Late last month the Americans for Prosperity Foundation – Maryland, along with the Sage Policy Group, released a study claiming that possibly over 1,000 jobs could be lost in Maryland if the gasoline tax is increased via either the adoption of a 3% or 6% sales tax on the product – in other words, expanding an already-existing tax to cover a product previously exempt from that avenue of taxation – or simply adding a dime per gallon to the current state tax burden of 23.5 cents per gallon.
Before I begin my take on this, though, it’s helpful to know the players. We all know AFP tends to be a group which favors low taxation and limited government; they have graced this website many times before with their message. I had never heard of the Sage Policy Group prior to this study, though, so I looked them up. It seems like a small, one-horse operation but their clientele is varied and they appear relatively apolitical. I would have to say, though, this isn’t the most in-depth study I’ve ever read – to me it’s almost like a paint-by-numbers job based on the description of the software used. (Then again, the experience to interpret the numbers has some value.)
The obvious weakness of the study, plainly stated within, is that it’s not an attempt at a cost-benefit analysis. Obviously the state would be able to derive some benefit to having a Transportation Trust Fund (TTF) stocked with more cash to do the needed repairs and construction on state transportation infrastructure, but the question on the mind of most is whether they trust a greedy governor and compliant legislators to keep their hands out of the till. We probably wouldn’t be having this discussion if our last two governors hadn’t “borrowed” over $1 billion from the TTF “pot of gold” to keep the budget in balance, rather than bearing the blame for unpopular spending cuts or more new taxes; not that the latter stopped Martin O’Malley.
Yet it’s all but inevitable the tax will be increased; after all, the Democrats have the votes and the respective ribbon-cuttings on projects would likely be timed in the few months before they face voters. Surely, they will argue, a dime or two a gallon – most of these schemes would work out to ten to twenty cents a gallon, depending on gasoline price – is a small price to pay for fixing Maryland’s roads and bringing O’Malley’s dream of expanded light rail to fruition. And perhaps it would be, if the former assumption on usage was true.
But a study by the Department of Legislative Services shows that spending on transit takes up almost half of TTF funding, up from about 1/3 twenty years ago; meanwhile, the highway construction share has declined by about the same amount, to less than a quarter per dollar spent. The drop has been most precipitous during Martin O’Malley’s tenure. Given those facts and O’Malley’s stated wish list of new mass transit projects, it’s likely that the best we can hope for would be to get back to pre-O’Malley levels of spending on highway needs if the gas tax were increased.
The Sage Policy study, though, also estimates the number of jobs lost due to the tax hike. Obviously, though, there would be some jobs gained as a number of construction projects are funded. Someone has to pave the roads, design the bridges, and provide the materials necessary for working on infrastructure. While the Sage study couches in some fashion the job losses based on a theory that money taken out of the private-sector economy results in job losses, there are legitimate needs the public sector pays for and roads are among them – hopefully to provide a net gain.
Simply put, if you figure the $4 a week lost by an average family due to this tax is computed as one latte, sure, if everyone stops buying as many lattes it will eventually result in the coffee shop laying off workers or even closing, but the construction business next door may be able to hire laborers with a higher skill level and wage thanks to the new highway projects being built. It’s a tradeoff, and we all know that a robust highway network facilitates the efficient movement of people and goods. On the other hand, light rail projects don’t contribute in the same way and generally require subsidies from the state to remain in operation. Fewer jobs are created with that spending – yet that’s my suspicion as to the real purpose of this proposed gas tax hike.
I believe Marylanders would be less reluctant to pay a gas tax increase which amounts to something no worse than an average “sticker shock” gas price jump where the cost goes up 20 cents a gallon overnight if they had confidence the money would be spent wisely and not just tossed into the void of the state’s General Fund or spent on mass transit boondoggles. Yet if we returned mass transit to its traditional level of spending we might be able to get back to fixing roads without the need to increase the gasoline tax. That seems like the logical step here before we vacuum more money from the pockets of those Marylanders who still are among the working.