Time to Raise the Gas Tax?

John J. Walters Dec 3, 2010

To raise the gas tax or not to raise the gas tax -- that is the question.  If you ask me, it’s an easy one, and I bet you can guess my response: NO.  Of course, not everyone agrees with me.  In fact, Senate President Miller has been campaigning for an increased tax on gasoline in Maryland for years, and even used the legislative orientation session as an opportunity to push for it again.

In fact, I must admit that he has some very valid points.  Tax revenue generated from gasoline purchases and tolls are (supposed to be) used to fund the maintenance and construction of our roads, and the roads in Maryland are terrible, with some exceptions.  Miller even has compiled a list of construction projects that the state has had to push to the back burner due to funding shortfalls.  Truly, the man has done his homework.

When you consider the fact that the tax on gasoline has remained at 23.5 cents per gallon since 1992, it actually doesn’t seem all that unreasonable to increase it.  It takes 35 cents to buy the same amount of stuff today as you could get for 23 cents in 1992 -- so why not just increase it to 35 cents a gallon to at least compensate for inflation?

Would it be a cardinal sin to increase the gas tax?  Not really.  In fact, taxes on gasoline and toll roads are some of the best taxes our government has ever devised, in my opinion.  Why?  Because they are directly proportional to our use of a good that we can choose not to consume.  If we don’t want to pay the tax we can avoid toll roads, drive less, buy a more fuel efficient car, or take public transportation.

So why the opposition to a fairly benign tax amidst a sea of ridiculous taxes and fees?  Am I such a staunch fiscal conservative that I oppose tax hikes without even giving a thought to their use?  Again, the answer is no.  The explanation of why I oppose an increase in the gas tax comes from everyone’s favorite government document, the Budget Reconciliation and Financing Act (BRFA) of 2010.

The BRFA is a document written annually by the state government that records all the changes they have made to state law that allow them to move money around from their various accounts, agencies, and programs to submit a balanced budget -- something required by our state constitution.  First time readers of this wonderful document are in for a treat, as it details some staggeringly large transfers from dedicated programs to the nebulous “General Fund” that are difficult to classify as anything besides legalized theft.

One such transfer is from the Local Share of Highway User Revenues (LSHUR) -- the fund that is supposed to be built up through gas taxes and the like and used to maintain our roads.  In 2010 we moved $160 million from the LSHUR to the General Fund.  But the fun didn’t stop there.  We also will be taking another $238 million in 2011 and $340 million in 2012.  And if you think this is the first time our roads have been shortchanged so that the state could spend money elsewhere, I must inform you that we also took $271 million from it during 2003-5.

Maybe that’s the reason why Miller has his list of backlogged transportation projects.  It’s not that we’re not raising enough money -- it’s that we’re spending it on other things!  Increasing the gas tax might be an effective way to increase revenue for these other things, but it will only serve to increase the disconnect between government inflows and outflows.  This disconnect is what causes us to spend more than we take in, and what allows certain pet projects of politicians to flourish while other, more essential projects (like transportation), languish.

If we want to increase the gas tax, we must first make sure the government fully intends to use any extra money to fund transportation-related projects in the state.  With our current track record, I’m not so confident that would be the case.