WASHINGTON, March 5 Maryland Governor Martin
O'Malley is seeking an overhaul of his state's transportation
funding, less than two weeks after neighboring Virginia approved
a reorganization of how it funds road, bridge and highway
States and federal funding for transportation, which is
mainly based on gasoline taxes, has shrunk in recent years as
vehicles have become more fuel-efficient.
O'Malley's plan would closely resemble Virginia's by moving
the state away from relying on a gas tax charged at the pump and
instead using revenues from taxes on wholesale gasoline and
Internet sales. The governor's office also said the state would
issue general obligation bonds for federally required
environmental improvements, but did not give an amount.
"This plan will help us generate the revenue we need to ease
some of the worst traffic congestion in the nation while
building and repairing our transportation infrastructure,"
O'Malley, a Democrat, said in a statement issued late Monday.
In his proposal, the state would lower its gas tax to 18.5
cents per gallon from the current 23.5 cents and index the tax
to inflation. The state would also link its public transit fares
to the Consumer Price Index, the federal measure of inflation.
Then, it would create a sales tax on wholesale gasoline,
beginning on July 1 at a rate of 2 percent. That tax would rise
to 4 percent in 2014.
The U.S. Congress is poised to pass legislation that would
resolve a decades-long fight between states and Internet
retailers. Under current law, states can only collect sales
taxes on web purchases from retailers who have physical
presences within their borders. Governors of both parties say
they are missing out on millions of dollars of revenue each year
as more consumers shop on web sites such as Amazon.com.
Under O'Malley's proposal, if Congress approves legislation
allowing states to tax Internet sales, Maryland would devote a
portion of the new revenue to transportation. If it does not
pass a bill by June 1, 2015, Maryland would make up for any
shortage with a higher tax on wholesale gasoline.
The plan Virginia approved on Feb. 23 also looked to
Internet sales revenues for transportation projects, and would
increase the wholesale gas tax if the legislation fails.
In its overhaul, which was initially drafted by Republican
Governor Bob McDonnell, Virginia completely scrapped its 17.5
cent-per-gallon gas tax at the pump and instituted taxes on
wholesale and diesel. It also raises the state sales tax and
charges registration fees for hybrid, electric and
Virginia is the "first state to legislatively address
stagnant gas tax collections that have been increasingly
insufficient to meet transportation funding needs," Moody's
Investors Service said in a report released last week. The
rating agency said Virginia's transportation package was "a
Maryland will likely pass its overhaul quickly as
O'Malley already has support from the leadership in both
chambers of the statehouse, which is controlled by Democrats.
Although O'Malley's proposal has major divergences from
Virginia's legislation - Maryland would not touch its sales tax
or charge alternative-fuel vehicle fees - it could generate
similar amounts of money. According to O'Malley's office, his
proposal would bring in $3.4 billion over five years for
transportation, while Virginia's overhaul is expected to
generate $3.5 billion over five years.
The U.S. government uses an 18.4 cent-per-gallon tax to fill
its Highway Trust Fund, which is perpetually at risk of going
The main source of highway funds in about half the states is
a motor vehicle fuel tax, according to the National Conference
of State Legislatures.