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Christopher Summers: We need to put the brakes on the O’Malley gas tax

There’s a coordinated push by Gov. Martin O’Malley to raise Maryland’s gasoline tax by applying the state’s sales tax of 6 percent to fuel purchases.

That means that, at current gas prices, the state tax would rise from 23.5 cents per gallon to 44.5 cents — an increase of 89 percent. This would make Maryland’s gas tax the ninth-highest in the nation.

Many in the business community, mainly the Maryland Chamber of Commerce and Greater Baltimore Committee, are misguidedly supporting this tax hike.

Make no mistake about it, this tax hike will not help our state’s economy and it won’t address the real problems facing Maryland’s transportation funding structure.

The governor and his allies claim we need this tax increase to pay for much-needed transportation projects. This claim assumes the new revenue will go to high-value transportation projects, but there’s little reason to think that that will actually happen.

Recent Maryland history offers plenty of examples of policymakers using gas tax revenues to pay for non-transportation projects, or else routing them to projects that have great political value but do little to unclog Maryland’s overburdened roads.

Why think that state officials will become more responsible with taxpayers’ transportation dollars when more of those dollars flow into Annapolis?

Faulty reasoning on new jobs

In Fiscal Year 2010, for instance, Annapolis took $370 million from the state’s Transportation Trust Fund to cover other spending needs. Though that money supposedly was only “borrowed,” it has yet to be returned.

FY2010 is not an outlier. Overall, some $1.1 billion that has been “borrowed” from the trust fund in recent years has yet to be repaid, and there currently are no serious plans for repayment.

This isn’t the only problem with advocates’ arguments for this tax hike. Take their claim that the higher taxes would lead to more jobs.

Yes, the tax revenue would finance more state spending (which perhaps would be in transportation, and perhaps not), and that spending would lead to employment. But the $491 million a year in additional tax revenue would come from motorists who buy gasoline.

Without the tax increase, this money would be spent by motorists on other goods and services, or else be saved by motorists, and thus lent out by their banks as investments.

Handing an additional $491 million to the state means that Maryland motorists will have $491 million less for themselves, and that means that jobs will also be lost because of the tax.

So, will the tax increase result in a net increase or decrease of jobs? No one can answer that for certain, but we can say that tax increase proponents’ claim of an ensuing great wave of employment gains is wishful thinking.

Gas tax as user fee

Not only are the job creation numbers of this tax hike overhyped, but so, too, is the need for massive transportation repair in Maryland. According to the Federal Highway Administration, Maryland is around the national average in infrastructure quality.

That’s not great, but it’s not the dire emergency that some make it out to be. And in terms of important areas like bridge safety, Maryland performs above average.

I don’t dispute that there are some transportation maintenance and building projects that need to be completed. We don’t need a gas tax hike to fix those problems, however. Simply re-prioritizing current funding would free up significant revenue.

Focusing the tax revenue Marylanders pay when fueling their cars and trucks on projects that serve cars and trucks would be a good first step.

In its ideal form, a gas tax is very close to a user fee: those who use roads pay for the building and upkeep of those roads. In Maryland, however, those who use roads not only pay for the building and upkeep of the roads; they also pay for the building and upkeep of mass transit.

Roughly half of the total money the state spends on highways and transit combined goes to pay for transit, but transit accounts for a mere 4 percent of the statewide travel. Of the new revenue the state has allocated for highway and transit funding, transit has received 95 percent in the past decade.

And no, upgrading transit does not take enough cars off the road to justify siphoning money away from roads, nor does it yield much environmental benefit.

Another consideration weighing against this tax is the burden it will place on poorer Marylanders. The gas tax is a regressive tax that forces people with lower incomes to pay a greater percentage of their income than do the wealthy.

The disproportionate impact of this tax will hurt households that are least able to afford it.

Any transportation needs the state has can largely be addressed by fixing the fundamental flaws in how our state allocates transportation funding. Raising the gas tax is the wrong answer to an overhyped problem.

Christopher B. Summers is president of the Maryland Public Policy Institute. His email address is [email protected]