Gov. Martin O'Malley proposes gasoline tax hike

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Local,Maryland,Andy Brownfield,Taxes

ANNAPOLIS -- Marylanders would pay 2 cents more per gallon on gasoline over current prices this summer under a transportation funding plan announced by Gov. Martin O'Malley on Monday night.

That means it would cost 40 cents more to fill up a 20-gallon tank starting in July, given the state's statewide average cost of $3.74 per gallon Monday, according to auto club AAA.

O'Malley's plan would reduce the flat gas tax by 5 cents per gallon in fiscal 2014, from 23.5 cents to 18.5 cents. It would index that to inflation, raising it by an estimated half a cent per year.

The plan also would impose a 2 percent sales tax on gasoline, which would increase to 4 percent by July 1, 2014. By that date, Marylanders will be paying a total of 9 cents more per gallon than they do today.

The details
» Reduce gas tax by 5 cents from 23.5 cents per gallon to 18.5 cents and index to inflation.
» Apply 2 percent sales tax to gasoline in fiscal 2014, increase to 4 percent in fiscal 2015 and beyond.
» Reserve any revenue from Internet sales tax bill currently before Congress for Maryland transportation projects. If Internet sales tax fails to pass by 2015, apply full 6 percent state sales tax to gasoline.
» Put lockbox on Transportation Trust Fund, forbidding it to be used for anything other than transportation projects, unless governor declares a fiscal emergency and three-fifths of the members of each chamber approve.
» Create group to study regional means to raise transportation funding.

The plan, which includes bond sales and indexes Maryland Transit Authority fares to inflation, would raise a total of $3.4 billion over five years in much-needed funds for transportation projects.

"Building a 21st-century transportation network won't happen by itself," O'Malley said.

"Inaction has had a huge cost."

Maryland's Transportation Trust Fund only has money to maintain current infrastructure and is slated to go bankrupt by 2018.

Maryland currently is ranked 29th in terms of total state and local taxes on gasoline, said AAA Mid-Atlantic's John Townsend. The state's combined average tax is 41.9 cents per gallon, compared with Virginia's 38.3 cents.

If O'Malley's plan becomes law, Maryland would be bumped into the top tier of states with combined gas taxes of more than 50 cents a gallon. Only 14 states -- including New York, California and Connecticut -- have combined gas taxes that high.

The plan would raise $81 million in the first year, some of which would be used to leverage an additional $310 million in bonds for transportation for a total of $391 million.

Under the bill, all revenue from a proposed bill before Congress that would require online retailers to collect state sales taxes would be used for transportation. If that bill fails to become law, Maryland would apply the full 6 percent state sales tax to gasoline on July 1, 2015.

The bill requires a study on regional means to raise revenue but does not contain any authority for local governments to raise taxes.

On the heels of Virginia passing a transportation package -- eliminating its 17.5 cents-per-gallon gas tax, imposing a 3.5 percent sales tax on wholesale gas, raising the statewide sales tax to 5.3 percent from 5 percent, and imposing a number of other taxes and fees -- the pressure is on Maryland to pass a funding plan.

"What Virginia has done will make it ... only easier for Maryland to enact serious and consequential funding passage this year because if it doesn't, it's going to be a serious black eye for the state," Townsend said.

The bill has the support of the leaders of Maryland's House and Senate, giving it a better chance of passing than previous measures.

abrownfield@washingtonexaminer.com

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