This story was corrected at 10:30 a.m. June 28. An explanation follows the story.
The first stage in a controversial increase in Maryland’s fuel tax took effect Monday, part of a plan to raise hundreds of millions of new dollars each year for transportation projects
The tax rate on gasoline increased from 23.5 cents per gallon to 27 cents per gallon, according to the office of Comptroller Peter V.R. Franchot. The tax rate for diesel and biodiesel fuel increased from 24.25 cents per gallon to 27.75 cents per gallon, according to Franchot’s office.
The additional 3.5 cents per gallon marks the first increase in the tax since 1992, and is the result of a new law tying the tax rate to the Consumer Price Index, so it keeps pace with inflation, as well as a sales and use tax-equivalent rate of 1 percent.
The indexing accounts for 0.4 cent of the increase, while the sales and use component accounts for 3.1 cents, said Charles Brown, a spokesman for the Maryland Department of Transportation.
The tax increase, adopted by the General Assembly earlier this year, led Gov. Martin O’Malley (D) to approve $1.2 billion in funding for several road and transit projects. The package includes $125 million for an interchange at Interstate 270 and Watkins Mill Road, $280 million for the proposed Purple Line light-rail system and $100 million for the proposed Corridor Cities Transitway bus rapid transit system.
Additional projects will be announced later this year, leading up to the release of MDOTs new six-year capital budget for transportation projects in September, Brown said.
Opponents of the increase, such as Del. Kathy Afzali (R-Dist. 4A) of Middletown, argue that most of the new revenue will go to transit projects that rural Marylanders won’t be using. Afzali and other western Maryland lawmakers held a press conference Monday afternoon in Frederick to denounce the measure.
“We fought against this with everything we had,” Afzali said. “The whole thing stinks.”
Gas prices when the bill was introduced averaged about $3.69 per gallon, but had dropped to an average of $3.49 per gallon the week before the increase kicked in, underscoring that market forces caused more volatility in gas prices than the tax increase, Brown wrote in an email.
Increases in the fuel tax due to inflation are limited to 8 percent per year, and the sales tax on fuel will increase to 5 percent, phased in over three years. If the federal Marketplace Fairness Act is adopted, the sales tax on fuel would be capped at 3 percent.
The O’Malley administration expects the new law to support 57,200 jobs over the next six years.
An earlier version of this story incorrectly said that when the new law was passed, gas prices averaged about $3.69 per gallon. Actually, this was the average price when the legislation was introduced in March.