A tax is a tax unless it's a fee

October 26, 2003|By C. Fraser Smith

HE'S NOT going to raise your taxes, but he might do something creative with the automobile registration fee. Like doubling or tripling it, or whatever.

If a tax increase is in his cards at all, it'll be a smallish one at the gas pump. With a transportation trust fund deficit reaching several hundred million dollars, these options or a combination of the two are on the Ehrlich administration's table.

The goal would be to raise $300 million. A 10 cent increase in the gas tax would do that. A healthy increase in the vehicle registration fee would, too. So we could get one or both, probably both. It's a work in progress.

Gov. Robert L. Ehrlich Jr.'s fundamental opposition to new or increased sales and income taxes leaves his administration a bit torn. No one on the Ehrlich team argues for major tax increases. If there are any "yes" votes among the advisers, they say something must be done to maintain basic transportation services.

But the "nos" have it.

An increase in the registration fee remains ascendant with them because the gas tax is, well, a tax. Advisers in Annapolis and Washington believe increasing taxes is evidence of a political death wish. So, even in the face of deficits and declining public services, some governors are cutting taxes.

Some Republican legislators in Annapolis are scared silly that Mr. Ehrlich will ask them to vote for a tax increase of any kind. These diehards believe their constituents are "peasants with pitchforks," one administration observer said. "They just don't get it."

What they don't get is the relationship between road conditions, paralyzing traffic jams and revenue. Thus we have the possibility of a major increase in the vehicle registration fee. This sort of levy has encountered heavy weather in Virginia and California, but so far that has not been a deterrent.

Pressure to find revenue may be coming from one of the other usual sources: campaign contributors who would like to see more highway construction - more business for their companies - and realize there's no money in the till. The transportation trust fund from which construction money might be drawn has been drained to help deal with the general fund deficit. So here the administration tries to satisfy voters and contributors whose interests are not the same.

Some have suggested a sales tax increase with some portion of the new revenue committed to transportation. But that's a non-starter. So, what's left? An increase in the vehicle registration fee because, hey ... psst ... (whisper) it's not a tax!

Really? Well maybe it won't play like one. Tuition at state universities has gone up to plug some of the deficit gap and could go higher, and so far there's been no widespread outcry. Lack of road maintenance now costs Maryland drivers $271 million a year in pothole-engendered repair bills, according to a recent study. No one complains. So, maybe a fee will fly.

Steve Hill of the Maryland Budget and Tax Policy Institute sees an opportunity in this semantic exercise. Why not go through the tax code and change the word tax to fee? Then you could have a personal income fee or a sales fee and people wouldn't object.

Or, we could call it the wool fee - a tax that happens after the wool has been pulled over our eyes.

There's some question about just where Mr. Ehrlich wants to go with this one. He's got a blue-ribbon panel working on it. His determination to avoid new taxes and to stick by his word is appreciated. His promise to streamline government has been hailed. And his political position may be a formidable one.

If all the woolly tax dodges fall of their own weight and slots aren't approved, the governor can renew his credentials by vetoing a straightforward tax increase (if the General Assembly has the gumption to send him one). He could win either way.

Inside the political community, though, there are questions. When will he put some points on the board? When will his administration have a program, an initiative - a goal, even? Points, according to this view, cost money. Goals are expensive.

For the Ehrlich administration, erasing the deficit is Job 1. And doing that without raising taxes may actually be points on the board.

But there's a risk: When he runs for re-election, will he want to say, "Vote for me. I didn't do anything"?

C. Fraser Smith is news director for WYPR-FM and appears Sundays in The Sun.

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