Maryland Gov. Martin O'Malley (D) last week unveiled a new transportation funding plan that would lower the state's excise tax on gasoline and replace it with a sales tax on the wholesale price. The governor appears to be following the lead of neighboring state Virginia, which passed a similar plan last month.
O’Malley’s plan would reduce the state’s existing 23.5-cents-per-gallon gas tax by 5 cents to 18.5 cents per gallon, and replace it with a new 4 percent sales tax at the wholesale level, phased in over two years. The flat gas tax also would rise in future years to reflect inflation. O’Malley’s proposal also would steer revenue generated from taxing Internet sales which is pending legislation at the federal level — to transportation. If the U.S. Congress takes no action on the Internet sales tax issue by 2015, O’Malley’s plan would bump up the wholesale sale tax on gas from 4 percent to 6 percent. The proposal — expected to yield $3.4 billion over the next five years — was endorsed by the two Democratic leaders of Maryland's General Assembly, boosting its prospects in a legislature that has resisted efforts to raise taxes on gas since 1992.
Eighteen states are considering similar proposals that are moving away from a cents-per-gallon excise tax and toward a percentage-based sales tax that would keep up with inflation.
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