Franchot Opposes Any Gas Tax Hike

By Megan Poinski,

Calling any gas tax increase a “crushing blow” to families and a “shot to the gut” of businesses, Comptroller Peter Franchot declared his opposition to Gov. Martin O’Malley’s proposal to start charging the 6% sales tax on gas.

At an event he hosted Tuesday, Franchot said that the state’s economy is too fragile right now to sustain tax increases. Gas taxes and sales taxes, he said, are both “regressive” – they have the greatest impact on the people who make the least money.

Franchot said he understands that the state is looking for more funds. However, there are ways to get it without raising taxes, like entering into public-private partnerships and not wasting funds that the state already has.

“This is not the time for tax hikes. It is time for more efficient spending,” Franchot said.

For all of the talk about a gas tax increase, O’Malley still has not formally proposed a bill to put it into place.

On a radio show last week, O’Malley announced that he will propose collecting sales tax on gasoline, phased in over three years. He said just a little bit more about his plan in his State of the State Address days later. But there still is no written document to say much about how the governor thinks it should be done.

New gas tax could be bureaucratic nightmare

The comptroller’s office is responsible for collecting all taxes. Franchot, department employees, and petroleum industry representatives said that the tax could also become a bureaucratic nightmare, depending on how it is imposed.

Because there is no written proposal for the tax, nobody knows how the tax would be imposed. O’Malley spokesman Rick Abbruzzese said in an e-mail last week that the tax would be paid by the gasoline wholesaler or distributor as it enters the state.

Jeff Kelly, who works with the Comptroller’s Field Enforcement Division, said that if retailers do prepay the tax, it could mean that they could be paying $1,700 to $1,900 more for each fuel tanker that supplies them. Kelly said that some retailers could recoup this cost quickly, but it might take smaller, less busy retailers quite a lot of time to make that money back.

Chuck Ulm, who also works in the Field Enforcement Division, talked about all of the issues that companies moving gasoline could have with a sales tax. Several gasoline companies ship their products through the Port of Baltimore, and tax is collected as it comes in. There are dealers that pick up gas in Maryland and sell it in other states, and Ulm said they are entitled to refunds on the taxes. However, this creates quite a headache for the dealers, especially since they have so long to wait to get their taxes refunded.

Customers oppose gas tax hike

Pete Horrigan, president of the Mid-Atlantic Petroleum Distributors’ Association, said that his members always hear customers complaining about gas prices. Once this kind of gas tax is in place, Horrigan said, prices are only going to go up.

With world events and uncertainty in the Middle East driving prices up already, Horrigan said that the state shouldn’t do anything to make gas prices even higher. Gas prices tend to be an emotional issue, he said, and studies have indicated that people will drive 10 miles to pay 5 cents less per gallon.

If this gas tax increase goes through, Horrigan said that prices in Maryland could be 26 cents more than in Virginia.

“We think that applying the 6% sales tax will cost the state tax revenue and cost Marylanders jobs,” Horrigan said.

Roy Littlefield, executive director of the Washington, Maryland and Delaware Service Station and Automotive Repair Association, said that there is a real disconnect between politicians trying to increase revenues and families trying to make ends meet. Kirk McCauley, the association’s director of member relations, agreed.

“Maryland is not a business friendly state,” he said.

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