O’Malley pitches sales tax on gas, called job creator and a job killer

By Megan Poinski
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Gov. Martin O’Malley’s plan to raise transportation funds with a 6% sales tax on gasoline was hailed both as a way to raise money for needed infrastructure projects and derided as a way to kill local jobs in gas stations and trucking companies at hearings in House and Senate committees Wednesday.

Currently, the state imposes a 23.5-cent gasoline tax is on each gallon of gas, a rate that hasn’t been increased in 20 years.

Starting in fiscal year 2013, O’Malley’s bill would phase in 2% of the sales tax in gasoline each year for three years. Most of the funds would go into the state’s transportation trust fund. By the time the 6% tax is fully implemented, returns are projected at $664 million. The tax could add about 20 cents to the price of each gallon.

“Yes, we are all against taxes, but we pay for that too, and in this case, doing less will cost us more,” O’Malley said.

Traffic congestion and infrastructure needs cost jobs

Gov. Martin O'Malley

Maryland now has the most traffic congestion in the nation, O’Malley said. After 20 years, the revenues from the 23.5-cent gas tax can no longer pay for the work needed to bring the state’s roads, bridges and mass transit up to date.

Lack of up-to-date infrastructure also costs the state jobs, O’Malley said. If the state can raise the additional dollars it needs for road and bridge projects, between 7,500 and 8,000 construction jobs would be created. Businesses would also be more likely to locate in Maryland because of infrastructure.

O’Malley told the committee that while it wasn’t included in his bill, he would be willing to work with the General Assembly if members think a separate law or constitutional amendment to protect transportation money is necessary.

“I’m totally open and flexible to whatever outcomes you think would best safeguard these dollars,” O’Malley said.

Protections and sharing with local governments

If gas prices continue to skyrocket, O’Malley’s proposal slows the tax increases. Until the 6% tax is completely phased in, if gas prices increase more than 15% in a year, the tax rate would not go up.

The proposal also divides the revenues so that some of the money goes to county and municipal governments. Once the 6% sales tax is fully phased in, a fifth of the money collected will go to local governments – 70% of that to counties, 20% of that to municipalities, and 10% to Baltimore City.

Baltimore Mayor Stephanie Rawlings-Blake said that the increased transportation revenues are sorely needed. Without more money to make repairs, Rawlings-Blake said that about 15 bridges in the city will have to be closed in the next few years. She told the lawmakers that she and other government officials testifying in support of the tax understand what a “tough ask” they were making.

“I know it is a tough decision,” Rawlings-Blake said. “We understand the difficulty and the impact this has on all of us.”

After O’Malley and public officials testified, a parade of supporters ranging from union representatives to business advocacy groups to first responders to people in the construction and asphalt industries endorsed the bill. Some supported the proposal as is, though several said that there should also be an amendment to protect money in the transportation trust fund from getting borrowed.

Maryland Chamber of Commerce President Kathy Snyder was among the supporters, but advocated a flat 10-cent per gallon tax increase.

Gas state operators oppose the plan

Several people who operate gas stations and work with the trucking and bus industries testified against the plan.

Gas station operators carried stacks of paper bearing tens of thousands of petition signatures from customers who oppose any sort of gas tax increase.

Lock Wills, chairman and CEO of a La Plata company managing different service station franchises, pointed out that most Marylanders are within an easy drive of other states. The sales tax would essentially increase gas tax 85%, he said.

“That will make Maryland prices the highest in the region,” Wills said. “That begs the question of how far Marylanders will travel to get gasoline.”

Roy Littlefield, executive director of the Washington, Maryland, Delaware Service Station and Automotive Repair Association, brandished bundles of paper that he said were 35,000 signatures from gas station customers who opposed gas taxes.

There seems to be a total disconnect between this and the real world,” Littlefield said. “Citizens are concerned with this.”

Maryland Motor Truck Association Chairman Paul Kelly said that the trucking business operates at a 2% profit, and increasing taxes will gut company revenues.

Other plans would index revenues

Two other delegates presented bills to increase gas tax through other means. Del. Bill Frick, D- Montgomery, proposed a bill that would index gas taxes to the cost of construction as determined by engineers.

“Really, this is just here as an alternative vehicle to what the governor proposed,” Frick said.

Del. Justin Ross, D- Prince George’s said that his bill presents the top funding recommendation of the Blue Ribbon Commission on Maryland Transportation Funding: a total of a 15-cent per gallon gas tax increase phased in over three years, and indexing the gas tax to construction costs after that.