Once again, Virginia has beaten Maryland to the punch regarding taxes on business and consumers. Virginia eliminated its gas tax completely and replaced it with a 3.5 percent sales tax on the wholesale price of gasoline. Gov. Martin O'Malley's new tax increase proposal would reduce the gas tax rate 5 cents but add a sales tax to the retail price of gasoline and diesel, resulting in a 63 percent increase in the tax on gas and a 90 percent increase in the diesel tax.
Only in Maryland would we claim to "reduce" taxes in a way that results in increases — and leaves Maryland retailers at a devastating competitive disadvantage. The Virginia tax rate in particular will be almost 28 cents per gallon less than Maryland's, and we will have the highest fuel tax rate compared to all our surrounding states. Most of Maryland's approximately 2,300 gas stations are operated by small businesses, and many are located within close proximity to our neighboring states. These increases will make our small businesses uncompetitive with their nearby, out of state competitors.
Maryland fuel retailers, on average, don't even make 20 cents per gallon and will be forced to pass all tax increases on to their customers. The net result will be the loss of Maryland jobs and tax revenues as consumers make their purchases out of state.
Equally concerning is the fact that the governor's proposal does nothing to address the real issue of why we have a transportation revenue problem, and that is mass transit: two systems (the Maryland Transit Administration and the Washington Metro) where highway users already pay over 50 percent of the operating costs. Fares paid by transit riders cover only a fraction of the operating costs, yet mass transit systems handle less than 10 percent of local travel while highways and bridges are choked with the remaining 90 percent. This is not sustainable. Maryland, like Virginia, must change its approach and recognize that highway users already pay more than their fair share, and raising gas taxes is not the solution. Other, broader-based funding sources need to be identified.
Protecting the funds in the Transportation Trust Fund is absolutely essential to prevent our elected representatives from siphoning off funds for other purposes. Although the governor's plan includes a "lockbox" intended to ensure that the funds collected are used for their intended purpose, in reality his proposal does nothing to protect these funds, because all it takes is a three-fifths vote of a standing committee to raise the funds. Moreover, the governor's proposal specifically indicates that the state can continue to divert Highway User Revenue funds that are supposed to be shared with the counties.
Motorist-paid gas taxes and vehicle fees are by far the largest source of transportation funding for both highways and mass transit. Maryland can no longer meet the needs of two costly major mass transit systems and adequately maintain and improve our highway system on the backs of motorists. A look at Maryland's transportation spending history over the last 10 years bears this out, as commute times have increased, transit ridership has been flat and millions of dollars of transportation funds have been permanently diverted to the General Fund.
Now is not the time to raise our gas taxes 63 percent and squeeze more money out of Marylander's highway users' pockets. Our state government needs to find other alternatives — including living within its means.
Pete Horrigan is president of the Mid-Atlantic Petroleum Distributors Association. His email is firstname.lastname@example.org.