Tax income falls as gas prices rise

Maryland gets less road revenue than expected as drivers cut back

November 10, 2005|By JOHN FRITZE | JOHN FRITZE,SUN REPORTER

Sticker-shocked drivers skimping at the gas pump could be costing Maryland millions in unrealized vehicle taxes - threatening a source of money tapped for road and transit projects.

State officials said they believe gas tax collection is falling far below expectations because drivers are taking shorter trips or using public transit, even through fuel prices have retreated from their late-summer spike.

"As everyone knows, the price of gas has really increased," said Maryland Transportation Secretary Robert L. Flanagan, who is raising the issue during a statewide tour to unveil the department's six-year plan. "The result is people are making logical judgments in their everyday lives."

In the fiscal year that ended in June, Maryland collected $753 million in gasoline taxes, $10 million less than anticipated, though more than the $746 million collected the year before. Flanagan said more recent data are not available.

Because gas tax collection can lag behind consumption by months, state officials believe revenue might be further weakened by the spike in prices that occurred in September, shortly after Hurricane Katrina disrupted refining.

Unlike Maryland's 5 percent sales tax on other items, which captures more revenue when prices go up, the state's gas tax is a flat 23.5-cents-per-gallon charge that is immune to swings in price.

Other states report mixed fuel tax collection. Pennsylvania's October fuel tax collection was nearly $20 million below projections - though officials there said it is too early to tell whether the decline is related to consumption. Virginia's tax take was up nearly $4 million in October.

Still, Flanagan said he believes personal factors are driving Maryland's decline. Some motorists might be taking shorter trips or ditching gas-guzzling SUVs. Others could be linking together trips they used to take separately.

Changes might be subtle, said transportation expert Martin Wachs, but they can quickly add up.

"They don't shift in huge amounts, but at the margins some turn to carpooling or public transit or are just using the car less frequently," said Wachs, a professor at the Institute of Transportation Studies at the University of California at Berkeley.

When it comes to taking steps to reduce fuel consumption, put Cindy Bourret down for all of the above. The 36-year-old Federal Hill resident is trying to shorten trips. Her husband started taking light rail to work. They are contemplating selling one of their cars.

"It was a little bit of a wake-up call," said Bourret, as she pumped just under 10 gallons into her Toyota yesterday. "We've been talking about it, but [the recent increase] was the final straw."

Volatility of the tax is one reason California and Oregon are looking for other ways to fund highway and transit projects. California counties are adopting general sales taxes to pay for road work; Oregon is considering a fee based on the number of miles a vehicle travels.

The average price for a gallon of regular unleaded gas in Maryland fell to $2.33 yesterday, the lowest since early August, according to the AAA Mid-Atlantic. At the Royal Farms store on Key Highway, a manager was dropping prices by 4 cents, and regular unleaded was marked at $2.20, once rounded up.

That was good news for Beth Miller, 22, who was putting a few bucks in her car at the station. Miller, who drives every day from her home in Essex to her job in Columbia, said she never made major changes at the pump.

"Instead of filling up as much, I'd maybe put about $20 in," she said. "Now that they're down to where they used to be, I fill up."

The price has fallen, but it is still about 34 cents more than it was a year ago.

Tax collection is not the only indicator that fell. The Maryland Transportation Authority, which oversees toll booths at the Bay Bridge and the Fort McHenry and Harbor tunnels, counted 2 million fewer drivers through its facilities than projected in this most recent fiscal year, said spokesman Bryon Johnston.

For fiscal year 2006, the projection is being revised down to 118.3 million from 123.1 million, he said.

And next week, AAA is expected to forecast significantly reduced auto travel for this Thanksgiving compared with last year, spokeswoman Ragina Averella said.

Further complicating the state's transportation funding, according to officials, is a drop in the titling tax revenue collected in the past fiscal year, down $15 million from projections.

Maryland's titling tax is 5 percent of the value of the vehicle. The number of cars titled in Maryland declined from 1,227,528 to 1,205,886 between the 2004 and 2005 fiscal years, a Maryland Motor Vehicle Administration spokesman said.

Car sales have also been down, especially in October, according to the Maryland Automobile Dealers Association. Sales of sport utility vehicles and pickup trucks were off by about 50 percent last month.

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