Larry Hogan’s signature. That makes Maryland the first state to pass a measure many others are considering to lessen pain at the pump.
Lawmakers are hoping the tax holiday translates to a sharp drop in gasoline prices right away. The average statewide cost of a gallon of regular gas stood at $4.17 on Friday, down a bit from an all-time peak of $4.31 six days earlier.
But whether a price drop happens, including how quickly and by how much, will be up to gas station operators. The state cannot force them to cut prices 36 cents overnight, but lawmakers designed the legislation to make that as likely as possible.
Comptroller Peter Franchot, whose agency regulates gas stations, said based on conversations with the fuel industry he was confident the retailers would “be very, very responsive” in adjusting prices, and suggested his office could revoke licenses of stations that do not. It was not immediately clear what legal authority could justify such an action; the law states that the gas tax holiday “shall be reflected in sales to consumers.”
A representative from one transportation industry group said he expects 36-cent price cuts to be taken at most of the state’s 2,300 gas stations.
“I haven’t talked to one that wasn’t going to,” said Kirk McCauley, director of member and government relations for the Washington, Maryland, Delaware Service Station and Automotive Repair Association.
The measure’s swift journey — going from concept to reality in barely more than a week — comes as the legislature enters the busy final stretch of its annual 90-day session. Observers say that reflects both politicians’ desire for a political win just ahead of statewide elections, and the level of simmering frustrations with rising household costs.
The gas tax holiday won’t put that large a sum of money back in motorists’ pockets: a 36-cent-per-gallon price cut would mean about $4 less to fill a 12-gallon tank. But the sentiment behind it may be most impactful for consumers and voters who feel like they’re struggling, said Todd Eberly, a political scientist professor at St. Mary’s College of Maryland.
“They want to know the people who represent them are trying to do something about it,” Eberly said. “It’s not much, but it’s an indication that they’ve tried to do something. That often scores more points than people may think.”
The House of Delegates and state Senate each passed the other’s bills unanimously Friday morning, finalizing legislative approval.
With Hogan’s signature, Maryland would adopt what many other states are weighing, and some, such as California, have so far rejected.
[ FAQ: What does the gas tax holiday mean for drivers? ]
Georgia Gov. Brian Kemp also was expected to sign a law Friday suspending that state’s gas tax through May 31. Gov. Glenn Youngkin this week proposed a three-month gas tax holiday in Virginia. Michigan lawmakers approved a six-month gas tax holiday Tuesday, but Gov. Gretchen Whitmer has signaled she will veto it. And lawmakers in Connecticut and Mississippi are considering similarly lengthy gas tax holidays.
Florida recently approved a gas tax holiday that is scheduled for October.
The governors of Colorado, Michigan, Minnesota, New Mexico, Pennsylvania and Wisconsin, meanwhile, have asked congressional leaders to suspend the federal government’s 18.4-cent-a-gallon gas tax through the end of the year.
Maryland legislators had considered stretching their proposal to 90 days, but resisted, with oil prices on a steady decline over the past week and rising hope that the trend extends to gas prices by the time the 30-day tax holiday ends.
“The idea behind this bill is to be a bridge for Maryland consumers,” said Del. Eric Luedtke, a Montgomery County Democrat.
The spike in fuel costs is largely the result of surging demand for fuel as the global economy recovers from pandemic-induced recession, but a lagging rebound in oil production around the world. Prices climbed more steeply after Russia invaded Ukraine. With many buyers refusing to accept Russian oil, the global supply of oil is even more limited.
Because the drivers of oil and gas prices are global and complex, there is no guarantee the tax holiday will save Marylanders money. The bill lawmakers drafted simply says the tax holiday “shall be reflected in sales to consumers.”
As lawmakers debated the legislation, there was concern that gas stations would be slow to drop prices as long as their storage tanks hold gas they’d already paid the 36-cent state tax on. So, to ensure that price reductions are as swift and as large as possible, the state will refund gas stations for taxes paid on any fuel they have on hand at the beginning of the holiday.
When the holiday period ends, gas stations will have to report their fuel inventory at that time and pay taxes on it.
Maryland Policy & Politics
Research shows changes in gas tax rates have not always carried over to prices at the pump. On average, only about a third of the value of previous gas tax cuts or tax increases were passed on to consumers, according to a 2020 report from the American Road & Transportation Builders Association that analyzed 113 state gas tax changes enacted over several years. That’s because retail gas prices are influenced by complex factors, including the price of crude oil and supply-and-demand pressures.
The Maryland policy is expected to cost the state $98 million that otherwise would have gone to its transportation trust fund, an account used to pay for road, bridge, tunnel and transit projects. Lawmakers have pledged to cover that loss in transportation money, using some of a $7 billion surplus in the state operating budget.
That largesse may have made the gas tax holiday a no-brainer for lawmakers, but more debates over the levy could be on the way. Maryland’s gas tax is tied to inflation, and with that economic indicator at its highest level since the early 1980s, the current 36.1-cent rate is expected to rise by a cent or two effective July 1.
Senate Republicans and a handful of Democrats voted to head that off Wednesday with an amendment to take inflation out of the gas tax formula. It has been factored in since 2014, after the General Assembly approved the first state gas tax increase in two decades.
The Democratic majority easily defeated the proposal, and in explaining his vote against it, Senate President Bill Ferguson hinted at challenges ahead for transportation investment. Gas tax revenue, the largest source of transportation funding, is declining as vehicle fuel efficiency improves and more electric vehicles take to roadways.
“As we electrify, there is less gas consumed,” the Baltimore Democrat said. “We don’t know what that will mean.”
The Associated Press contributed to this article.