March 14, 2012

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

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By Megan Poinski
Megan@MarylandReporter.com

Shell gas pricesGov. 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

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.

  • ELAINE WILLIAMS

    Ok I know we have a revenue problem but O’Malley needs to get a grip.  How about cutting out overlapping departments for starters.  What about the DGS (Department of General Services).  Really? I checked on them and read their “Mission” statment which is off the wall vague.   And on top of that aren’t they dragging their feet about turning over documentation of what their moving costs would be to New Carrollton?  Who needs a department like that?  

  • abby_adams

    A silly thought given all the problems with contracts in the State Highway Admin., just what has MDTA been doing with all the money collected for the past 20+ years? Since the Gov doesn’t have to pay to fill up the tank that totes him around, raising the gas tax isn’t really a problem for him. Being a lame duck, whatever O’Malley succeeds in dumping on taxpayers will be with us long after he’s left Annapolis. The legislators aren’t quite so eager to back a tax hike that may come back to bite them in the next election. Look at the services you use & receive, then ask am I better off now than when O’Malley was re-elected? The sales tax hike in 2007 was touted as solving all our $$ problems. How did that work out? Still $1B in the red.  Now we are facing another DIRE problem that we’re assured can only be solved with higher taxes. What a total disconnect!

    • Dale Mcnamee

       I agree with your statements ! Like you, I’d like to see where the money went…State and Federal highway funds…for the past 26 years that I’ve been living here… I look at the roads and see that the same problems keep on cropping up…a;; that seems to be done is patching, not re-building the base of the roads to keep them in good shape longer…

      There should be an amendment that keeps the funds from being used for anything other than roads…With criminal penalties and restitution for doing so…One can only hope…

      As for other programs…Who’s demanding the increased spending ?

      O’Malley isn’t “disconnected”…He’s willfully doing these things, knowing that nobody will hold him, or the Democrats responsible…

  • Pingback: MACo Testifies in Opposition to the Governor’s Transportation Plan « Conduit Street()

  • RT

    Think about it when bill would be fully implemented we all would be paying an extra 18 cents on $3 gas and 24 cents on $4 gas on top of the 23.5 cents per gallon we already pay almost 50 cents per gallon in taxes. On a 20 gallon tank you would be paying $10 in taxes on $4/gallon gas. That is absurd. Not to mention all of the toll increases that have already came or are coming. The reason we don’t have enough money in the Transportation Fund is because the Governor and Assembly keep raiding it every year in order to balance the budget that BTW the Governor has raised by $1 billion each year and wants to increases taxes each year in order to pay for his increase. He’s always whining that there are not enough money, well stop adding programs Governor, stop increasing program funding, make it flat. But we all know words such as cut and flat are not in the Governors vocab. He only learned words such as tax, spend, steal, and increase when he went to school. He seems to think that everyone can afford to give him more money, but we’re all not rich. Most of us have bills and an average paying job or worse and increases like this can kill a families budget. If we can’t afford to buy things in the private sector how can we increase jobs? If people have to cut things out of their life to pay more taxes then that’s another industry that suffers.

    • Dale Mcnamee

       RT,
       
        Here’s how I’m going to deny him as much tax revenue as I can…I won’t be doing any driving driving beyond what I need to do…No trips to the shore…I’ve stopped being a “beach lemming”, denying them toll revenue as well… And avoid toll roads when I may take a rare trip…

      No eating out, no concerts,movies, etc. I can live without 90% of the state government, they can’t live without my wallet…

  • RRB

    This proposal is very short-sighted.  The revenue projections do not take into account the fact that service stations in Maryland will start going out of business – first near the state borders – because they cannot compete with out-of-state gas prices.  The lost tax revenue from the gas stations that go out of business is going to dramatically offset the extra revenue from the extra tax on gas.  Interstate truckers will no longer buy gas in Maryland.  They will plan their gas purchases in VA, DC, Delaware, W. Va, PA.