Stopping Maryland’s Pro-Gas Tax “START” Coalition
In his State of the State address, Governor O’Malley this week asked the legislature to begin applying a 6% sales tax to gasoline sales. With typical O’Malley double-speak, he called for ending “the current sales tax exemption on a gallon of gasoline.” While he may try to make “ending an exemption” sound like tax reform, at current prices this would give us the fifth-highest total gasoline tax in the country.
On many business climate issues conservatives often find common cause with business trade associations. Unfortunately Maryland’s business associations have decided to throw both Maryland consumers and many small businesses under the proverbial bus. Maryland small business gas stations would be especially hard hit by this an increase because drivers would remain close to other jurisdictions with lower gas prices.
The Statewide Transportation Alliance for Restoring the Trust (START) is a coalition comprised of the Greater Baltimore Committee, the Greater Washington Board of Trade, the Maryland Chamber of Commerce, more than a dozen county and local chambers of commerce and more than 50 organizations and businesses. They are cheerleading the gas tax increase, seeking an increase in annual revenue to the transportation fund of $800 million.
Among the business association executives pushing hardest for higher taxes has been Greater Baltimore Committee CEO Donald Fry. When not working for the Baltimore business group, he was O’Malley’s appointee to the state’s “Blue Ribbon Commission on Transportation Funding.”
Pushing for higher taxes, especially transportation taxes, is familiar role for Fry. As a Democratic legislator in the nineties is he was active with transportation “funding” efforts. After losing his Cecil and Harford County State Senate seat in 1998, Fry was able to continue his pro-tax advocacy on behalf of the Greater Baltimore Committee. Losing his Senate seat allowed him take what has become a $340,000 a year (2009) job with the association.
Forty years ago Maryland established the Transportation Trust Fund as a dedicated budget for the Department of Transportation. Revenue sources for the Trust Fund include gas taxes, vehicle titling taxes, vehicle license, registration and other fees, 24% of corporate income taxes, 5.3% of sales taxes and federal aid.
However Governor O’Malley has raided nearly $700 million from the Transportation Trust Fund in the past two fiscal years to help plug general fund deficits. This year’s budget took out another $100 million. Only $60 million of this latest raid will be repaid within five years and then not until FY 2014. Another $40 million will be restored through new revenue from increased auto titling, vanity plate fees and dealers’ processing charges passed during this year’s session.
Think of it as a shell game. Money is already collected for transportation that is supposedly held in “trust.” Instead it is used for other purposes. Rather than fight to have the missing money restored to transportation, these business groups respond by supporting higher taxes and another solemn promise not to raid the fund again.
At a recent START rally, tax hike advocates rattled gas cans with coins in them to promote higher taxes. One prominent Republican actually backed START in the media, citing her support for a “lock-box” to keep transportation revenues from other uses.
Senate Minority Leader E.J. Pipkin has appropriately described the “lock box” component of the tax increase as a gimmick. The senator has told the media: “There are all kinds of gimmicks to get at people’s money. The gas tax is one of the most impactful taxes and working families would have already paid. On one hand O’Malley talks jobs and on the other hand he kills jobs with higher taxes.” Pipkin notes that most of the transportation money has gone to fund transit projects that only 3% of state residents use. “Before we have a discussion about raising taxes we should examine how government spends the money.”
For example, for the past 30 years, the state has required Baltimore’s public transportation to pay for 50% of its operating costs through “farebox revenues.” Yet, in addition to the O’Malley’s trust fund raid, the Governor signed legislation this year allowing Baltimore’s “farebox” share to drop to 40% of costs. As a result even more state subsidies are required. Now O’Malley’s “Blue Ribbon Commission” recommends dropping the fare-box share even more, to 35%.
Harford County Executive David Craig responded to the Governor: “Increasing fees, raising taxes, especially a sales tax on gasoline will cripple Maryland’s already fragile economy and destroy the budgets of small businesses and hard working families, the backbone of America.”
Montgomery County Republican Chairman