For more than four decades, Missouri’s Hancock Amendment has played a role in protecting taxpayers from an ever-growing government. But actions by our state’s legislature over the past year have exposed what could be a potentially crippling weakness of the amendment.
Last week, I wrote about Missouri’s impending gas tax hike and the multiple questions it raises about the Hancock Amendment. At this point, we know the state’s gas tax will be going up on October 1, but we don’t know when or how the law’s compliance with the Hancock Amendment will be determined.
The bill’s fiscal note made clear that we won’t know whether the bill is constitutional until we know the “fully implemented impacts of all legislation passed during a session.” Such uncertainty raises several concerns. For starters, our state will be raising taxes on Missourians on October 1, but then waiting a number of years before knowing whether the tax hike should have happened in the first place.
Second, we don’t know when every bill from this past legislative session will be “fully implemented.” For example, we do know the gas tax hike will ramp up to 12.5 cents per gallon over the next five years. But will it be considered “fully implemented” in the first full fiscal year for which the tax hike has taken effect—meaning next year—or will we have to wait until 2026 to consider the bill fully implemented? An even more confusing case is SB 153 (Wayfair), which addresses sales taxation for online purchases. My colleagues and I have discussed at length here and here, because it included multiple incremental income tax cuts that won’t occur for an unknown amount of time.
More specifically, what makes the implementation of SB 153 so uncertain is that it included two automatically triggering future income tax cuts. These are in addition to three income tax cuts already on the books from a bill passed in 2014. For these cuts to take effect, state revenue collections must reach certain benchmarks. So, for SB 153 to reach “full implementation,” the revenue targets likely must be met five separate times. This assumes the newly added cuts can only be triggered after the currently remaining three go into effect. It’s important to keep in mind that only one cut can happen each year. So if a final Hancock determination cannot occur until all five cuts take effect, this process will take a minimum of five years, but would likely end up taking much longer.
While it’s hard to predict the future, it’s safe to say these state revenue benchmarks won’t be achieved until after the gas tax bill has fully ratcheted up to 12.5 cents per gallon in 2026. This highlights a potentially devastating Achilles’ heel for the Hancock Amendment. If compliance with the amendment cannot be assessed until every bill passed during a legislative session has gone into full effect, and legislators can pass laws that can take an indefinite number of years to be implemented, there’s no effective constraint on our elected official’s abilities to raise taxes on Missourians without public input as the Hancock Amendment originally intended.
Nevertheless, it still remains true regardless of how Hancock compliance is determined, that if this year’s bills are found to exceed the constitutionally defined revenue limit (which for this year was $111.8 million), the gas tax hike will be sent to voters for approval before collections can continue. And while there are still many questions remaining about how Hancock Amendment compliance will be determined, it’s important to remember that all of this could have been avoided if the legislature had simply asked for voter approval in the first place.
