The most interesting tax issue on the Harrisonville ballot is a local gas tax. Local gas taxes are a little-used option for funding roads for municipalities. Harrisonville would be the eighth city in Missouri to enact such a tax for its roads, according to Show-Me Institute research. Not surprisingly, many of these municipalities are located along major highways where people frequently stop for gas. In the same way that Prussia was called “an army with a country,” Foristell and Matthews could be considered truck stops with their own cities.

Local gas taxes require a 60 percent threshold for voter approval. The funds raised by the tax can only be spent on roads within the city. Obviously, getting 60 percent of the vote for any new tax is difficult, and that is likely one reason local gas taxes are so rare. Foristell, for example, needed multiple attempts before voters approved its gas tax.

Funding roads with user taxes like a gas tax is good public policy, and this includes local roads. It is smart policy to connect the cost of driving with the act of driving as much as possible. When you pay for roads with unrelated taxes, such as a property tax, a general transportation sales tax, or a targeted transportation development district (TDD) sales tax (which sounds like a transportation tax but is often just a form of corporate welfare), you subsidize increased driving by lowering the relative cost of driving.

As electric vehicles become more common, adjustments to the gas tax system will have to be made. But in the short term, more cities should consider adopting very low gas taxes in order to fund local roads. This table has more information on the local gas taxes implemented by Missouri cities:

While not every municipality can raise hundreds of thousands of dollars a year, it is worth considering in any municipality with a gas station. Similarly, the state should consider lowering the threshold for voter approval of local gas taxes to the standard 50 percent plus one.

The other two taxes and bonds being considered are much less beneficial. Harrisonville already has a local sales tax rate of 2.375%, and it is asking voters to raise it another 0.25%. However, the ballot wording is very confusing. The ballot says, “Shall the city of Harrisonville, Missouri impose a city sales tax of one and one quarter of a percent?” That would seemingly indicate a tax increase of 1.25%. However, the city website says it is only a 0.25% increase, leading to a total tax of 1.25%. But that conflicts with the other city website (link above), which lists the city sales tax at 2.375%. It may be that the city general sales tax is being increased, but then the city is clearly misleading voters as to the current sales tax rate by saying it is just 1% when it is 2.375%.

This sales tax rate increase is particularly high considering that Harrisonville also levies a moderately high property tax rate. Other cities with extremely high sales taxes tend to have very low property tax rates, such as Ashland. Whether they want the tax increase or not, Harrisonville residents should know they are living in a city with very high total municipal taxes. In particular, Harrisonville should remove some of its 1% TDD sales taxes, which would make its local sales tax almost 5%, if voters approve the tax increase.

Finally, voters are being asked to approve a bond issue for the Harrisonville municipal water and sewer system. This blog post is long enough, but suffice it to say residents of Harrisonville would be better served by privatizing their municipal utilities instead of continuing to go further into debt for them.

The post Harrisonville Goes for a Local Gas Tax appeared first on Show-Me Institute.

TDDs are often abused by private developers as a means to expand corporate welfare under the pretext of “infrastructure improvements.” Most TDDs are created simply by the signatures of the property owners (often just one developer) who want to establish them. The TDDs are then governed by a board (affiliated with the property owner) that treats the tax funds as private money rather than public tax dollars. Missouri state auditors have consistently documented problems with TDDs for the past two decades.

Kirkwood city leaders deserve credit for putting this TDD to a vote of the entire city. They also made the right choice by ensuring that city leaders will have primary control of the future funds. Kirkwood residents can be confident that the taxes raised would be properly accounted for and spent on public needs, not private wants.

The main argument against this TDD is that sales taxes are not, generally speaking, the preferred way to fund transportation projects. Kirkwood should consider a local gas tax (which is allowed, yet admittedly rare in Missouri) before it commits to a sales tax for its roads. And, while nobody wants to hear it, property taxes are a better way to fund sidewalks in a community. General sales taxes are a way to push local costs onto visitors instead of having local people pay for the public services in their own neighborhoods.

Kirkwood voters face a tough decision tomorrow, but whatever the result of the vote, residents will benefit because the most harmful aspects of TDDs have been properly addressed by the city.

The post A Fork in the Road in Kirkwood appeared first on Show-Me Institute.

As I’ve written in the past, I’m not a fan of the refund scheme. The bill that created the refund raised the state’s gas tax by 2.5 cents per year for five years, but avoided a public vote by offering a path for Missourians to get back what they paid in new taxes at the end of the state’s fiscal year. The catch is that you need to keep all your gas receipts for the year and file a claim with the state’s department of revenue between July 1st and September 30th to be eligible for a refund.

