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Pros and cons of raising Maryland's gas tax debated

February 10, 2011|By HEATHER KEELS | heather.keels@herald-mail.com
  • Rich Parsons, left, makes a point Thursday during a debate on the proposed gas tax increase. Opponent Pete Horrigan sits at the right. The discussion was hosted by the Hagerstown-Washington County Chamber of Commerce.. Moderator Brian Flook sits center.
By Kevin G. Gilbert

HAGERSTOWN — A petroleum industry activist and a Montgomery County business advocate went head to head Thursday on the pros and cons of raising Maryland's gas tax during a discussion hosted by the Hagerstown-Washington County Chamber of Commerce.

Rich Parsons, a consultant and former lobbyist who chairs the Montgomery County Business Political Action Committee, argued in support of a proposed 10-cent-per-gallon hike to the gas tax, saying it is the only way to fund much-needed road improvements statewide.

On the other side, Pete Horrigan, president of the Mid-Atlantic Petroleum Distributors Association, argued that a gas tax increase would be passed down to consumers in the cost of goods and services and would motivate truckers to fuel up in other states.

He said the state should find ways to use its existing transportation revenue more effectively.

Sen. Rob Garagiola, D-Montgomery, introduced a transportation funding bill Monday in the Maryland General Assembly that includes a 10-cent increase in the gas tax.

About 20 local business and government leaders attended the "Eggs and Issues" breakfast discussion, which was held at the Academy Theater in Hagerstown.

Parsons said the state has been taking money from its Transportation Trust Fund — money from the gas tax, vehicle titling and other sources meant for transportation-related expenses — to close deficits in its general fund.

About $1 billion has been siphoned from that fund, and the road system has been the primary area to suffer, Parsons said.

"That's been squeezed and squeezed and squeezed, and specifically what has been squeezed out of it is the ability to build more capacity to deal with congestion," he said. "All that's left, pretty much, in the capital budget at the state level (for roads), is maintenance and repair."

County and local roads also have suffered, because the state has nearly  eliminated the Highway User Funds it normally passed down to counties from the Transportation Trust Fund, Parsons said.

"There is, I think, a good reason why a lot of business organizations in this state are advocating a gas tax, and that is the benefits outweigh the cost," he said.

A study by the Road Information Project, a national think tank, estimated the poor condition of roads costs drivers in Maryland $2,500 per person per year in extra fuel, wear-and-tear and lost time, Parsons said.

Parsons said Maryland's gas tax has not been raised since 1992 and has lost about 60 percent of its value since then due to inflation.

Parsons and Horrigan agreed that the state needs to put in place a "lockbox" policy on the Transportation Trust Fund to ensure that it is used only for transportation-related projects.

To propose a constitutional amendment for a lockbox requires approval from three-fifths of the General Assembly — support the measure likely will not have if it is paired with a gas tax increase, Horrigan said.


Trucker impact

In an industry in which even a 1-cent price difference from a neighboring station can cause a gas station to lose 20 percent of its business, a 10-cent increase is a "huge amount," Horrigan said.

A trucker driving on the interstate with a 300-gallon gas tank could choose to bypass Maryland in favor of lower gas prices in Virginia, he said.

Horrigan said that with gas already over $3 a gallon, small businesses would be unable to absorb an increase and pass it on to consumers in the costs of goods and services.

Parsons countered by saying that the state could remain competitive to truckers by taxing diesel fuel less than gasoline. Local drivers are unlikely to go out-of-state because, for most of them, the extra drive would outweigh the savings, he said.

Parsons said higher gas taxes don't always translate to higher prices at the pump.

If a state fails to raise its gas tax, the price will go up anyway — but instead of supporting local roads, the extra money goes to the profit margins of large oil companies, Parsons said.

Horrigan responded that many factors, such as the type of fuel, contribute to the gas prices in a given area, but profit margins do not vary much.

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State gasoline tax rates (cents per gallon)

Maryland — 23.5

Pennsylvania — 31.2

Virginia — 17.5

Washington, D.C. — 23.5

West Virginia — 32.2

Average state tax nationwide — 22.44


Source: U.S. Energy Information Administration
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