Dan Geldon: Political courage and the gasoline tax

An issue like that surfaced last session in Senate Bill 949, the Transportation Funding Act of 2007. In that bill, Senate President Thomas V. Mike Miller proposed raising the state’s gasoline tax from 23.5 to 35.5 cents per gallon. Neither chamber of the legislature found the courage to pass it.

A gasoline tax is a classic ‘‘Pigovian” tax: It increases a product’s market price so that it incorporates the various costs that consumption imposes on third parties. This price increase promotes fairness by ensuring that we all pay the full costs of the things we consume. In the process, such a tax also reduces consumption by forcing us to factor different types of costs into our purchasing decisions.

Certainly, the costs of burning fossil fuels into the environment are large. Fuel consumption harms public health in the short-term by contaminating our air and contributes to global warming in the long-term by emitting greenhouse gases. Our reliance on fossil fuels also complicates our policies in the Middle East and Latin America and limits our flexibility in fighting the war on terror. The price of gasoline ought to incorporate these costs.

Of course, an increase in the gasoline tax has another benefit too: Increasing our state’s tax revenues. Maryland’s Department of Legislative Services estimated last year that the 12-cent hike would increase revenues by $406 million in 2008. This extra revenue would significantly eat into Maryland’s $1.5 billion structural deficit. Gov. Martin O’Malley has rightly emphasized that the state could use the new revenue to revamp our infrastructure and prevent bridge collapses like the recent deadly one in Minnesota.

Even under Miller’s proposal, Maryland residents would pay only about 53.5 cents per gallon in state and federal taxes. This amounts to only about a seventh of the British gasoline tax and a fraction of the amount in other European countries as well.

No doubt, it is an age-old truism that politicians prefer to avoid tough political issues. While a typical campaign promise brings immediate political benefits and unclear costs, support for a gasoline tax has immediate political costs and unclear benefits. No politician likes being attacked for increasing taxes.

Nonetheless, a New York Times⁄CBS News nationwide poll last year indicated that 59 percent of Americans would support a gasoline tax increase that would result in less consumption and less global warming. Public support here in Maryland was evident last year with the success of Montgomery County Executive Isiah Leggett, who won a tough election despite coming under attack for supporting a higher tax.

It has been a decade and a half since Maryland last increased its gasoline tax. It’s past time for the state to react to the inflation that has occurred over that time and lead the nation in taking our global warming and national security challenges seriously. And you need not be a liberal to agree. Even N. Gregory Mankiw, a former chairman of President Bush’s Council of Economic Advisers, has called for a major hike in the gasoline tax.

What’s more, maybe the legislature can find the funds to pay for all the usual campaign promises by passing the 12-cent increase. You can’t reduce health care costs, class sizes and traffic for free.

Dan Geldon of Bethesda is a student at Harvard Law. He has interned for the Maryland Senate Judiciary Proceedings Committee and the U.S. Senate Judiciary Committee.