If the refund were too easy to claim, the gas tax hike approved by legislators in 2021 would never raise much money for state roads. But our elected officials were willing to bet that taxpayers wouldn’t want to go through all the hassle to get a meager refund, and based on the refunds claimed last year, they were correct. Very few taxpayers claimed refunds last year, but it was also the least lucrative year for claiming a refund (only 2.5 cents per gallon was eligible for refund).

This year, the refund has doubled up to 5 cents per gallon, which means that drivers that fill up a 12-gallon tank every week for a year would receive around $30 back. While the total is still not a lot, it’s more than before, and the department of revenue now has an online portal available for filing claims, which is supposed to make the process a bit easier.

Of course, I would have rather Missouri’s legislature make the process easier—something like what was proposed in the bill I discussed here—or gotten rid of the tax hike altogether. But with prices up all across our economy, every little bit helps. Personally, I did not file for a refund last year, but I wish I had. This year, I did a better job of keeping track of my receipts and will be submitting my claim once the window opens. I hope many other Missourians join me in doing the same.

The post Second Time’s the Charm? appeared first on Show-Me Institute.

If enacted, House Bill (HB) 519 would require the state’s department of revenue to develop a mobile application for claiming gas tax refunds, which is what I suggested the state do back before the program began. The idea of keeping track of gas receipts for a whole year to fill out a form and mail it to Jefferson City always seemed like more work than the refund would likely be worth to most Missourians. That’s why I think having an easy process for registering gas purchases at the point of sale and submitting those receipts through an app for refunds would be a real game changer.

Additionally, the bill would get rid of the arbitrary window for filing rebates. As much as I’d like to think most Missourians enjoy following the state’s budget along with me every year, I don’t think the end of the state’s fiscal year (which is the current deadline for filing gas tax refunds) represents an obvious time for most to be filing tax documents. Expanding the window to allow gas receipt submissions through the app all year, as well as when individuals file their taxes in April, would likely make things much more convenient for those interested in claiming a refund.

Finally, the bill allows taxpayers who don’t want to mess with tracking gas receipts to claim a “standard refund,” which will offer a specified amount as a credit against the individual’s income tax liability. For the 2023 tax year, the standard refund would be $30. But by 2026 and every year after, when the gas tax hike is fully ramped up, the refund would be $75.

As I explained previously, if the legislature really wasn’t trying to raise taxes on Missourians without their input, the refund portion of the gas tax hike should be simple enough that most taxpayers feel they can reasonably take advantage of the refund opportunity. Based on the data from the refund’s first full year, I’d say that was not the case. While HB 519 is not perfect, I think it goes a long way toward demonstrating the state’s commitment to the law enacted by the legislature. I, for one, would appreciate a better way to reclaim my tax dollars.

The post A Better Way to Pay? appeared first on Show-Me Institute.

Recently, the Missouri Department of Revenue released data showing that in the refund program’s first year, fewer than 17,000 Missouri taxpayers decided to claim a refund. This amounted to less than $500,000 being returned to taxpayers.

Back when the gas tax hike was being debated, I repeatedly sounded the alarm about a few of the bill’s provisions (read more about the concerns here). The gist of the bill was that the state’s gas tax would increase by 2.5 cents per year for five years, but Missourians could get a refund for the amount of the new tax they paid.

Typically, Missouri’s constitution requires tax increases to receive voter approval before they can be enacted. But this refund provision helped convince lawmakers that their legislation wasn’t necessarily a “tax increase” on Missourians, thus giving them the ability to sidestep this pesky provision. According to the bill’s fiscal note, even the department of revenue’s “low-refund” estimate suggested that at least 15% of all gallons purchased would receive refund claims. If this were true, this first year of refunds would have totaled more than $11 million. Instead, only about 4% of the low estimate was claimed.

At the time, I remarked how skeptical I was that many Missourians would claim these refunds. I thought that unless the department of revenue made it easier for taxpayers to file claims, the amount of money eligible for refund would likely be too small to convince Missourians to bother. The process is tedious and cumbersome—in order to file for a refund, you must keep all the gas receipts that you are seeking reimbursement for, fill out a spreadsheet with information on those receipts, and the request must be completed in a narrow time window after the fiscal year ends. While the current sample size for refund claims is small, the ridiculously low amount of dollars returned leads me to believe that this prediction turned out to be correct.

