State gas tax declines – slightly – for second consecutive year

A small decrease in the state’s gas tax is coming in July.

New tax rates released by the Office of the Comptroller set the new tax rate on gasoline at 46 cents per gallon. The decrease of one-tenth of a penny is the second in two years and the fourth since a 2013 law was enacted that linked automatic increases to the rate of inflation.

By law, the comptroller must set and announce the new rate by June 1, to take effect on the July 1 start of the fiscal year.

Maryland’s gas tax includes two components — the Consumer Price Index and pre-tax prices on gasoline.

In 2013, lawmakers passed legislation coupling a portion of the gasoline tax to inflation. The rate can only go up — capped at 8% annually — but never decreases.

Over the last year, the inflation index increased 2.7% — down seven-tenths of a percent from the previous year. The increase in inflation will add nine-tenths of a penny to the gas tax.

That increase was offset by a drop in the pre-tax price of gasoline, according to Robert Rehrmann, director of the Board of Revenue Estimates.

Rehrmann, in a May 23 letter to Gov. Wes Moore (D), Senate President Bill Ferguson (D-Baltimore City) and House Speaker Adrienne Jones (D-Baltimore County), said the pre-tax sales price decreased by a full penny year over year.

“The new rates, as a result of slower inflation and lower fuel prices, decrease by 0.1 cent per gallon and are 46 cents per gallon” for gasoline and clean-burning fuels, Rehrmann wrote in his letter.

That means the current rate of 46.10 cents per gallon for gasoline will decrease to 46 cents even. The tax for diesel fuel, called special fuel, will decrease from 46.85 cents per gallon to 46.75 cents, according to the rates released by the Office of the Comptroller.

When lawmakers passed a law increasing the gas tax in 2013, it was the first such increase in more than two decades. The Democratic majority in the legislature that year indexed future increases inflation. The automatic increases, calculated annually, would not require politically charged debates and votes.

The law included a safety valve meant to prevent spikes if annual inflation grew by more than 8% annually. At the time, sharp inflation spikes were rare.

Two years ago, the gas tax rate jumped by nearly 7 cents per gallon, driven by an annual inflation rate of 7.1% and higher wholesale gas prices.

The new rate for fiscal 2026 is just the fourth decrease since the tax was indexed to inflation in 2013. In each case, lower wholesale prices were the cause.

Decreases in fiscal years 2021 and 2022 were caused by lower fuel prices during the pandemic, when fuel demand waned as more people worked from home and traveled less.