Governor Larry Hogan signed an invoice Today the Marylanders was supposed to be taking a break at the pump. A 30-day gas tax exemption applies with immediate effect.
Maryland is now among the first states to help address rising gas costs, which average about $4.20 per gallon in the state. Virginia is explore the idea too a three-month vacation, although Democrats there are less enthusiastic about the idea.
But gas tax collection is somewhat convoluted and the reduced price is not guaranteed to be passed on to the consumer.
How does a gas tax holiday work? Here’s what you need to know.
Gas taxes are not sales taxes
Maryland has the eighth highest gasoline tax in the country – about 36 cents per gallon for regular fuel and 37 cents for diesel.
This tax is an excise tax and is paid by gas stations when they buy fuel from wholesalers. So it’s not as simple or straightforward as a sales tax that consumers pay at the pump.
Gas stations may have already paid the gas tax on fuel deliveries, so the Maryland Comptroller’s Office asks gas station operators to record how full their tanks are when the vacation begins. They are reimbursed for the tax already paid on the gas they have bought but not yet sold. This tactic is known as a “reverse price floor”.
Will prices drop 36 cents immediately?
Not necessarily. Much of this depends on the honor system and market forces.
Officials expect and have advised gas station owners to do the right thing and lower the price for consumers as the state has cut costs for gas station operators. The bill says the tax cut “should be reflected in sales to consumers.” But the state doesn’t have enough inspectors to ensure all 2,300 gas stations in the state are following the law.
That being said, officials expect gas stations to remain competitive, so you probably won’t see a gas station across the street selling $4.20 gas versus $3.83 gas. Nobody would go to the gas station, which costs $4.20 a gallon.
And gas prices are constantly changing. Unlike some states, Maryland does not have a law that limits price changes to only once a day.
Market forces have pushed gas prices up about 75 cents a gallon over the past month, correlating with rising crude oil prices. But crude oil prices have been falling for the past few days, so prices should fall accordingly. It is difficult to predict what drivers will pay at the pump.
What will the prices be like at the DC-Maryland border?
This is perhaps the most intriguing aspect of all. DC charges 29 cents per gallon for the gas tax, but you often see similar prices just across the border despite the difference in gas tax.
For example, at the top of DC’s diamond-shaped rim, you can Find prices for $4.28 and $4.23. Just over the border in Silver Spring it’s $4.29 and $4.39. Gas prices have a number of factors including crude oil prices, supply and demand, station location, scarcity at nearby stations, and more. So it’s unclear if we’ll see dramatically different prices across the border.
The holidays are expected to last until April 16th
Maryland’s gas tax applies to a 30-day window ending April 16 at 11:59 am. Some wanted the gas tax exemption to extend longer or have a clause allowing for an extension, but that didn’t make it into the bill.
Why make a gas tax and not try other ideas?
Legislators see this as a direct way in their power to help consumers.
Todd Eberly, Professor of Political Science at St. Mary’s College of Maryland, said the Baltimore Sun that the gesture is probably bigger than the savings.
“It’s not a lot, but it’s a sign that they’ve tried to do something,” he said, “that often scores more points than people might think.”
In reality, the gas tax does not save that much money. Even if you filled up a 15 gallon tank every week throughout the month you would only save $22.20 and that is the best case scenario.
Critics say a gas tax exemption could also hurt transport finance. Maryland officials say the expected $100 million in damage will be covered by the state’s $7 billion surplus. Other critics say officials should encourage or even pay people to use public transport, bicycles or other alternatives.
In California, The governor is proposing a $400 tax refund that helps everyone with rising costs instead of just offering breaks to drivers. The rebate would essentially cover the state’s 51 cents per gallon gas tax on annual fuel consumption for a vehicle with a 15-gallon tank. And that rebate goes to every taxpayer — including those who use public transit or own electric vehicles.
This story has been updated to reflect Hogan signed the bill.
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https://dcist.com/story/22/03/18/maryland-gas-tax-holiday/ Maryland’s 30-day gas tax holiday begins today. That’s how it works