Proposed Amendment 7 Is Bad Policy

As first appearing in the St. Louis Business Journal:

The St. Louis Business Journal recently published an editorial critiquing my objections to the proposed transportation sales tax, also known as Amendment 7. To set the record straight, I agree with the Business Journal on the need for timely and adequate upkeep of our road and bridge system. This is an essential public service. However, I disagree on two important points.

First, despite the various alarms that supporters of Amendment 7 have raised, Missouri’s roads and bridges are not “crumbling.” In fact, our road system ranks among the best in the country according to the Reason Foundation and the U.S. Chamber of Commerce Foundation.

Second, what has been allowed to crumble – over the course of two decades – is the underlying user-pay model that has traditionally supported our transportation infrastructure. This is a good model and it should be restored, not replaced with something new and totally inappropriate – i.e., a sales tax imposed upon shoppers as opposed to other taxes on people actually using the roads.

Historically, the bulk of the Missouri Department of Transportation’s (MoDOT) revenues came from fees imposed on drivers – most importantly, the 17 cents per gallon state gas tax. However, that tax has held steady since 1996. If the gas tax was simply adjusted for inflation, it would be 8 cents higher and generate almost $300 million per year in additional revenue for MoDOT.

Instead of shoring up the traditional model, the Missouri Legislature opted for a proposed statewide sales tax to raise $534 million a year or $5.4 billion over the course of 10 years. That is more than what is needed to keep Missouri’s infrastructure from falling into disrepair.

There is a better solution: Raise the gas tax and/or implement tolls on major highways. These user-generated fees reduce the free-rider problem inherent in a transportation sales tax. Increasing the gas tax would increase road funding in Missouri while simultaneously reducing MoDOT’s long-term costs. Tolling major highways and bridges, such as I-70, would finance major improvements. Tolls and gas taxes are a fair and economically sound solution to MoDOT’s funding needs.

If voters approve a statewide 0.75 percent sales tax, it will cause ordinary Missourians to cross-subsidize truckers and other heavy users of the roads. And when the tax expires, Missouri will face an even worse problem than it does today — after 10 years of regressive taxes and wasteful spending.

Joseph Miller is a policy researcher at the Show-Me Institute, which promotes market solutions for Missouri public policy.