A plan proposed by Virginia's governor to raise transportation revenue while scrapping the gas tax is largely based on "wishful thinking," the chief policy analyst for the Maryland General Assembly has concluded.
"It is hoped that Maryland can do better," Warren G. Deschenaux said in a letter to legislative leaders.
Deschenaux said Gov. Bob McDonnell's plan to raise almost $3.2 billion for transportation over five years depends in large part on transfers from other programs and a revenue stream that Congress has not yet allowed the states to tap.
The Virginia proposal attracted considerable interest in Annapolis after McDonnell unveiled it Tuesday because Maryland faces a similar shortfall in transportation revenue. Though he did not endorse McDonnell's plan, Gov. Martin O'Malley said he agreed with certain aspects of it -- especially a move away from reliance on the conventional center-per-gallon gas tax.
Deschenaux told legislative leaders he reviewed the Virginia proposal because of Maryland's "great interest" in transportation funding. He called the plan a "conversation starter" but pointed out several concerns.
By eliminating the state's 17.5-cent-a-gallon gas tax gas and increasing the state sales tax, Deschenaux said, Virginia would move from a system in which all taxpayers -- rather than road users -- bear the burden of financing transportation. He called it "curious" that the plan abolishes the gas tax but imposes a charge on alternate-fuel vehicles.
Deschenaux pointed out that about $1.2 billion of the proposed new revenues are based on the assumption that Congress will pass a bill letting states impose sales taxes on Internet sales. Senate President Thomas V. Mike Miller said this week that congressional passage of that measure is doubtful and described McDonnell's proposal as "disingenuous."
The Virginia plan also takes money from the state's other programs by increasing the share of the state sales tax that goes to transportation from 0.5 percent to 0.75 percent, Deschenaux said. By 2018, according to his analysis, shifted funds would account for 34 percent of the new transportation revenue.
A chart accompanying the letter shows that only about one-third of the $3.2 billion plan, or $1.2 billion, is based on new revenues that the state could rely on. That comes to roughly $240 million in new revenue. O'Malley is talking about raising $700-$800 million a year for a smaller state.
"While the Virginia plan appears to produce substantial revenues to address a critical need, our preliminary early analysis notes that it is based on wishful thinking, shifting of monies away from the general fund and moving away from a user-based financing of transportation," Deschenaux wrote.
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