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As prices rise, Maine’s gas tax is in the spotlight. Here’s what you need to know

Gas prices appear on a pump at a gas station Monday, March 7, 2022, in Needham, Mass. The average price for a gallon of gasoline in the U.S. hits a record $4.17 on Tuesday as the country prepares to ban Russian oil imports. (AP Photo/Steven Senne)
Steven Senne
Gas prices appear on a pump at a gas station Monday, March 7, 2022, in Needham, Mass. The average price for a gallon of gasoline in the U.S. hits a record $4.17 on Tuesday as the country prepares to ban Russian oil imports. (AP Photo/Steven Senne)

With gas prices soaring, some politicians in Maine and nationally are pushing to reduce the amount of taxes that we pay on every gallon of gas. Former Republican Gov. Paul LePage joined that chorus on Tuesday when he called on Gov. Janet Mills – his likely opponent this November – to at least cut the gas tax by 50% for the next several months. We break down the gas tax debate and some of the implications of reducing or suspending the tax in Maine.

How much is the gas tax and what is it actually used for?

In Maine, the state collects 30 cents in taxes on every gallon of regular gasoline and about 31 cents a gallon for diesel fuel. The federal government tacks on another 18 or so cents in taxes for gas and a little more for diesel. But the state fuel tax alone adds up to about $230 million a year that flows into the state's Highway Fund. And that fund is used to pay for road repairs, snow plowing, bridge maintenance, and of course, filling all those massive potholes that that tend to pop up on Maine roads, especially during this time of year. The Maine Secretary of State’s Office and the Department of Public Safety also receive a share of the gas tax.

Gov. LePage isn't the only person calling for a reduction in Maine gas tax, though. What other proposals are out there?

A Republican lawmaker from Auburn. Rep. Laurel Libby, has proposed a bill that would suspend the gas tax for the rest of 2022. That bill would first need to get approval from the Legislative Council – which is controlled by Democrats – in order to be considered by the full Legislature. Gov. LePage, by comparison, called for reducing the gas tax by at least 50% over the next three months, although he also expressed an interest in a wholesale suspension on Tuesday.

What would be the impact of either reducing or suspending collection of the gas tax?

It’s unclear how much LePage’s proposal would cost the Highway Fund because it's more limited in scope and was only released on Tuesday. But the Maine Department of Transportation says the state Highway Fund is the primary source of funding to the department and that Libby's proposal to suspend the gas tax for the rest of the year would cost about $173 million, $133 of which would be absorbed by the DOT. Libby is proposing to cover those losses by using some of the estimated $1.2 billion surplus that the state expects to receive in the coming months and years. But the implication there is if you use part of that money to backfill the gas tax, that's less money available to spend on other things. Mills, meanwhile, has proposed devoting one-half of the surplus to sending $750 checks to more than 800,000 Mainers as a way to help them pay rising energy and inflation costs.

Are there any opponents to reducing the gas tax?

Several organizations expressed opposition or strong concern to the proposals on Tuesday. They included the Maine Better Transportation Association, Associated General Contractors of Maine and other groups involved in building or maintaining Maine’s road network. The Maine Municipal Association, which relies on this highway money to help pay for their own road road maintenance, plowing and other maintenance, also expressed concerns because fuel tax revenues are one of the ways that tourists help pay for road maintenance. And some lawmakers have expressed concerns about what this could mean to their towns and to statewide road maintenance.

How likely is it that gas taxes could be suspended or reduced.

Suspending the gas tax seems unlikely at this point. A reduction might be more palatable to some, and there are also proposals at the federal level for a gas tax “holiday” amid the current price crisis. But it likely depends on how high prices go. Should the price at the pump continue rising past $5 a gallon, there will likely be tremendous pressure on both state and federal policymakers to do something. Mills’ campaign, meanwhile, pointed to her proposal for $750 direct checks to more than 800,000 Mainers, saying that's the best and the fastest way to deal with rising costs of gas and heating oil and other basic necessities.

Of course, there are political aspects over this debate over oil prices. What is happening in Maine?

It’s not a coincidence that LePage held his press conference on Tuesday on the same day that Mills formally launched her campaign. While LePage said that he's not blaming Mills for the price of gas, he did blame her and Democrats for other price increases. And across the country, some politicians – particularly Republicans – have been accusing President Biden and Democrats of driving up gas prices even as they support policy shifts (such as banning the importation of Russian oil) that will likely increase prices around the globe. Rising prices are also re-elevating the debate over increasing domestic production of oil.