Gas Taxes by State

From MSN Money and the Tax Foundation, here's how Maryland's gas tax stacks up against other states.


Maryland is tied with Massachusetts for the 26th-highest gas tax rate among U.S. states.


A 2007 study by the Texas Transportation Institute found that traffic congestion in the Washington-Baltimore corridor cost Maryland $3 billion per year, up 1200% since 1982. Maryland's gas tax rate has been unchanged since 1992.

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Crisis in Transportation, Part Three

In Part Two, we described Oregon Governor Ted Kulongoski’s aggressive infrastructure bill to create jobs, stimulate the state’s economy and generate long-run returns for Oregon. So what about Maryland?

No one argues that Maryland’s transportation needs are immense. And according to MDOT Secretary John Porcari, the $400 million increase approved in the 2007 special session is only now yielding $265 million, just barely enough to keep up with system preservation needs. Put aside the obvious need for specific projects like the state’s three proposed transit lines and the BRAC projects in Bethesda, Aberdeen and Fort Meade. There are four reasons why Maryland’s political leaders must heed the example of Oregon and start putting more money into transportation now.

1. The need for matching funds
Many large projects that rely on federal financing require matching funds from state government. That is especially true of Baltimore’s Red Line and the Washington suburbs’ Purple Line and Corridor Cities Transitway. Unless Maryland demonstrates an ability to raise sufficient funds to pay its share of these projects, federal money will flow elsewhere.

2. Costs will go up in the future
At present, we are deferring $1.1 billion in new transportation projects and face the possibility of delaying $2.5 billion more. It is inevitable that delayed projects will see higher construction costs if they are started years in the future. That will be especially true if petroleum costs rise again and ripple through into construction materials. And recessions are good times to build construction projects because contractors are hungry for work and will restrain their margins just to keep their key personnel employed.

3. Economic competitiveness
The Tax Foundation’s determination that Maryland’s business tax climate has deteriorated from 24th to 45th among U.S. states in one year is a threat to the state’s reputation. If in addition the state is perceived as unable to finance its transportation infrastructure, it will risk being perceived as a radioactive place for locating jobs.

4. Job creation and the next elections
Governor O’Malley has done his best to deal with a difficult budget situation. But if the economy is still in rough shape in 2010, that may be insufficient to mollify voters. What voters want in tough times is to create jobs – especially high-paying jobs. The construction industry creates and supports many high-wage jobs such as estimators, engineers, architects, planners and superintendents. And on state transportation projects, the building trades workforce is protected by Maryland’s prevailing wage law, ensuring adequate pay and benefits. The short-term ripple effects of job creation will combine with long-run returns on improved infrastructure to benefit the state’s economy immensely. And the Governor will enjoy support from both business and labor if he proposes such a plan.

But what about the tax increase necessary to support it? Voters recently demonstrated their unhappiness with tax hikes by voting for slots and the Ficker amendment while opposing a telephone tax in Prince George’s County. But transportation taxes differ in two ways:

1. If they are truly dedicated to transportation, voters may support them. If they are used to finance “general spending,” voters will be skeptical.

2. Recent declines in gas prices mean that voters will not be hit in their pocketbooks by a gas tax hike. According to Gasbuddy, the average gas price in Maryland has fallen from over $4.00 last summer to less than $2.00 now.


Oregon Governor Kulongoski’s two-cent gas hike would amount to less than one-percent of the recent reduction in gas prices if implemented in the Free State. If the gas tax cannot be raised and/or indexed now, when can it ever be increased?

Maryland has a transportation crisis. So does Oregon. Oregon’s leadership has a plan to deal with it. We need one too.

Update: The Baltimore Sun details the total lack of leadership in Howard County on this issue.

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MoCo: Not as Rich as You Think, Part Three

Have you ever heard of zone pricing for gasoline? Under this practice, energy companies, wholesalers and service stations adjust gas prices for shipping costs and a large variety of geographic characteristics, one of which is rumored to be household income for the areas around the stations. This conforms to the basic realities that most of us have noticed in looking for gas. No one drives into wealthy neighborhoods to fill up – we go into relatively poorer areas instead.

And so we launched an empirical investigation: do Montgomery County residents pay more for gas than other Marylanders because their household incomes are greater?

To find out, we consulted Gas Buddy, a website that relies on volunteers to gather gas prices and report them by service station. During the week of 8/30/08-9/5/08, we tracked every price reported on Gas Buddy in Maryland. This database does not cover every service station, but the volunteers collected 2,947 individual price observations all over the state during that week. Below are the average regular gasoline price levels they reported by county:


Garrett County had the highest average price, but Gas Buddy’s volunteers only made 26 observations there over the week – less than four per day. Given the small sample size, it is doubtful that that accurately reflects gas prices there. Montgomery’s average price ($3.63) was easily the highest among the remaining counties and was significantly higher than the state average ($3.50).

Below are the average regular gasoline price levels for every local area with at least 30 observations, along with their average household incomes in 1999:


The four most expensive areas for gas were all in Montgomery County, as were six of the top ten. Was that because the Montgomery areas had higher incomes than other places around the state? Not necessarily. For example, Silver Spring’s average household income ($51,653) was slightly lower than in Catonsville ($53,061). Yet, gas prices were much higher in Silver Spring ($3.62) than in Catonsville ($3.43). Similar inconsistencies show that average household income and gas price do not track each other very well.

In fact, when we ran a simple regression of household income on gas price, our model found that income only explained 27% of the variation in price. In contrast, a simple regression relating location to price found that whether or not a station was located in Montgomery County explained 37% of the variation in price. In other words, for this rather large sample of price data, whether or not a station was located in Montgomery may actually be a more important determinant of its price than the average household income in the surrounding area. In wealthy local areas (like Bethesda) and in less-wealthy areas (like Silver Spring and Aspen Hill), gas in Montgomery costs more than in the rest of the state.

What is driving this? We don’t have enough data to know (so you statistical geeks out there should forget any multi-variate or logit models). One possible cause may be the higher price of real estate in Montgomery than in other counties. Higher land costs, higher mortgages and higher property taxes may be pushing up gas prices here.

But regardless of the reason, the evidence is clear: Montgomery County residents pay more for gas than other Marylanders. Metro offers no relief because it periodically raises fares and parking charges. And higher gas prices, like higher real estate prices, may very well ripple through and push up prices for goods and services throughout the county’s economy.

So if Montgomery County residents make more money only to pay higher prices for housing, gas and everything else, is their living standard really superior to most people in other counties? Except for the wealthiest residents of Montgomery’s richest neighborhoods, the answer may very well be no.

Tomorrow, we will conclude this discussion by taking a hard look at who exactly is paying these high costs of living.

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