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Costly Gas Tax Holiday Offers Little Benefit to Marylanders Living Paycheck to Paycheck

March 14, 2022 by Kali Schumitz in 2022 session, Blog, Budget and Tax

 

The planned one-month suspension of the state gas tax that Governor Hogan, Comptroller Franchot, and legislative leaders announced last week will provide little benefit to Maryland drivers and comes at a big cost to public investments.

While the current surge in gas prices related to Russia’s invasion of Ukraine is certainly creating challenges for Marylanders who are living paycheck-to-paycheck and rely on a car to go to work, this measure would do very little to ease their financial pain. Someone who fills up their tank once a week would save about $20 total, spread over the course of the month – whether they’re driving a 10-year-old Toyota or a brand new Porsche.

At the same time, this tax break will cost the state nearly $94 million. The gas tax is the state’s main funding source for state and local transportation projects, so that means either the state will have fewer resources to improve roads and support transit services, or state policymakers will have to shift the money from the fund that pays for other major public investments, like schools and health care. Either way, there are significant costs for Maryland communities that aren’t worth the tradeoff of a one-time tax break.

Further, this does nothing to address the real factors that are leading to higher prices at the pump: global instability, oil company profiteering, and price gouging. Attorney General Brian Frosh has said his office does not have the authority to address most price gouging complaints and is backing legislation that would allow his office to take action in some circumstances.

There is no doubt that too many Maryland families are facing economic challenges. However, there are better options for provide more targeted and effective support:

  • Maryland’s refundable working family tax credits, the Earned Income Tax Credit and Child Tax Credit, help offset the taxes that low- and moderate-income Marylanders pay, including gas and sales taxes. Policymakers should permanently extend the more valuable and inclusive EITC structure passed in 2021, and build on the very modest Child Tax Credit passed in 2021 so it as available to more Marylanders.
  • Provide another round of economic impact payments, targeting to the Marylanders with the greatest need. With the latest state fiscal forecast increasing the state budget surplus by another $1.6 billion last week, the state is in a strong fiscal position to do this and provide much more meaningful relief than $20 at the gas pump.
  • Invest more in the things Maryland families and communities need. There are current legislative proposals that would expand access to health coverage, invest in our transit systems, and ensure people facing life-altering eviction or immigration court proceedings have access to a lawyer, just to name a few. Using the available funds to address these critical needs, rather than provide barely noticeable savings for one month, would have much greater short- and long-term benefits for working families and communities.

With great needs across the state and an unprecedented amount of state resources available, it’s time for meaningful steps that have lasting impact for Maryland families and communities.