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Tuesday, January 31, 2012

The Gas Tax

There's been a lot of buzz about Governor O'Malley's proposal to pursue a balanced approach to end the current sales tax exemption on gasoline. We wanted to make sure you saw this Baltimore Sun editorial...

KEY POINT: "Raising the gas tax is the right thing to do today if Maryland is to preserve its quality of life tomorrow and for the next generation."

The cost of transportation

Our view: Gov. Martin O'Malley's proposed 6 percent tax on gasoline may be a tough sell in Annapolis, but it's the right thing for Maryland's future

January 31, 2012

When Gov. Martin O'Malley gives his annual State of the State address Wednesday, he will officially unveil his plan to apply a 6 percent sales tax to gasoline. The public's mood about gas prices being what it is, the governor probably shouldn't expect huge applause — despite the fact he deserves it.

Maryland hasn't raised the gasoline tax since William Donald Schaefer was governor two decades ago, and the current rate — applied as a 23.5-cent charge per gallon — has been rendered insufficient by inflation. The state faces tens of billions of dollars of unmet highway, bridge, transit, port and other transportation needs, but its Transportation Trust Fund has little more than enough for basic maintenance.

What's been done in the past to avoid raising the gas tax — the usual motley assortment of fees, fares and transportation-related taxes — is no longer good enough. If Maryland continues to embrace a 1992 tax rate, it will have to settle for crumbling 1992-era infrastructure.

Polls show a majority of Maryland residents oppose a gas tax increase. Twenty years ago, the public was largely indifferent about the tax, which at least has the benefit of being a "user's fee" (the more you drive, the more you pay). Rising gasoline prices have obviously caused people to become much more sensitive about prices at the pump.

But the tax — even if Mr. O'Malley convinces lawmakers to approve his increase — isn't what's driving fuel costs. What the governor is proposing would be collected at the wholesale level and would not apply to existing state and federal excise taxes — that is, motorists would not be paying a tax on a tax. Mr. O'Malley would also phase in the tax over several years — and plans to offer a "circuit breaker" to delay any of those incremental steps if average gasoline prices rise too steeply (perhaps 15 percent) during the year.

Thus, someone paying a theoretical $3.52 per gallon at the pump would see a first-year 2 percent tax applied to roughly $3.10 ($3.52 minus the state's 23.5-cent and federal government's 18.4-cent tax) or about 6 cents per gallon. Taken together, that's about 48 cents per gallon, or less than 14 percent of the cost of a gallon of gasoline. Even when fully implemented, the total cost of fuel taxes would be around 60 cents, or 17 percent of the price. In 1992, state and federal taxes represented closer to 20 percent of the price of gasoline.

What would motorists get in return? When the full gas tax increase is realized, about $613 million annually to spend on badly-needed transportation infrastructure. It means reduced congestion, upgraded mass transit service, safer roads and bridges and a more robust state economy (not to mention thousands of construction-related jobs).

Household budgets may be hurting, but many will be suffering a whole lot less if Maryland businesses are thriving. Small wonder that the gas tax increase is a top priority for the Greater Baltimore Committee and many other business-related advocacy groups.

Critics will claim that such a tax increase wouldn't be necessary if Mr. O'Malley (and his predecessors) hadn't drawn money out of transportation projects to balance the general fund. But that's not true. Those transfers have been largely paid back. Only local transportation aid (also known as highway user revenue) that is not used for state capital projects was reduced permanently — the same fate forced upon all other forms of local aid during the economic downturn.

Could the gas tax be postponed? Of course, but the benefits to the economy would be postponed as well. The problem Maryland faces is that it's been delayed too long already. If the last gasoline tax increase had simply been required to keep pace with inflation, Maryland would have collected $4.4 billion more over the past two decades, and Mr. O'Malley's plan would not be needed.

As the governor's own blue-ribbon commission on transportation finances pointed out last year, Maryland's transportation network is the lifeblood of the state, yet its finances are on the verge of collapse. Merely funding the one top priority of each political subdivision would require $12 billion more in transportation spending.

Convincing lawmakers to approve the tax won't be easy. Republicans and most rural lawmakers are likely to oppose it. Even support from the key jurisdictions of Baltimore City and Montgomery and Prince George's counties is far from automatic. Business leaders will have to stand up and voice their approval. So will many city and county elected leaders.

But at least nobody can accuse Mr. O'Malley of showing political cowardice. His plan is actually more forward-thinking than the commission's proposed 15-cent gas tax hike. By applying a sales tax on a percentage basis, revenues will now rise with inflation (although higher fuel efficiency and reduced demand for gas could offset the effect).

Lawmakers will have to ask themselves, if now is not the time to raise the gas tax, when would it be? When the 2014 election is drawing near? When prices at the pump rise further? When crucial economic development projects like the Red Line are shelved for lack of funds?

Mr. O'Malley seems willing to be flexible. If legislators want transportation funds put in a lock box (requiring a General Assembly super-majority to approve any future transfers), aides say he's ready to sign on. We think that's a bad idea that carries unintended consequences, but at least it would send the message that transportation is a high priority and not a piggy bank.

