On Monday night, Governor O’Malley revealed details of his proposal for transportation funding. On the Governor’s website, the Administration argues against the “cost of inaction.”
The essentials of the plan’s financing include an immediate drop of 5 cents per gallon in the motor fuel tax, offset by a 2% sales tax applied at the wholesale level. The wholesale level tax would increase to 4% in 2014, and another 2% if the federal government fails to enact legislation applying sales taxes to internet sales by June 2015. The base motor fuel tax rate would also be indexed to cost of living increases in future years.
Tuesday morning update: Based on MACo’s preliminary reading of the bill (just made available) it appears that the full new funding stream (through either the wholesale-level sales tax or the eventual increase in motor fuel tax rates) would be excluded from the Gasoline and Motor Vehicle Revenue Account, which is shared with local governments (historically 30% to locals, more recently about 10%). Since the only revenue stream sent for that state/local distribution would be the remaining 18.5 cent motor fuel tax, distributions to counties, Baltimore City, and municipalities would be reduced immediately and permanently, even from their currently drastically lowered levels.