Gas tax increase discussed by Senate panel

Increases to the gas tax, vehicle registration fees and the titling tax were among the options discussed to raise transportation revenues during a lengthy Senate Budget and Taxation Committee hearing Wednesday.

The panel is examining ways to increase funding by $800 million a year for road projects, an issue that's likely to be one of several budget-related priorities in the 2012 General Assembly session. The legislature will also try to take another bite out of Maryland's persistent $1 billion structural deficit.

Wednesday's meeting was the third in a series of interim hearings on potential tax increases to close various budget holes. Earlier this summer, the committee discussed the corporate tax structure and taxing goods sold on the Internet. Revenues from those increases would mainly benefit the state's $14 billion general fund.

The discussion of increased tax and fee revenue for transportation comes as the state also moves forward on the largest package of toll increases in its history. That money goes toward funding a system — the eight toll facilities run by the Maryland Transportation Authority — that is separate from the general transportation system.

The toll package would raise an estimated $132 million annually when fully implemented in 2014. The authority says the money is needed to make payments on bonds and to keep up with the increasing maintenance costs of an aging system.

Gov.Martin O'Malley reflected some of the sensitivity about the toll increases in a letter this week to Transportation Secretary Beverley K. Swaim-Staley, the authority's chairwoman. The letter preceded a meeting of the independent agency's board Thursday at which it is expected to discuss possible revisions to the package.

O'Malley urged the board to ease the burden on some customers, including commercial truckers and users of recreational vehicles and small trailers. He also urged caution in eliminating discounts such as the decal program on the U.S. 40 bridge over the Susquehanna River — a proposal bitterly denounced in public hearings in Harford and Cecil counties.

"While it is important to modernize business practices, I think it is wise to allow users time to absorb changes gradually," the governor wrote.

O'Malley did not, however, urge the board to change the overall size and structure of the package, which would raise tolls at the facilities — excluding the partially opened Intercounty Connector — in two steps. His proposed revisions mirror those discussed by the board after the public hearings ended.

At the legislative hearing Wednesday, lawmakers mostly kept their thoughts to themselves. Some Republicans, though, expressed discomfort with state spending on public transit projects that benefit urban areas at the expense of rural road construction.

The panel heard one possible solution: Impose a regional sales tax on some localities that would fund transit projects. Raising the sales tax from 6 percent to 7 percent in Central Maryland, for example, could yield about $400 million, according to legislative analysts.

Other ideas included adding a nickel or a dime to the state gas tax, adding a 6 percent sales tax to the wholesale price of gas, and doubling an assortment of fees.

Most of the discussion about increasing revenue for transportation projects has centered on changes to the state's gas tax, which is now 23.5 cents per gallon. Analysts warned that in recent years gas tax revenues have been flat because drivers are buying more fuel-efficient cars and have used their cars less during the recession.

In 2007, O'Malley proposed tying the gas tax to the construction cost index, but the General Assembly rejected the idea. Legislative analysts showed that the gas tax would have risen to about 41 cents per gallon in 2010 had that measure passed.

In evaluating unmet transportation needs, lawmakers on the committee were guided by the interim findings from a Blue Ribbon Commission on Maryland Transportation Funding, which estimated the state needs $800 million a year to "shore up and expand core" funding.

Swaim-Staley presented sobering news during the hearing: The cost to fund just the top-priority project for each of the state's 24 subdivisions would be $12 billion. Even if the General Assembly raises revenues and the federal government provides more funding than expected, she said it is "very clear" that the state could not "knock off" the backlog of projects.

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