As Maine’s Gas Tax Increases, Indexing Goes Under Fire

Fri August 01, 2008 - Northeast Edition

PORTLAND, Maine (AP) With the average price of regular gasoline in Maine up $1.11 per gallon since last year, the eight-tenths-of-a-cent increase that took effect July 1 hardly drew notice.

The increase came about automatically under terms of a 2002 law that made Maine one of a handful of states to index its gas and diesel taxes to inflation. Now, at a time of record high fuel prices, some lawmakers are questioning whether the law still makes sense.

The indexing is “onerous,’’ said Rep. William Browne of Vassalboro, ranking Republican on the Legislature’s Transportation Committee.

“I definitely would be up for an up-or-down vote every time [an increase in funds were needed],’’ he said.

The issue will come before the next legislative session, when lawmakers are scheduled to vote on whether or not to keep the tax indexed to inflation. The law setting up the indexing requires a review vote every two years.

“Obviously, [a penny’s] not going to be breaking the bank, but I think the concept needs to be looked at and debated and considered,’’ said Sen. Bill Diamond, D-Windham, who also serves on the Transportation panel. “Times change, traditions change, the economy changes. I believe these sorts of things need to be looked at, given the state of the economy.’’

Supporters of indexing say it provides stable funding for roads and other transportation infrastructure. Critics, however, say it’s bad public policy to allow any taxes to increase automatically.

During the past fiscal year, the state highway fund received $223 million from gasoline and diesel fuel taxes, accounting for the bulk of the $325 million it took in. Maine’s 28.4 percent gas tax is the nation’s 16th highest.

Rep. Boyd Marley, D-Portland, co-chairman of the Transportation Committee, said pegging tax increases to inflation came about as a way to provide steady budget increases for infrastructure improvements.

“Politically, none of us like it,’’ Marley said. “But responsibly, that’s the only way we’ll fund roads and bridges.’’

While lawmakers have voted to keep indexing in place up to now, current economic conditions may cause a change in thinking, said Chris Jackson, vice president of the Maine Oil Dealers Association.

“I certainly think the dynamics around the legislation change when prices go from $2 a gallon to $4 a gallon. I don’t think it’s going to be a slam-dunk to keep the indexing on autopilot,’’ Jackson said.

Maria Fuentes, executive director of the Maine Better Transportation Association, said indexing is worthwhile and the indexed increases should be kept in perspective.

“Obviously, everyone’s concerned and upset about the wild spikes that we’ve had in gas prices, but those increases have been so dramatic that when you look at the adjustment that results from indexing [it] represents not even 1 percent of the [price] increase that we’ve seen in the last 12 months,’’ she said. “Ninety-nine percent of that increase is being driven by other things.’’