Gas Tax Follies

Gas Tax Follies

Many states are rethinking how they pay for transportation in general and how they tax gasoline in particular. Maryland is the latest state to pass legislation (HB 1515) dramatically changing the look of transportation finance. Gov. Martin O'Malley (D), who isn't known for promoting good tax policy, will sign the legislation. But he shouldn't.

The Maryland bill would impose a sales tax on gasoline at the wholesale level. The new law would also index the gasoline excise tax to inflation. Both those approaches represent terrible tax policy. The gas tax is an excise tax that has traditionally funded road and highway maintenance. The logic of it is that drivers pay for the government's upkeep of the road system. In essence, the tax acts like a user fee, albeit an imperfect one...

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