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The transportation financing gridlock

Road TransportationBusinessPetroleum IndustryExecutive BranchMartin O'Malley

Here's a question for you Maryland taxpayers out there: Would you rather pay a higher tax on many items you purchase each day or on something you may buy perhaps once a week (a commodity that's actually decreased in price nearly 20 percent in recent months, by the way)?

Surely, most people would choose the latter. But there's another way to look at it: Would you rather see the Maryland sales tax rise after enduring a similar increase a mere five years ago, or see the gas tax rise after a 20-year freeze? Oh, and keep in mind that sales tax revenues rise with inflation, while the gas tax — assessed on a per-gallon basis — does not.

Again, one presumes a rational person would prefer to endure a reasonable increase in the gas tax, knowing that the revenue would go to badly needed transportation infrastructure: roads, bridges, public transit and other upgrades that would relieve congestion and stimulate job growth and Maryland's economy.

Yet the word in the State House is that Gov. Martin O'Malley and legislative leaders are seriously contemplating raising the sales tax from the current 6 percent (one presumes to 7 percent) to generate hundreds of millions of dollars for the Maryland Transportation Trust Fund. This somehow strikes them as more appealing than raising the current motor fuel tax from 23.5 cents per gallon — a rate that represented about a 20 percent tax on gas two decades ago but has been diminished to one-third of that today.

By any measure, this is the wrong road to go down. First, because it actually takes substantially more out of taxpayer pockets (a 1-cent sales tax increase translates to about $770 million per year) than what Governor O'Malley proposed last year — gradually applying the 6 percent sales tax to gasoline at the wholesale level, which was estimated to generate about $613 million.

But more important, it steers Maryland away from the best quality of the gas tax and toward a more regressive alternative that inevitably hits poor residents harder. The gas tax is a "user fee," meaning it causes those who use a public benefit — primarily roads and bridges built and maintained by the state — to pay more for it. The sales tax doesn't have such a tidy formula. It's a General Fund revenue source that has traditionally been used for all sorts of state-financed activities, from the salaries of bureaucrats to school air-conditioning systems. And since lower-income families use a higher percentage of their income to buy necessities (aside from certain items, like groceries, that are tax-exempt), they and not the motoring public are the ones hit hardest by it.

Certainly, one can argue that a gas tax increase is spread across the economy when businesses see transportation costs rise. But that's a difficult argument to make when congestion — caused by a failure to invest sufficiently in transportation infrastructure — creates the same situation as businesses struggle to deliver goods and services at reasonable prices.

So why even think about raising the sales tax? Most likely, it's because of resistance to the gas tax in the House of Delegates. Recent polls have shown taxpayers are so turned off by the thought of a higher gas tax, they might be more inclined to accept a penny more on the sales tax. But such speculation is highly misleading.

First, it's misleading because consumers are far more likely to feel the pinch from the sales tax, if only because gasoline prices are so volatile that a 10-cent swing one way or the other can happen in a day, with or without taxes. Conversely, a second increase in the state sales tax in such a short span of time is not going to pass unnoticed. Taxpayer revolts have been spawned by less.

A gas tax increase (or applying the sales tax to gasoline) is far from a perfect solution. In the long run, more gas-efficient vehicles, including electric cars, will make it ineffective. Perhaps, someday, a carbon tax or a tax on vehicle miles traveled will provide a better alternative, but that choice isn't yet available to lawmakers in Annapolis. Other alternatives, such as more toll roads, raising transit fares, and public-private partnerships can be helpful, too, but they fall way short of what's needed.

Here's another bad idea: raising taxes on the Baltimore-Washington area alone on the theory that the biggest-ticket items in the transportation agenda right now are the Red and Purple transit lines. Senate President Thomas V. Mike Miller apparently likes the idea, but divvying up the state into higher- and lower-taxed segments — whether for transportation or any other government function — strikes us as a bad policy.

Ultimately, what's needed is a great deal more public education on the topic. The claim that legislators "stole" nearly $1 billion from the Transportation Trust Fund to balance recent budgets is highly misleading and overblown. Taxpayers need to understand what 10 cents a gallon could provide them — including the thousands of jobs and billions of dollars invested in easing their daily commutes. The gas tax isn't a perfect or even pain-free solution to Maryland's mounting transportation needs, but it's the best one available.

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