MD Governor's Wise Plan To Raise The Gas Tax

A blog about business and economics.
Feb. 17 2012 8:18 AM

MD Governor's Wise Plan To Raise The Gas Tax

WASHINGTON, DC - FEBRUARY 25: Governor Martin O'Malley of Maryland speaks as other Democratic governors (L-R) Jay Nixon of Missouri, Deval Patrick of Massachusetts, Peter Shumlin of Vermont, Mark Dayton of Minnesota, and Bev Perdue of North Carolina look on during a press briefing after a meeting with President Barack Obama at the Eisenhower Executive Office Building February 25, 2011 in Washington, DC.

Photo by Alex Wong/Getty Images

In the spirit of the idea that we save for the future by building things, it's worth joining the New York Times editorial board in hailing Maryland Governor Martin O'Malley's plan to raise the gasoline tax and use the revenue to finance more infrastructure. Obviously people don't like to pay higher taxes, and the gasoline tax particularly stings the middle class. But this is a model of how to build a more prosperous future. If you have two similar jurisdictions, one of which uses higher gas tax revenue to finance more infrastructure and one of which refuses to do so, then you'll see that residents of the low-tax jurisdiction get more consumer goods in the short term. But the higher-tax jurisdiction will be stockpiling capital goods—its roads will function well, its buses will be upgraded in line with current best practices, it'll be able to invest in some rail, its airports will be nice—and over the medium and long runs it will become substantially more prosperous.

The flipside is that "saving money" by deferring maintainence on your existing infrastructure or by refusing to undertake new projects as your population and economy grows is the very model of false economies. The depreciation of an area's capital stock is a cost, not a saving.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



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