Mike Miller's Gas Tax Proposal Won't Work

Maryland Senate President, Thomas V. Mike Miller is proposing to apply a sales tax to gasoline in an effort to generate revenue for Maryland transportation projects, relieve congestion, and infrastructure maintenance. 

Last November Maryland’s top budget analyst told lawmakers that Maryland has no money to start new projects and it would run out of funds for maintenance by 2018.

According to the Washington Post, Miller’s proposal would apply a 3 percent sales tax to gasoline, on top of the 23.5 cents per gallon state tax and 18.4 cents per gallon federal tax.  Miller’s sales tax plan is estimated to generate $300 million in annual revenue.  Miller’s idea cuts in half, the 6 percent sales tax on gasoline Governor Martin O’Malley proposed last year.

Miller also proposed leasing the new Intercounty Connector to a private firm, and creating special regional authorities with the power to raise property taxes to pay for transit projects in the Washington, DC and Baltimore regions of the state.

Maryland’s transportation funding woes are one of its own making.  Since 2003 the lawmakers have raided the state’s transportation trust fund to the tune of $ 1 billion to cover budget deficits.  Both O’Malley and Miller presided over much of those fund raids and cuts to highway user funds, which the counties use to maintain roads and infrastructure.  The excerpt below of a video from Reason.TV explains how O’Malley took over $861 million—including $771 million in federal stimulus dollars allocated for infrastructure—and used it to pay for other non-transportation spending.

Of course there is no guarantee that O’Malley, or his successor, will not transfer any of the new revenues to cover general spending, which has increased 14 percent since 2007.

Last year, The Maryland Public Policy Institute analyzed various gas tax and transportation revenue plans floated by the governor and others.  The report found that O’Malley’s gasoline sales tax, and other tax and fee proposals would disproportionately affect lower income families, taking a larger share of household income from those making $20,000 to $40,000 in income than families with higher incomes.  The analysis noted O’Malley’s 6 percent sales tax plan to be the most regressive among the various proposals. 

MPPI also debunked the claim made by proponents of gas tax increases that new revenues would go to relieving congestion and maximizing mobility.  The study found that a disproportionate share of transportation money goes to transit, not roads, even though transit ridership has not substantially increased.  In other words, drivers using Maryland’s roads disproportionately subsidize a small minority of transit users. Maryland spends 54 percent of transportation revenue on transit, while only 4 percent of all travel, and 9 percent of all commuting is done on transit.

Figures from The Maryland Public Policy Institute's Rethinking Maryland's Proposed Gas Tax Increase. 

In fact, MPPI notes that, “even with substantial increased in commuter rail (MARC) service and expansion of Metro service in the Washington suburbs, approximately the same share of Marylanders get to work by transit today as they did in 1980.”

Expensive transit projects like the Purple Line in the Washington suburbs, and the Red Line in Baltimore will only increase the funding imbalance while worsening Maryland’s congestion problems. 

Instead of increasing gasoline taxes, MPPI recommended the state pursue public private partnerships—like Miller’s idea for the Intercounty Connector—with private investors much like Virginia has done since the late 1980s.  Virginia’s partnership with American and Australian firms is creating 14 miles of high occupancy toll lanes (HOT).  For a $409 billion investment, Virginia will receive $ 2 billion in new road capacity.  

MPPI also suggests Maryland, like Virginia under Governor Bob McDonnell, undertake an independent comprehensive financial and performance audit of the Maryland Department of Transportation.  MPPI states that any reform process should begin with “acknowledging that the state’s political leadership has failed to adequately address the problem…They should also acknowledge that the whole system might need to be rebuilt from the ground up to better serve the citizens, not the leading legislators, the privileged interest groups that have diverted state transportation funds to other purposes, or unproductive transportation projects implemented for largely political purposes.”

The Maryland Department of Transportation and State Highway Administration were the subject of several embarrassing legislative audits over the last two years, including serious ethics violations.  O’Malley’s former Secretary of Transportation, Beverly Swaim Staley announced her resignation last April, he has not yet found a replacement for the post.