The gas tax compromise

The gas tax plan unveiled this week by Gov. Martin O'Malley and the General Assembly's top leaders is a complicated proposal that wouldn't represent our first choice in how best to pay for Maryland's transportation needs. But, on balance, it's a better-than-expected solution to a problem that has been nagging the State House for two decades.

Better than expected because efforts to increase the gas tax have been practically dead on arrival in Annapolis for years, thanks to high prices at the pump and public hostility toward anything that might raise them further — even as alternatives like vehicle registration and licensing fees hit Marylanders harder than a few pennies on the gallon would.


What the governor, Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch have crafted is essentially a watered-down version of what Mr. O'Malley attempted to do last year in applying a phased-in wholesale sales tax to motor fuel. The primary difference is that it also rolls back Maryland's current gas tax from 23.5 cents per gallon to 18.5 cents per gallon this summer.

The bottom line? It nets out to a 2-cent-per-gallon increase on July 1 (as a 2 percent wholesale tax is applied but the gas tax is lowered by that nickel), followed by another 2 percent increase, resulting in a net 7-cent increase one year later, and potentially another 7-cent raise if Congress fails to approve an Internet sales tax (since that would kick in the final 2 percent, elevating the sales tax to 6 percent total).


Confused yet? It also raises Maryland Transit Administration fares by a net 10 cents on the base fare beginning July 1 and by a similar amount every three years (under an inflation index) and ties the 18.5-cent gas tax to the Consumer Price Index so that the tax will increase with inflation. The failure of gas tax revenue to keep up with inflation — it was last raised in 1992, when retail gas prices were one-third of today's — has been disastrous for state transportation finances.

Those compromises may help the presiding officers round up votes, but it was also clearly helpful that Virginia Gov. Robert McDonnell last month persuaded his legislature to approve a sweeping transportation financing package as well. While his approach was quite different — relying more on a sales tax increase and robbing from other state priorities, like education — the proposal produces a similar amount of new revenue for roads, bridges and transit projects.

Nevertheless, it's going to require a major lobbying effort for Mr. O'Malley's tax increase proposal to win a majority in Maryland's House and Senate. Republicans have already attacked the measure for potentially allowing the state to move forward with two long-awaited light rail projects, the 16-mile Purple Line connecting Bethesda with New Carrollton in the Washington suburbs and Baltimore's 14-mile Red Line running from Woodlawn to Johns Hopkins Bayview Medical Center.

Yet the GOP leadership is also pleased to see the MTA fare increase. Whether or not that represents the equivalent of a "War on Urban Maryland" (to rework the mantra of rural lawmakers), transit-bashing Republican lawmakers who claim to be sympathetic toward working people are clearly not at all interested in those who ride the bus.

To win a sufficient number of Democratic votes, the gas tax bill is likely to be tied to other big-ticket proposals from two of the state's most politically influential subdivisions: Baltimore's ambitious school construction plan and Prince George's County's proposed regional medical center and effort to attract the new FBI headquarters. Lawmakers from traffic-clogged Montgomery County will also have to be relied upon for their support.

But here's the rub. While ambitious, the compromise falls short of what is needed to build the Red and Purple lines simultaneously. Essentially, that's the price of dropping the gas tax by a nickel. Instead of $3.4 billion in new transportation spending over the next five years, the state could afford more than $4 billion if the gas tax remained at 23.5 cents per gallon.

Maryland will be able to design, plan and even acquire rights-of-way for both rail lines — but when it's time to build? Then, the state will either have to delay, phase the projects in or find some other creative solution. That strikes us as politically foolish, as it simply increases the chance that the legislature will have to revisit transportation finances in five years.

Still, that might be quibbling considering that prospects for raising the gas tax looked dismal just weeks ago, and particularly so since it would not even be considered in 2014, an election year. That the gas tax would forever be tied to the Consumer Price Index is a critical improvement, given how contentious tax increases have become.


Will consumers feel the tax increase? Perhaps, although gas prices are so volatile that a 20-cent adjustment, let alone a 7-cent one, might go unnoticed. But in return for these additional pennies on the gallon, Marylanders will see billions of dollars spent on roads and transit, upgrades that should relieve congestion, promote economic development and keep this state competitive with its neighbors. That makes the unfairly maligned gas tax a good investment for Maryland.