Legislature’s Gas Tax Increase Is Sound Policy

As first appearing in the Columbia Daily Tribune:

How did you get to work this morning? How were the groceries at your local market delivered? If you are like most Missourians, you rely on the state’s highway system, like I-70, Manchester Road, and Natural Bridge Ave. Unfortunately for Missouri, the system’s funding is drying up.

The problem facing the Missouri Department of Transportation (MoDOT), which maintains state highways, has been building for almost two decades. For more than half a century, the main funding source for highways has been people who use roads. Through gas taxes, license fees, and vehicle sales taxes, the federal government and Missouri have invested billions in Missouri’s busiest roads. But this relationship has broken down.

Since the fuel tax was last increased to 17 cents in 1996, inflation has reduced its purchasing power by almost one-third, and the state now has the nation’s fifth-lowest gasoline tax and fourth-lowest diesel tax. In the early 2000s, these growing problems were papered over through bond proceeds from Amendment 3 and then by federal stimulus dollars. Now, the bonds and federal aid have been spent, and payments are coming due. Starting next year, MoDOT’s problems will quadruple, as MoDOT will no longer be able to match federal dollars. If Missouri cannot match federal funds, these dollars, which Missourians pay in federal gas taxes, will be parceled out to other states.

What should be done? Last year, the Missouri Legislature proposed a .75 cent statewide sales tax to pay for transportation. This proposal, known as Amendment 7 and rejected by voters, would have raised a lot of money, but it was not a sound policy solution for MoDOT’s funding crisis. Updating the user-funding base, not general taxation, is the fair and economically sound way to fix MoDOT’s funding problems.

The Missouri Legislature finally may get serious about the fuel tax and tolling by considering a proposal that would increase the regular fuel tax by 1.5 cents and the diesel fuel tax by 3.5 cents, making the tax per gallon 18.5 cents and 20.5 cents, respectively. Such an increase could raise over $50 million for MoDOT and more than $20 million for our local roads. That’s not enough for major improvements to the state highway system, but it would provide enough funds to allow MoDOT to match federal dollars next year, staving off significant construction budget cuts. Furthermore, increasing the diesel fuel tax more than the regular gasoline tax makes sense. Interstate trucks, which do more damage to roads, buy the majority of diesel fuel. Twenty other states and the federal government have higher taxes on diesel fuel.

Aside from giving policymakers breathing room to come up with more long-term solutions, the current proposal would create a public-private partnership authority that could, with the approval of the Missouri Legislature, allow the private sector to build and toll an expanded I-70, along with other infrastructure projects. This is a major opportunity for Missouri, which simply does not have enough tax revenue to rebuild our most expensive highways. In other states, leasing toll roads has resulted not only in better, less congested roads, but also significant upfront payments to improve the transportation system in general. Using tolls is also the fairest way for rebuilding major roads; only those who directly benefit will have to pay.

The state highway system is critical to Missouri’s economy and the everyday lives of the state’s residents. The highways should not be allowed to fall into a state of disrepair. The limited measures moving through the state legislature are a sound policy response to the problem, and a good first step toward modernizing MoDOT’s funding base.

Joseph Miller is a policy analyst at the Show-Me Institute.