Gas Tax Cut Again in Missouri

Gas Tax Cut Again in Missouri

Another year has passed and the fuel tax has been cut again. Since Missouri’s fuel tax is fixed at 17 cents a gallon, its buying power is eroded over time by inflation. Fuel buyers also escape the ever increasing sales tax.

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As I have noted over the years transit users have seen their fares not only keep up with inflation, but far outpace it.

I had to extend the vertical axis downward this year. Fuel buyers now have received an over 40% tax cut since 1996. Had the fuel tax kept up with the consumer price index, it would have raised 30% more over the last 25 years, assuming the same amount would have been purchased. Despite the built-in revenue erosion, the state has added 7,932 lane miles to its liabilities since 1996.

MoDOT’s financial health saga continues with the roundly rejected 0.75% sales tax proposal in 2014 and 10 cent fuel tax increase in 2018, Regrettably in 2019 the Missouri Legislature approved appropriation of $50M in general revenue to subsidize driving. This came at an opportunity cost to education, healthcare, public safety, etc.

Missouri Department of Revenue

Despite the pandemic, fuel sales in Missouri were down only 6% from 2019. That works out to $42M less in state fuel tax revenue. Due to budget pressure from the fallout of the pandemic, Governor Parson cut the general revenue appropriation by $25M.

Bills that would increase the fuel tax which wouldn’t require a state-wide vote by the Hancock Amendment have not gotten across the finish line. Luckily MoDOT’s sky-is-falling prediction that fuel consumption would wither has not come to pass. Fuel sales have been above 4 billion gallons each year 2015-19. With robust fuel sales and the passage of the FAST Act by Congress, the dreaded missing out of federal matching money has not occurred yet.

Talk of big infrastructure bills in Congress has gone no where for years. With the new administration there is much excitement about the possibility of passing one. Also with new leadership in Congress and at USDOT, expectations are high for a realignment of priorities. New priorities are desperately needed as it would be profoundly stupid to dig the hole deeper again by expanding the road system.

Even with steady fuel consumption, MoDOT is losing ground. Drivers have to consume more and more to make up for the lost buying power of the fuel tax. Plus the fact that cost of road work rises faster than the consumer price index means maintenance needs, let alone expansion fantasies, are far from being met.

There are some bills filed in the Missouri Legislature this year to add more funding for MoDOT:

HB114 – Butz – Would increase the fuel tax by 2 cents a year for 5 years, totaling 10 cents.

HB694 – Francis – Same as above but with a break for fuels with biodiesel bended in.

HJR18 – Merideth – A constitutional amendment that enhances local control by allowing cities and counties to spend their allotment of revenue from the fuel tax on transit. It would also change the threshold for the local option fuel tax of 1 cent from 2/3 to simple majority. (Hurray good policy!)

SB262 – Schatz – Same as HB114

SJR12 – Shatz – A constitutional amendment to do the same.

SB252 – Onder – Shifts 0.5% of the 3% state sales tax that goes to general revenue to roads and bridges. This is terrible policy, mispricing driving even more than it already is. It would shift $500M per year from healthcare, education, public safety, etc to subsidize driving. Why should school kids of the future have their funding cut because the state irresponsibly took on too many infrastructure liabilities without accounting for their long-term costs?

What is missing is reform. Tolls would be a good start. Our system is over-built and mispriced. The state has spread out our cities and towns, destroying wealth by undermining property values and sending more wealth out of communities, and the state as a whole, in the form of vehicle, insurance, and fuel purchases coerced by built environments that offer no freedom of choice, all the while putting each of us on the hook for more and more infrastructure.

Many miles of roads should be bequeathed to counties to maintain (or not) as they see fit. MoDOT is responsible for the seventh most lane miles or any state DOT, yet Missouri is far from the seventh most populous nor in economic output. Our road system is outpacing our ability or desire to pay for it.

We run our road system like an unfunded pension system. Promises are made each time a new road or bridge is built to maintain and eventually replace them, but no money is set aside for those inevitable and predictable costs. Imagine if money had to be set aside with each new road, road expansion, and bridge. The money to fix or replace would be there when needed. But then not as much could be built for the same level of taxation. Sandbagging the future by previous generations has been our policy, and the chickens have come home to roost.

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