Franchot calls raising Maryland tax on gas ‘crushing blow’

ANNAPOLIS — Maryland Comptroller Peter V.R. Franchot blasted Gov. Martin O'Malley on Tuesday for pushing a gas-tax increase that the comptroller said would deliver a “crushing blow” to families and small businesses.

Mr. Franchot, a Democrat, made his comments during a briefing he called to explain the potential tax hike’s effect. He was joined by representatives of the oil and auto industries, who also were harshly critical of the governor.

Mr. O'Malley, a Democrat, said last week that he would support phasing in the state’s 6 percent sales tax on gas, a plan he says will help pay for needed road and transit improvements.

However, Mr. Franchot warned that any tax increases during this year’s General Assembly could overburden taxpayers and reverse improving employment numbers. He also said raising gas prices could have a wide-ranging effect on residents and businesses that depend on automobiles and trucks.

“It’s hard to imagine a worse time to raise any tax,” he said. “Particularly one that would immediately bite into family income, raise prices on consumer goods and destroy the profit margins of so many of the state’s employers.”

Mr. O'Malley’s proposal would impose a sales tax of 2 percent the first year, rising to 4 percent the second year and to 6 percent the third year.

A 6 percent sales tax eventually could add more than 18 cents to the cost of a gallon of gas, exceeding the 18-cent increase of the state’s 23.5-cent excise tax recommended last year by a state transportation commission.

Mr. Franchot said adding the 6 percent sales tax today on wholesale purchasers would vault Maryland gas prices to the fourth highest of any state in the country.

A gallon of regular gas in Maryland now averages $3.53, according to AAA, a price exceeded only by 12 states and the District.

Pete Horrigan, president of the Mid-Atlantic Petroleum Distributors’ Association, said a tax increase would lead to more consumers buying their gas out of state, which he said would hurt gas stations and distributors near the state’s borders.

Mr. Horrigan said polls have shown people often will drive out of their way for cheaper gas, even if gas spent on the trip cancels out any savings.

“It doesn’t make sense, but gas is an emotional purchase,” he said. “It’s a purchase that’s not an option. People need it to go to work, they need it to take their kids to soccer, and it’s an important issue to them.”

Mr. O'Malley and Democratic leaders have acknowledged that a gas-tax increase could burden residents but insist the long-term benefits outweigh the costs. While the revenues would go into the Transportation Trust Fund for road and transit projects, officials in the past often have raided the fund for general-fund use.

Lawmakers are considering several measures this session to better ensure that future funds are used for transportation purposes only.

Representatives for the governor criticized Mr. Franchot, who served 20 years in the House of Delegates before becoming comptroller in 2007 and has since established himself as a relative fiscal conservative in the heavily Democratic state. He is considering a run for governor in 2014.

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