O’Malley Plans to Raise Gas Tax by Two Percent
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ANNAPOLIS, Md. — Maryland Gov. Martin O’Malley on Monday called for establishing a new sales tax on gasoline and enacting other measures to raise hundreds of millions of dollars a year to fund a backlog of transportation projects.
O’Malley, a Democrat, outlined the plan at a news conference accompanied by Senate President Thomas V. Mike Miller, D-Calvert, and House Speaker Michael Busch, D-Anne Arundel. With the state’s top legislative leaders in his corner, O’Malley appears to have a strong chance of ushering the measure through the Democrat-controlled Legislature.
The plan would apply a new 2 percent sales tax on gasoline starting in July. The tax would increase to 4 percent in July, 2014. O’Malley’s plan also would reduce the current excise tax on a gallon of gas by 5 cents, from 23.5 cents to 18.5 cents. The plan would then index the excise tax to the consumer price index to adjust for inflation.
By fiscal year 2018, the plan would generate an estimated $833 million in new funding for transportation, once new bonding capacity created by the additional revenues is added into the mix. Overall, in a five-year period, the plan would create $3.4 billion for Maryland highway and transit projects, according to the O’Malley administration.
Maryland has not raised its gas tax since 1992, and supporters are quick to point to its steep drop in buying power over two decades. Supporters of raising more revenue also underscore that this is the year to act — since next year will be an election year when it will be harder to approve a tax increase.
Together, the changes, if approved, would add about 2 cents a gallon to the pump price in Maryland starting in July, O’Malley estimated. Customers would be paying about 7 cents a gallon more than now, starting in July 2014.
O’Malley said building a 21st century transportation network won’t happen by itself.
“This plan will help us generate the revenue we need to ease some of the worst traffic congestion in the nation while building and repairing our transportation infrastructure,” O’Malley said.
Busch said the proposal was the result of weeks of talks between O’Malley’s office and the presiding officers.
“We must make strategic investments and leverage private dollars to move our state forward,” Busch said. “A strong transportation system is the cornerstone of a strong economy.”
Miller, who put forward a proposal of his own weeks ago and has been pushing for the governor to put his stamp on a plan, noted that the state’s Transportation Trust Fund is about to go broke.
O’Malley, who last year proposed phasing in a 6 percent sales tax on gasoline only to see it stall, wanted to reach a consensus between the state’s top lawmakers before announcing a proposal.
“Working together and reaching the consensus reflected in the proposal is a tremendous step forward that can turn our transportation crisis around,” Miller said.
The plan also would index Maryland Transit Authority fares to the consumer price index. The plan includes providing a portion of the money raised by implementation of the federal Marketplace Equity Act, which would enable states to apply the sales tax to Internet sales. However, it’s unclear if Congress will pass the measure. If it is not enacted, the governor’s bill provides for increasing the sales tax another 2 percentage points, from 4 percent to 6 percent.
The plan follows approval last month of a sweeping, long-term overhaul to neighboring Virginia’s system for funding repairs. Backed by Republican Gov. Bob McDonnell, it represented the largest tax increase to clear Virginia’s Legislature since 2004.
Sen. E.J. Pipkin, R-Cecil, criticized the O’Malley plan, saying priorities of the Transportation Trust Fund continue to unfairly stress mass transit over roads.
“Once again, the governor continues to double down more and more money for huge mass transit projects, which have huge capital costs and huge operating expenses, and it doesn’t seem to change, and therefore I think it will be rejected,” Pipkin said.
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