State leaders propose transportation package

Governor O'Malley, Senate President Mike Miller, and House Speaker Michael Busch released their transportation funding package yesterday (HB 1515/SB 1054). Maryland's transportation system has struggled for years with inadequate funding and the gas tax (which isn't indexed to inflation) hasn't been raised since 1992. Critical transportation needs are coming to a head in many states (see Virginia's recent transformation of its funding structure), and our state lawmakers finally have a plan to do something about it.

The proposal would raise $3.4 billion over five years. Here are the details, according to a graphic put out by the Governor:

Click to enlarge

This plan is a strong and sensible move toward more sustainable transportation funding. A healthier transportation system will help Maryland businesses and residents of all incomes live a better life.

However, we would advocate that the General Assembly add one more piece to the leadership's bill. Any expansion of the gas tax, sales tax, or other taxes or fees that disproportionately burden low-income families should also include an increase in the earned income tax credit. In fact, there are already bills before the legislature that would do just that. MBTPI strongly recommends that HB 845/SB 703 be made part of any transportation finance deal based on the plan put forward today.

Apply the sales tax to gas

[This post has been updated and revised for accuracy]

On Monday, Governor O’Malley unveiled his plan to improve Maryland’s roads, bridges, and transit systems by making the first changes in the state’s gas tax in two decades. .  The Maryland gas tax has been 23.5 cents per gallon since 1992, but its purchasing power has declined dramatically over the last twenty years, to the point where it now approaches that of the 1920s.  With this decline in value, it’s clear why Maryland’s transportation system is in serious financial trouble today.

The governor’s plan addresses this problem by phasing out the sales tax exemption for fuel over three years, while continuing the 23.5 cent per gallon tax.  

Maryland State Fuel Tax
	Current Tax Rate	Proposed Tax Rate	Proposed Tax  per gallon *	Difference per gallon
First year	23.5 cents	23.5 cents plus 2%	29.7 cents	6.2 cents
Second year	23.5 cents	23.5 cents plus 4%	35.8 cents	12.3 cents
Third year	23.5 cents	23.5 cents plus 6%	42 cents	18.5 cents
* Assumes average price of regular gasoline is stable at $3.50 per gallon [which includes 18.4 cents in federal gas tax and 23.5 cents in state gas tax].  AAA makes available data on current state average gas prices.

Good transportation is one of the foundations of a healthy economy, and we need to raise the gas tax to make job-creating investments in better transit, roads, and bridges.  At the same time, applying the sales tax to gas will cost working Marylanders more, and we need to take that into account.  Pairing this change in the gas tax with strategic investments in public transportation, as well as asking wealthier Marylanders to pay their fair share of costs for vital services, are good places to start.