Raising gas tax for inflation would have netted millions

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RICHMOND — An analysis by a nonprofit tax-policy institute says that Maryland and Virginia could have collected hundreds of millions of dollars per year since their last gas-tax increases if they had raised the tax regularly to account for inflation.

The states, both of which are desperately trying to cobble together more money for transportation, had among the highest totals in the nation of unimposed gas-tax dollars, according to the D.C.-based Institute on Taxation and Economic Policy.

Maryland’s gas tax of 23.5 cents per gallon, in place since 1992, could have generated an additional $421 million per year in the past two decades if it had been tied to inflation, the analysis concluded.

Virginia, with a 17.5 cents per gallon rate since 1986, could have collected an additional $580.3 million per year in 25 years.

“That’s just not a sustainable finance structure,” said Carl Davis, a senior analyst at the Institute and author of the report, “Building a Better Gas Tax.”

Maryland Gov. Martin O’Malley’s Blue Ribbon Commission on Transportation Funding has recommended to the state’s General Assembly a 15-cent increase over three years to the gas tax that would include an index tying it to inflation. Mr. O’Malley, a Democrat, has indicated support for increasing the tax, which could generate nearly $500 million in annual revenue and is expected to be hotly debated during the upcoming General Assembly session.

But Virginia Gov. Bob McDonnell, a Republican, has flatly rejected a gas-tax increase, noting that more fuel-efficient vehicles and more efficient fuel are leading to less gas consumption and causing the revenue stream to dry up. The governor also maintains that a tax increase would be unwise as the state emerges from a national recession.

“It would kill the steady economic growth we have experienced,” Mr. McDonnell said on his monthly call-in appearance on WNIS Radio in Norfolk on Tuesday.

Delegate Joe T. May, Loudoun Republican and chairman of the House Transportation Committee, agreed that in the long-term the gas tax alone would not work as a sustainable funding stream because of declining returns.

“If the gas tax is diminishing, there aren’t too many areas left open to raise transportation dollars,” he said. “There aren’t any free lunches. There really aren’t.”

To that end, he’s looking elsewhere. Mr. May said he will carry legislation to create a system where oversize, overweight trucks pay permitting fees based on how much damage they do to the state’s infrastructure, an item that would generate about $10 million a year.

Others argue that an increase in the gas tax, coupled with some form of inflation index, is simply necessary to meet the overwhelming needs of the state’s underfunded, crumbling transportation infrastructure.

“Our state leaders have to come to grips with the fact that Virginians are paying less and less for the transportation system they’re using more and more in today’s dollars,” said Bob Chase, president of the Northern Virginia Transportation Alliance.

Had the state tied the tax to the consumer price index in 1986, he said, it would be 35 cents today - and would pre-empt the messy process of voting on another tax hike.

The NVTA, along with a coalition of more than 20 Northern Virginia business groups, has called on Mr. McDonnell and the state legislature to approve new, sustainable revenue streams for transportation, arguing in a resolution that the state’s transportation needs “cannot be met without new, reliable revenues in the form of dedicated taxes and fees.”

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