Gas tax holiday concludes in Maryland as Virginia debates one of its own
6 min read
“As we saw in Maryland, this proposal would bring quick relief to Virginians struggling with high gas prices,” Youngkin said in a written statement Tuesday as his proposal advanced to the House Appropriations Committee for its review.
Where Hogan’s plan had Democratic buy-in, Youngkin faces an uphill battle after he inflamed partisan tensions with a flurry of unusual vetoes and bill amendments widely seen as payback for Senate Democrats’ refusal to approve a former Trump administration official for Youngkin’s Cabinet.
Hogan’s tax break lasted for 30 days, dropped prices by 30 cents or more per gallon, and was expected to cost the state an estimated $100 million. Youngkin wants to suspend the Virginia gasoline tax entirely for three months and reduce it for another two, for a total estimated cost of $437 million.
Maryland Comptroller Peter Franchot (D), Hogan and Republicans pushed for an even longer gas tax holiday given that the state had an unprecedented $7.5 billion surplus. But the Democrats who control both chambers of Maryland’s General Assembly insisted on 30 days, arguing it was wiser to save the money in an unpredictable economy.
Virginia’s coffers are similarly flush and Youngkin’s party controls the House of Delegates. Yet the new governor faces fierce opposition in the Democratic-led Senate, where leaders have been cold even to a rival tax-relief plan proposed by House Democrats. The House and Senate were already deadlocked on the two-year state budget — forced into overtime in a special session that began April 4 — when Youngkin threw his gas tax plan into the mix, driving the two sides farther apart.
“We still have one of the lowest gas taxes in America. It doesn’t make any sense,” said Virginia Senate Majority Leader Richard L. Saslaw (D-Fairfax), a longtime gas station owner who contends that the state’s long-neglected roads need every penny in the state transportation fund, which Republicans are quick to point out is running a surplus.
“Braddock Road looks like they drove tanks on it, it’s so torn up,” he said. “The highway department just doesn’t have the money.”
Under Youngkin’s plan, the state would suspend the tax for three months — May, June and July — and then slowly ramp it back up, imposing half the normal rate for the month of August and 25 percent in September. The full tax would resume Oct. 1. The bill has not yet had a hearing in the Senate, but members said that could happen Wednesday, when the General Assembly reconvenes to consider Youngkin’s vetoes and amendments.
Maryland set up a system to encourage station owners to pass on the savings to consumers. Virginia’s plan does not.
Virginia Democrats say that suspending the state tax of 27 cents per gallon would primarily benefit companies that sell gas, who would not necessarily pass savings on to consumers — a point Youngkin conceded in an interview. They also note that as much as 30 percent of the gas sold in Virginia is purchased by motorists who live elsewhere.
Democrats in the House of Delegates have offered an alternative that would instead send $50 cash to each car owner, up to $100 per household. That plan has a price tag of about a third of the Youngkin proposal, with the $50 amount aimed at offsetting taxes on about 200 gallons of gas.
Three states — Maryland, Georgia and Connecticut — launched gas tax holidays in March, and at least a dozen have considered at least partially implementing one. California, New Jersey and Delaware have considered sending rebates to offset rising gas prices.
Maryland’s 30-day gas tax reprieve took effect the second Hogan signed the law on March 18, and prices dropped 21 cents on average that day, according to AAA Mid-Atlantic.
“The impact was immediate,” said Ragina Ali, AAA Mid-Atlantic spokesperson. “Motorists are paying record high gas prices, and these gas tax holidays are providing some relief.”
Prices continued to fall over the next several days and gas became roughly 30 to 40 cents cheaper in Maryland than in D.C. and Northern Virginia for the duration of the holiday, which ended Sunday.
Concern that gas station owners would not pass on savings to motorists did not materialize. Franchot, the comptroller, set up a system to ease the cash-flow crunch for stations that lowered prices.
Maryland’s gas tax is paid by station owners, who could apply for refunds on gas pumped into storage before the holiday took effect. No taxes were paid on any gas deliveries made during the duration of the holiday. So far, the state has processed more than 500 requests for a total of $4.8 million in refunds.
Maryland set up an easy-to-use portal to report those adjustments and quickly processed refunds, said Andre LeBlanc, vice president of operations at Petroleum Marketing Group. The company owns, operate or supplies more than 1,500 gas stations from Maine to Florida, including 223 in Virginia, 277 in Maryland and 26 in D.C.
LeBlanc considered Maryland’s system more fair than in states such as Connecticut, where stations were expected to “eat the taxes.”
Youngkin’s plan makes no provision for reimbursing gas stations for taxes paid on fuel before the holiday or collecting taxes on unsold fuel after it ends. Youngkin spokeswoman Macaulay Porter said the issue would quickly work itself out since stations fill up their underground tanks every few days.
Gas stations “will see that reduction in a matter of days — so they can then pass it on to consumers,” she said.
Before the tax holiday took effect, Franchot and his staff braced for a deluge of complaints about recalcitrant gas station owners but few materialized.
“We were ready, and thank God it went really, really well,” Franchot spokesperson Susan O’Brien said.
It’s too soon to tell exactly how much revenue Maryland lost from the holiday — or whether demand from out-of-state motorists rose, O’Brien said. The full cost of the holiday will be tabulated by the end of May, O’Brien said.
Maryland had posted record-high prices exceeding $4 per gallon in the weeks before the gas tax holiday took effect, spikes driven largely by geopolitics and the price of crude oil. For the average 15-gallon tank, forgoing Maryland’s 36.1 cent per gallon tax saved drivers $5.42 per tank. If Virginia suspended its 27-cent tax, that would save $4.05 on every fill up.
Once prices started falling, Maryland service stations saw a swell of customer appreciation, said Kirk McCauley, director of government affairs for the Washington, Maryland, Delaware Service Station and Automotive Repair Association.
“The customers were happy,” said McCauley, a former station owner for 31 years. “When the customers are happy, the station owners are happy.”
But his members didn’t report a significant surge in consumption. “We didn’t make any money on it. We didn’t lose any on it, either,” he said.
McCauley said he would have preferred a holiday like those proposed by Virginia House Democrats to send cash to residents rather than forgo gas taxes.
“It’s more value than the gas tax, truthfully,” he said.
Maryland stations bordering D.C. and Virginia saw a notable uptick in business as the tax break lured some motorists to fill up in that state, LeBlanc said.
But as time passed and upheaval overseas caused prices to fluctuate, motorists did not always feel like they were getting a break, LeBlanc added. He said Maryland officials and the media could have done more to keep the tax holiday front and center.
“If there was anything that could have supported and reinforced it better was continued communication … ‘Just a reminder, whatever the gas prices are on the street today, you’d be paying whatever it is. Keep that in the back of your mind. You’re still getting the benefit of this,’ ” he said.