To be fair, this is only the first year of the multi-year effort, and as the gas tax continues to rise over the next few years, the value of the refund to taxpayers will increase. But it’s also fair to say the participation in year one should be worrying to anyone who believed the bill was not an effort to significantly raise taxes on Missourians without their input.

The post Tax Refund: Failure to Launch appeared first on Show-Me Institute.

To avoid letting voters decide on this tax increase, Missouri lawmakers included a provision that ostensibly stopped the new law from triggering the Hancock Amendment by providing a mechanism to decrease revenue. As Show-Me Institute Senior Analyst Elias Tsapelas pointed out when the tax increased last year, the refund included in the law is effectively a mail-in-rebate gimmick. The state seemingly hopes to profit off Missourians and people driving through the state who will not go through the hassle of collecting gas station receipts and filing refund claims.

The gas tax is currently set to increase by 2.5 cents each year until 2025, and every time it does, drivers will be eligible for a larger refund. In 2025, Missourians who keep their receipts and file the required paperwork will get 12.5 cents back for every gallon of gas purchased. Tammi Hilton, creator of the No MO Gas Tax app, which digitally stores receipts until forms are due, estimates that a person who bought gas one to two times per week since October could receive a refund of $40 to $45 this year. That number will only increase in the future.

The form to request a refund can be found here. It requires personal and vehicle information along with a detailed list of all gas purchases between October 2021 and June 2022. The form must be postmarked by September 30. But if you didn’t think to take down the name and address of every gas station you’ve visited since last fall, and the exact amount of gas you purchased there, don’t worry – you will have another shot at claiming a refund next year. The tax increases by another 2.5 cents on July 1. If the form, which requires a separate log of transaction details for each fueled vehicle, seems designed to discourage refund seekers from getting their money back, thank the legislature, which enshrined these requirements in the law.

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There are ways to fund local road maintenance other than sales taxes. As the National Surface Transportation Infrastructure Financing Commission has noted, paying for road maintenance with taxes largely unrelated to road usage creates problems. If people aren’t charged for using roads directly, people will drive more, which in turn leads to higher road maintenance costs.

A local fuel tax is a good solution to the problem of paying for road maintenance—a fuel tax is directly related to driving. Additionally, local fuel tax revenue is constitutionally required to be spent on local road maintenance, decreasing the risk of financial misuse.

Seven Missouri cities already have local fuel taxes; none are higher than 2 cents per gallon. According to my calculations, Kirkwood could raise over $266,000 per year from a 2 cent per gallon local fuel tax on gasoline and diesel fuel. A downside of a local fuel tax is that you don’t collect any revenue from large trucks that may not stop to buy gas in Kirkwood, but still damage the roads when passing through.

No matter how Kirkwood residents and officials decide to raise money for local road maintenance, the city should carefully manage the money raised and ensure that all proper reporting, transparency, and auditing rules are observed. The proposed TDD has redeeming qualities and could be a viable option for funding needs. Nontheless, Kirkwood officials and residents should also consider other transportation policy options.

The post Kirkwood Should Consider the Pros and Cons of All Transportation Funding Options appeared first on Show-Me Institute.

Missourians interested in getting a gas tax refund should start saving their receipts immediately. Then, sometime between July 1 and September 30 of 2022, those seeking a refund will need to use the Missouri Department of Revenue (DOR) website to start the refund claiming process. Each claim will require:

• The vehicle identification number of the vehicle into which the fuel was delivered;
• The date of the fuel sale;
• Names and addresses of the purchaser and seller;
• The number of gallons purchased; and
• The number of gallons purchased and charged Missouri fuel tax.

As of now, Missouri’s DOR hopes to have a new online system ready to allow taxpayers to file their refund claims electronically, but if it’s not ready, refund seekers will likely need to complete a slew of paper forms. Refund seekers who have their claims accepted should expect to receive their refund within 45 days. And while the claims will not initially require the submission of receipts, DOR may ask for them. In addition, the DOR stated receipts should be kept for three years for good measure.

Keep in mind that only the new 2.5 cent gas tax will be eligible for a refund. So, if for example, you purchase 100 gallons of fuel before next July, you would need to keep all your receipts until then (then another three years after), submit the required information in the prescribed three-month claim window, and then hopefully receive a check for $2.50 a month and a half later.