The fact is, it's time to pay the piper. Higher prices at the pump may be unwanted, but a deteriorating transportation system is costly, too. Not only in mere congestion but also in lost economic opportunity. Raising the gas tax is the right thing to do today if Maryland is to preserve its quality of life tomorrow and for the next generation.

http://www.baltimoresun.com/news/opinion/oped/bs-ed-gas-tax-20120131,0,7529845,print.story

For a look at what types of projects could be impacted by the gas tax, click here.



New Posts to fall below.

15 comments:

Anonymous said...

There is no justification for raising ANY taxes at this point. Maryland has been taking the money that was supposed to be used for highways and bridges and spending it on other things.
This state government has only one solution to their mismanagement, corruption and waste, and that's to raise taxes even higher to pay for it.
NO MORE!

Anonymous said...

If not now when? NOW is the time and everyone in MD and surrounding areas pay - NOT just MDers! Everyone uses gas - different from only a select group use tobacco and drink alcohol. Dumb taxes given VA/DC/DE provide those vices at a much cheaper price. LONG overdue, but those oorruptive hands of Annapolis MUST keep their hands out of the cookie jar! BUSHMAN!

Anonymous said...

They have lost their minds, and so have Marylanders for electing these madmen.

Anonymous said...

They have a spending problem not a revenue problem vote all of these one trick pony politicians out.

lmclain said...

Quit spending so easily our hard earned money. THAT would solve the problem. And quit treating welfare recipients as equal citizens, deserving of everything (like cell phones) that the rest of us work hard for...quit taking you, your staff, and your family on world tours. Most middle class people I know can't afford to take their family to Ocean City for a week, but our politicians think nothing of going to Israel or Argentina. Its OUR money they are playing with. STOP being stupid with it and tax increases would never, ever be necessary. Quit lying to us would be an added bonus....

Anonymous said...

Note. Persons on gov. assistance will not be effected by this. They get it free anyway. So if you are on welfare you will vote Democrat. For our Country to finally understand what is happening, once 40% of working people, are paying for 60% of those not, and the USA is broke and the free shit stops, there will be a civil war.

Beezer said...

To the Author of The Gas Tax

I disagree with your assessment about Maryland in dire need of an increase in the gasoline tax.

FYI - I have tried to compile the figures out of Annapolis as to how much the eastern shore is paying verses how much we are receiving in gasoline tax revenue.

Would you believe me if I were to tell you that the State of Maryland is still tallying the gasoline sales receipts by hand and not by computer. That is correct - you can check it out yourself. The only way we can obtain this information is if we contact the gasoline vendors ourselves - (i.e. Wawa, Royal Farms, Gordy Tiger, Shell, Taylor, Cato, Taylor).

The State can give you an aggregate figure of the gasoline tax collections - but - they cannot tell you how much is being generated from Wicomico County, Worcester County, Somerset, and so on. So your analysis of Maryland neeeding the newly proposed tax is flawed and your underlying premise is baseless.

Fact is - I am of the sound opinion that the easternshore can sustain itself very well if we were just allowed to collect and spend the gasoline tax revenue ourselves. Problem is - most of the highway transportion money has been diverted Maryland's mass transit system.

Anonymous said...

Why is this so difficult? MD's legislature has been in office almost forever. They know how to fund things. Just take a little bit from the teacher's pension fund, a little bit from the State employee's fund, a little bit .... You get my drift. O'Malley has already mandated that ALL state employees (are teachers exempt?) pay union dues whether they belong or not. It will never end... stop complaining because you got what you got.

Anonymous said...

If the money would be spent on the roads then i am all for it. There still should be a mechanism for all the people from other states like delaware that drive into our state to work and shop, since there is really nothin in lower sussex, to pay also. They should be charged a higher income tax rate from maryland than they are.

Anonymous said...

All the tax and spend liberals must be eliminated in 2012 or it is over. Unfortunately for the rest of us, it will not happen because of exactly what 5:52 said. Keep your powder dry folks-the day of reckoning is right around the corner.

Anonymous said...

I hope someone builds another gas station in Delmar DE because if this passes you won't be able to get into the WAWA parking lot. I can see the traffic jam now...but it will be a good buisness opportunity for someone

Anonymous said...

Every time you blink your eyes this guy is raising some kind of tax or fee and I am sick and tired of it.It is a trend and he won't stop until we just say NO MORE.I say NO MORE.

Anonymous said...

Martin can put the gas tax up the same place as he can put same sex marriage

Anonymous said...

One key point is that the tax applies to the wholesale level. Does the author not realize that it WILL be passed along in the prices we pay at the pump? Perhaps they hope that we won't think of that. In addition, if you think the prices are rising on EVERYTHING else we purchase, just wait and see how much higher they go. The taxes applied to fuel affect everything because fuel is required for production and then getting the product to market. Businesses will not absorb the costs, they will be passed along to the consumer.

big mike said...

where can i get 4 pocket pants?....that way i can use the 2 that omalley doesnt have his hands in on really cold days...;)