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Maryland Governor Stymied in Effort to Raise State Gas Tax

1:19 PM EDT on April 18, 2012

Democratic Governor Martin O'Malley of Maryland was dealt a setback last week when the legislature failed to approve a revenue package that would have shored up funding for transportation projects.

Maryland has been at the forefront of a number of progressive planning issues in recent years, including a trailblazing statewide land-use plan. The difficulty in raising the gas tax is notable not only in relation to Maryland's smart growth trajectory, but also as a harbinger for other states struggling to maintain and invest in transportation infrastructure absent a long-term federal bill.

Maryland pays for transportation projects through its Transportation Trust Fund, which works pretty much like the federal Highway Trust Fund -- it gets money from gas taxes, excise taxes on SUVs, vehicle registration fees, and the feds, then dedicates it to transportation projects. Also like the HTF, the TTF routinely falls short of what it's supposed to cover.

One reason for the shortfall is that the state's gas tax has been frozen at 23.5 cents per gallon for the last 19 years. It has never been tied to the rate of inflation or fluctuations in the price of gas. Furthermore, gas is exempt from the state's 6 percent sales tax.

O'Malley proposed phasing out the exemption over several years, directing the proceeds to the TTF. He claimed that the state could raise some $600 million annually for transportation that way, nearly doubling the amount currently brought in by gas taxes. The state gas tax currently only covers about 20 percent of the state's transportation budget, according to an MDOT spokesperson -- under O'Malley's plan, it could cover 31 percent.

But even though O'Malley's party holds a majority in both houses of Maryland's legislature, his plan never made it out of committee in either chamber. So what happened?

"The proposal died for two reasons - lack of time, and lack of deep support," said Josh Tulkin, state director of the Maryland Sierra Club, in an email. "With most budget items pushed to the last days of the general assembly, only proposals with the strongest support are pushed forward." Much of that support was directed to O'Malley's proposal to raise taxes on those earning over $100,000, which ultimately failed. (The environmental community's chief concern -- a plan for offshore wind power -- didn't pass, either.)

"While the gas tax has a lot of merit, it is a relatively new proposal in Annapolis and may take some time for people to appreciate it," Tulkin explained. "However, the simple truth is that we need more funding for transportation, and a gas tax is a good policy to support public projects."

Because the assembly adjourned without passing a revenue package, O'Malley will likely call a special session, "at which point any proposals are fair game," Tulkin said. And even if the gas tax doesn't pass in a special session either, Tulkin thinks "it was an important step to put the issue in the spotlight." If state leaders don't reach an agreement before July 1, this would be the first time in 20 years that Maryland would fail to pass a revenue budget, triggering deep cuts across the board.

Right now, it's hard to see a silver lining. "If a progressive state like Maryland, where policymakers tend to understand the importance of addressing our state's transportation challenges, won't take appropriate action given the opportunity presented by the governor, then it doesn't bode well for most other states," NRDC's Rob Perks told Streetsblog. "We can kick the can down the road only so far until we tumble off a broken overpass."

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