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State Republicans Denounce Gas Tax Index, Special Session

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By Kate Prahlad
Capital News Service
Tuesday, Oct. 16, 2007

ANNAPOLIS - A day after Gov. Martin O'Malley called a special legislative session to deal with sweeping new tax proposals, Maryland Republicans said his plans would hurt working families and make the state less competitive with its neighbors.

The Joint Republican Caucus, during a briefing on state competitiveness, picked on what it called the "regressive nature" of O'Malley's proposal to index the gas tax to construction costs.

Economist Jonathan Williams said that gas taxes can work "if done correctly," but he went on to say that they almost never are. Williams, who directs a tax and fiscal policy task force at the American Legislative Exchange Council, said that transportation trust fund money is often diverted to "popular political projects," which can make it a regressive tax.

That means that the share of a person's income that goes toward the gas tax is about eight times higher for lower-income Marylanders than it is for someone in the $150,000 income bracket, Williams said.

"In theory, the gas tax is the best form of tax if done correctly," Williams said. "By that I mean, if it's structured as a user fee, which makes the revenue exclusively for roads."

Increasing the cost of travel for business would also drive up "bread, butter, food and medical costs," said Delegate Susan McComas, R-Harford. House Minority Leader Anthony O'Donnell, R-Calvert, seconded her worry about the "double whammy" caused by raising the gas tax.

Delegate Nicholaus Kipke, R-Anne Arundel, said he feared that the tax would increase "one cent per year forever."

But the actual number is about .08 cents per year, said Rick Abbruzzese, a spokesman for the governor. "It's not even a full cent," he said.

Abbruzzese said O'Malley is not calling for a higher tax, but rather for "indexing the gas tax to the cost-of-construction index, a way to keep pace with the cost of doing business." He also said that the governor does not intend to divert funds from the Transpiration Trust Fund, either.

"I would ask if there's anything that the Republican leadership is for," said Abbruzzese. "They've essentially taken themselves out of the debate on slots and saving Maryland's horse-racing industry."

At the briefing, leaders expressed concerns that Maryland would lose business to neighboring states.

Changes to the tax code "are not made in a vacuum," Williams said. "They always affect competitiveness."

But competitiveness with neighboring states can be increased by better roads, said Kathy Snyder, president of the Maryland Chamber of Commerce. She hopes at least $600 million will go into transportation projects through indexing the gas tax.

"Even though many of the members have fleets of vehicles, and it will be a tremendous business cost, we need more money for transportation," Snyder said.

A study released Tuesday by the Texas Transportation Institute said road congestion in the Baltimore and Washington areas costs Maryland $3 billion annually.

The results of the study, commissioned by the chamber and two other business groups, show that "we need to keep our infrastructure moving forward, and it may be savings in time," Snyder said. "And time is money in business."

At the briefing, O'Donnell reiterated that Republicans are "soundly unified against the wrong-headed notion" of a special session that will take up taxes without considering next year's budget.

Republicans also continued to say that the administration did not consult with them about any proposals.

Minority Whip Christopher Shank, R-Washington, said the party would continue to offer alternatives, but he feared that the final deal would be made behind closed doors.

But Abbruzzese said there was not unanimous opposition to the special session and that the "governor looks forward to working with the Republicans."

Copyright 2007 University of Maryland Philip Merrill College of Journalism

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