Pay Md. more from fuel tax

September 07, 2001|By Ronald D. Utt and Christopher B. Summers

MARYLAND'S WORSENING traffic congestion will be a top issue in the next gubernatorial election, as will Gov. Parris N. Glendening's recent initiative for an additional $500 million for transportation over the next six years that has been approved by the legislature.

But this could have been avoided if Maryland got its fair share of money from the Federal Highway Trust Fund. As the highway program operates, Maryland gets shortchanged, but reforms now being discussed could bring the state more federal state money without higher taxes.

Spending for roads and transit comes from the tax motorists pay when they buy gasoline. In Maryland, the price of each gallon of gas includes a state tax of 23.5 cents plus a federal tax of 18.4 cents. The Maryland tax stays here, but the federal tax goes to Washington. Only a portion is returned.

For Maryland and 24 other mostly Southern states, the money returned is less than taxes paid, while the rest of the states, mostly in the North, get more back than they pay. Between 1997 and 1999, Maryland received 84 percent of what it paid to Washington; only Texas did worse. In contrast, Pennsylvania, New York and all of New England received more than they paid.

Although 1998 legislation attempted to lessen these disparities, the effort fell short and virtually all Southern states are still subsidizing the North. In 1999, Maryland received only 86 percent of its contribution, and the missing 14 percent was a costly loss.

Had Maryland received as much as it paid in that year, it would have had an extra $71 million for roads, and closing that gap could yield an additional $426 million over six years.

A second congestion-causing flaw in the federal program is the diversion of the tax revenues to purposes other than roads. When the trust fund was created in 1956, all federal fuel-tax revenues were spent on highways, but over time, the federal fuel tax was increased and a growing share of the revenues was siphoned off into non-highway programs.

A federal Mass Transit Account, for example, was created in 1982 within the highway trust fund, and today about 18 percent of fuel taxes are spent on transit programs that benefit only 5 percent of commuters. Worse, more than 50 percent of 1999 transit spending went to just five states.

Over time, other non-highway claims on the trust fund have been added to accommodate special interests, and these diversions, including spending, will absorb more than $11 billion of the projected $35 billion in federal fuel taxes that motorists will pay.

As a result of these other claims on the trust fund and the diversion of federal highway money from the South to the North, Maryland motorists may be getting back as little as 57 cents in general purpose highway money for every federal tax dollar paid.

Maryland will have an opportunity to end these inequities in 2003 when the highway law is reauthorized. With debate already under way, it is essential that our elected officials commit themselves to reforms that ensure Maryland an equitable share.

One promising reform proposed by some in Congress is for the federal highway program to be "turned back" to the states. Under this plan, financial resources and responsibilities for roads and transit would be shifted from Washington to the states. Each state would retain the federal fuel taxes collected within its borders, and spend them on the transportation priorities of its own choosing, not Washington's.

With the interstate highway system completed and with most of today's transportation problems regional, a turn-back plan allows states to focus resources on pressing local needs. It also frees them of costly federal regulations that force a one-size-fits-all program on a diverse nation.

Ronald D. Utt is a senior fellow at the Heritage Foundation, and Christopher B. Summers is president of the Maryland Public Policy Institute.

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