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Residents purchasing gas in both Maryland and Pennsylvania saw gas tax increases beginning July 1, 2013 in MD and January 1, 2014 in PA. As someone who frequently drives in both states, I thought it would be interesting to compare their state gas taxes and the impact this will potentially have on funding of state roadway and bridge infrastructure improvements. I was surprised by how complicated these taxes are.
In Maryland the state gasoline tax had been held at 23.5 cents per gallon between 1992 and 2013. In that 21 year period, the purchasing power of the tax dropped nearly 70%. Effective July 1, 2013, the 23.5 cents will be indexed to the Consumer Price Index with a limit of an 8% increase in any given year. This portion of the tax increase isn't possible to predict exactly, but indexing guarantees that the purchasing power will not erode much, if any, further. On July 1, 2013, a 1% tax on the price of gasoline (before federal and state taxes) was added to the price of gas in MD. The tax will increase to 2% and 3% on January 1, 2015 and July 1, 2015. It is expected that Maryland state transportation funding will also receive revenue generated by the implementation of t  he federal Marketplace Fairness Act (enabling states to require internet sellers to collect sales tax) in 2016. If this Act is not passed by congress, the gas tax will increase to 4% on January 1, 2016 and to 5% on July 1, 2016.
In Pennsylvania, the wholesale gas tax has not changed since 2006 when it was artificially capped at 19 cents per gallon for gasoline. This wholesale or "franchise" tax is charged as 153.5 mills (0.1535) to the wholesaler, but the price of a gallon of gas allowed to compute the tax was capped at $1.25/gallon. The wholesale price of gas is currently close to $3.00/gallon. Prior to the January 1, 2014 gas tax change, there was also a 12 cent per gallon flat tax added at Pennsylvania pumps. The net state tax on regular gas was 31 cents per gallon.
The 12 cent per gallon flat tax in PA was eliminated on January 1, 2014. The "franchise" tax cap on gas prices used to compute the tax was increased to $1.87/gallon on January 1, 2014, $2.49/gallon on January 1, 2015, and eliminated in 2017. A floor price of $2.99 per gallon was set (when the cap is eliminated) to stop a major price drop from disrupting transportation funds. Effective in 2014, the "franchise" tax is computed by multiplying the wholesale cost of gas by 217.5 mills (0.2175). The tax in 2014 will thus be 0.2175 x $1.87 = 40.7 cents per gallon. As the cap on the price per gallon used to compute the gas tax is lifted, the tax rate will decrease gradually until 2018 when it will be 192.5 mills. The PA state tax on gas in 2018 will, thus, be a minimum of 0.1925 x $2.99 or 57.6 cents.
Maryland Pennsylvania
State Gas tax 1/1/13 23.5 cents/gal 31 cents/gal
Expected State Gas Tax 2018 38.5 cents+/gal 57.6 cents+/gal
Yearly Transportation Revenue $800,000,000 $2,400,000,000
Increase by 2017
Lane Miles of Roadway (2008) 68,889 253,838
In both Maryland and Pennsylvania, other funding increases such as fees, tolls and bond issues will be put in place over the next few years. Overall, Maryland's Governor O'Malley expects the "Transportation Infrastructure Investment Act of 2013" to generate an average of $800 million annually at full implementation and create or support 57,200 jobs. T he transportation revenue increase in Pennsylvania is expected to raise $2.3 to $2.4 billion annually. Gas tax monies in Pennsylvania are legally blocked from going anywhere other than to either PennDOT projects or local and county government road projects. As of 2008, Maryland had almost 69,000 lane miles or roadway, while Pennsylvania has nearly 254,000 lane miles (3.7 times as many as MD).
Both states have now created a sustainable transportation funding source that is tied to inflation (or at least gas prices in PA). As a result, all of us in the Maryland/Pennsylvania area should look forward to traveling over improved and well maintained roads and bridges by 2020.
References:
http://www.mdot.maryland.go/news/releases2013March29_HB1515_Passes_senate.html
http://blog.cubitplanning.com/2010/02/road-miles-by-state/
http://readingeagle.com/article/20140102/NEWS/301029954
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