Sparks likely over gas tax ideas

O'Malley is expected to ask for increase, other changes, to boost highway funding

August 22, 2007|By Jennifer Skalka and Michael Dresser | Jennifer Skalka and Michael Dresser,Sun reporters

The last time Maryland's gasoline tax was raised, the first President Bush was in office, Gov. William Donald Schaefer was near the height of his political power and the price of a gallon of regular was a little more than $1.

Now Gov. Martin O'Malley's administration is faced with swelling infrastructure costs and a state Transportation Trust Fund in urgent need of a cash infusion. Leading lawmakers say they expect O'Malley to propose an increase in Maryland's 23.5 cents-a-gallon tax and possibly recommend other measures, such as a sales tax on gasoline and tying future increases to inflation or construction costs.

Maryland Transportation Secretary John D. Porcari said in an interview this week that he supports changing the method of taxing gas, from one based on the gallon to one tied to rising prices.

Noting that some other states link their gas taxes to the Consumer Price Index, Porcari suggested that Maryland would be better served by aligning taxes with the less well-known Construction Cost Index. He said the prices of road- and bridge-building materials - cement and steel, among others - are rising annually by up to 50 percent.

"We think it makes a lot of sense to do that because it more accurately reflects the cost of our raw materials," Porcari said. He said that indexing Maryland's gas prices that way could bring in an additional $63 million a year.

O'Malley has yet to specify what his transportation tax package will include, but political will potentially exists in the Democrat-dominated legislature for an increase in the flat gas tax.

Maryland's gas tax of 23.5 cents a gallon compares with 19.6 cents in Virginia, 20 cents in the District of Columbia, 23 cents in Delaware, 31.5 cents in West Virginia and 32.3 cents in Pennsylvania. The figures represent a combination of taxes in some states.

For now, Maryland falls squarely in the middle of U.S. states in terms of its gas tax. Increases on the scale being discussed in Annapolis could catapult Maryland into the top ranks - but other states with similar unmet needs could soon be forced to catch up.

Other options abound. Vehicle registration fees are a potential revenue source, though lawmakers might be wary after Republican Gov. Robert L. Ehrlich Jr.'s near-doubling of them. The titling tax -paid when a vehicle is purchased - could also go up.

Porcari mentioned that a sales tax could be imposed on top of the gas tax. Senate President Thomas V. Mike Miller, a Democrat, suggested that a larger portion of the corporate income tax could also go to transportation.

Sources close to the governor said this week that these possibilities are all on the table.

The debate in Annapolis, meanwhile, is bound to be charged as lawmakers simultaneously grapple with how to address a $1.5 billion general fund shortfall. In accounting terms, the transportation fund problem and the so-called structural deficit are separate issues, but politically they are sure to be intertwined.

O'Malley has committed to getting a viable transportation package passed during the 2008 General Assembly session. He said traffic congestion is taking its toll on Maryland's roads and the costs of building and maintaining bridges and roads have skyrocketed.

"Our roads and bridges will not wait until the right political timing, the ideal gas price or the best fiscal environment," O'Malley, a Democrat, said during the Maryland Association of Counties conference in Ocean City.

Maryland spends roughly $2 billion a year on transportation. The gas tax, which yields $800 million annually, is the largest single source of state funds.

But transportation advocates believe Maryland needs to raise an additional $400 million to $600 million annually to adequately address $40 billion in unmet infrastructure needs.

However, O'Malley faces a different political dynamic than fellow Democrat Schaefer did in the early 1990s, when road-building was curtailed by an anemic trust fund and the state was in the grip of a recession that had idled many construction workers.

Back then, some leading Republicans were among the loudest proponents of Schaefer's proposal to raise the state gas tax - then 18.5 cents a gallon - by 5 cents. Robert R. Neall, then the Anne Arundel County executive and a former House Republican leader, was a staunch backer of the increase. Five Republican senators - but no delegates - backed the Schaefer revenue package that included the gas tax increase.

Neall said that in those days there was a group of moderate Republicans who would evaluate tax increase proposals on a case-by-case basis.

"We were not just reflexively anti-tax," said Neall, who later served in the Maryland Senate and eventually defected to the Democratic side before being defeated for re-election in 2002.

Next year O'Malley can expect little help from the opposition party. State Republicans are expected to dig in firmly against any major tax increase.

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