O'Malley, top Democrats propose higher taxes on gas

Gov. Martin O'Malley and the Democratic leaders of the General Assembly are proposing to raise taxes on gasoline by $2 billion over five years to pay for highways, transit and other transportation projects.

The legislation endorsed by the governor, Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch is a complex plan that would add 2 cents to the cost of a gallon of gas July 1 and another 7 cents a year later. In 2015, it would rise by another 7 cents unless Congress passes a bill to allow states to impose the sales tax on Internet purchases. Transit fares also would rise under the plan.

The proposal announced Monday night is the result of weeks of behind-the-scenes negotiations by top staff members of the three leaders, whose united support makes passage of the bill more likely.

O'Malley said the legislation does not raise as much money as he had proposed in a similar plan last year, but that it achieves consensus. "This would be a very solid step forward," he said.

Miller, of Calvert County, pointed to studies showing that the Washington area has the nation's worst traffic congestion. "This is an economic development issue, but more than that it's a quality-of-life issue," he said.

Busch, who represents Anne Arundel County, noted that Maryland is competing with Virginia to be the site of a new FBI headquarters building — a project that would likely require a heavy investment in transportation.

"Maryland's got to compete," Busch said. "If somebody has a better suggestion, we're willing to listen, but everyone knows we need revenue."

House Minority Leader Anthony O'Donnell criticized the proposal, saying it obscures the new taxes it would place on citizens. He said it also fails to address what he views as lopsided spending that favors mass transit over other transportation projects.

"Only this governor, in the worst economic times in 80 years, when people are struggling to buy food and pay their bills, would find a way to raise the gas tax," said O'Donnell, a Republican from Calvert County.

In an important policy change, the plan would tie the state's current gas tax to inflation as measured by the Consumer Price Index. That would move the state away from the current flat per-gallon gas tax, which loses buying power over time, to one that would increase along with the costs of building roads and bridges and operating transit systems.

Pressure on Maryland to raise transportation revenue has grown since Virginia — with a Republican governor and GOP-controlled legislature — enacted its own $880 million-a-year transportation revenue package late last month. Northern Virginia and the Maryland suburbs frequently compete over corporate decisions on where to locate in the Washington area. The state with fewer resources to address traffic congestion could be put at a disadvantage.

Maryland officials have projected that by 2017 there will be no money left for road construction projects or transit expansion as every available dollar goes for operations and basic maintenance.

The projects hanging in the balance include two large light rail projects worth a combined $5 billion: the Red Line in Baltimore and the Purple Line in the Washington suburbs. The Maryland Department of Transportation has said there will be no money to continue planning and engineering of the projects without additional revenue.

The multi-step plan announced Monday would start out by cutting the current 23.5-cents-a-gallon gas tax by 5 cents. But according to administration estimates, indexing would bring it back to its current level in a decade.

And the cut in the per-gallon gas tax would be more than offset by applying a sales tax to gas, which is now exempt. Motorists would start paying a 2 percent tax on gas purchases starting July 1. That would go to 4 percent in 2014 and — unless Congress passes what is known as the Marketplace Equity Act — 6 percent in 2015. One O'Malley idea that was not included in the legislation was to increase the general sales tax and dedicate the extra money to transportation.

The plan would provide roughly $3.4 billion for transportation over five years — roughly $2 billion from higher taxes, $1 billion from an increased ability to issue bonds and $400 million from other sources.

By tying Maryland Transit Administration fares to inflation, the plan would raise the basic bus, subway and light rail fare from the current $1.60 to $1.70 next year and by another 10 cents three years later.

The fare increase raises a relatively small amount of the plan's revenue — only $10 million a year for the first three years it would be in effect. But it would affect some of the state's poorest citizens, who depend on transit because they have no cars. MTA fares have not increased since O'Malley took office in 2007.

O'Donnell said the fare increase is the only piece of the plan to which he does not object, though he said the proposal does not go far enough to recoup the cost of transit.

The plan could also put Maryland on a path toward regional funding of mass transit, an idea promoted by Miller. It calls for a study of setting up regional transit authorities with taxing power in the Baltimore area and Washington suburbs. Administration officials said they decided there was too little time in the legislative session to actually set up such authorities this year. The plan would give a work group until December to complete its study.

Many business leaders also say the state must raise money for transportation, though polls suggest the public doesn't like the idea.

One of the main revenue generators for the Transportation Trust Fund, the state's gas tax, has lost much of its buying power since it was last raised in 1992. The erosion of transportation revenue has been accompanied by sharp increases in the cost of materials such as asphalt.

The result has been a backlog of billions of dollars in construction projects that can't get off the ground.

Last week, U.S. Deputy Transportation Secretary John D. Porcari met with House Democrats in Annapolis to deliver a stark message: States that fail to raise enough revenue to provide the matching funds for a range of projects — roads, transit, aviation and other purposes — will lose out on federal dollars.

michael.dresser@baltsun.com

ecox@baltsun.com

Taxes and fees

Here are key provisions of the plan by top Maryland Democrats to raise gas taxes and transit fees:

•The cost of gas would go up 2 cents a gallon in July, another 7 cents in 2014 and possibly another 7 cents in 2015.

•Bus fares, now $1.60, would go up 10 cents in July and increase by another 10 cents every three years.

•If Congress allows, Maryland would forgo the second 7-cent increase on gas and instead tax purchases made on the Internet.