It remains to be seen how many Missourians will decide to take the state up on its offer, but the amount of effort required for such a meager return makes me skeptical many will follow through. Of course, if the state really wanted to make it easy for Missourians to claim refunds, it would have created an app to allow taxpayers to file claims immediately after purchase. But just like many mail-in rebate schemes, the program doesn’t seem designed to encourage people to actually claim the refund.

The post Missouri’s New Gas Tax Hassle appeared first on Show-Me Institute.

• Affordable housing in Kansas City
• Education during the pandemic
• Jumping off the TIF bandwagon
• Public safety and the earnings tax in Kansas City
• Analysis of the Hancock Amendment and the gas tax increase

Click here to read the newsletter.

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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.

The post Does the Hancock Amendment Have an Achilles Heel? appeared first on Show-Me Institute.

The same bill that raised the gas tax will also raise the annual fuel decal fee that EV owners pay by 20 percent each year for five years. This means that the EV fee will rise from $75 to $150. Lawmakers are increasing this charge because EVs cause wear and tear on the state’s roads (just as gas-powered vehicles do), but EV drivers don’t pay into the state’s road-maintenance fund through gasoline taxes. Show-Me Institute researchers have estimated that the average driver of a gas-powered car in Missouri pays $250 per year in fuel taxes. A $150 fee would still have Missouri’s EV drivers paying only 60 percent of what other drivers (on average) pay. Nonetheless, it would be one the highest fees for EV drivers in the country.

The bill also establishes a new Electric Vehicle Task Force to study ways to ensure EV drivers pay fairly for road maintenance, such as through a per-kilowatt hour charge on electricity used to charge their EV. The Task Force will also attempt to ensure that non-EV drivers do not end up subsidizing EV drivers, as well as study what role actors typically not part of the transportation sector, like electric utilities and the Public Service Commission, play in the process.

The bill slates several government officials and industry representatives to be on the Task Force, and also stipulates that:

The task force may hold public meetings at which it may invite testimony from experts, or it may solicit information from any party it deems may have information relevant to its duties . . . .

I hope the Task force solicits input from ordinary citizens in addition to experts so that their voices are heard as well. The Task Force should also consider what other existing policies might be affecting drivers of both gas-powered vehicles and EVs (specifically, the federal ban on electric vehicle charging stations, gas stations, and nearly all other commercial activity at interstate rest stops).

Getting EV policy right is important. EV drivers should contribute their fair share for road maintenance just like drivers of gasoline-powered vehicles—with neither subsidizing the other. The transportation landscape in Missouri is changing, with more and more EVs hitting the road. Policymakers should remember that government’s role isn’t to promote or hinder the adoption of EVs, but rather to ensure a level playing field.

The post Electric Vehicle Policy Changes Coming Soon appeared first on Show-Me Institute.

In 1980, Missouri voters approved an amendment to the state’s constitution adding Article X, Sections 16 through 24, which are collectively referred to as the Hancock Amendment. The sections are some of Missouri’s most important safeguards against higher taxes and growing government. But as with most constitutional topics, the Hancock Amendment and its implications are quite complex.

The concerns about this year’s gas tax bill center around Article X, Section 18(e) of Missouri’s constitution, which was approved in 1996. The subsection states that in addition to the other limitations imposed by the Hancock Amendment, Missouri’s general assembly cannot raise taxes or fees above a certain threshold in a given year without voter approval.

To avoid a public vote, the cumulative revenue impact of every bill passed by the legislature each year must be calculated and determined to be below the constitutionally defined limit. If the limit is exceeded, the bills that raise revenue must be submitted for a public vote starting with the largest increase, then every other increase in descending order, until the net effect of the remaining bills is lower than the year’s cap.

Here’s an example. Let’s say the cap in a given year is $100 million, and the legislature has enacted net tax increases of $125 million, and the most expensive bill raises taxes by $30 million. You would only need to vote on that one bill. If the bill is rejected by voters, then the legislature is below the cap. If voters approve the bill, the bill no longer counts toward the Hancock cap. If one single bill didn’t cover the entire gap by itself, that’s where voting on each bill in descending order comes into play.

When the amendment was initially adopted, the cap was $50 million in new revenue but has since been adjusted according to state personal income growth, and for 2021 it was $111.8 million.

For this year’s gas tax bill, the official fiscal estimates suggest that once fully implemented, it could raise between $123–$455 million. On its own, the bill would appear likely to exceed the Hancock Amendment cap, but that’s only one part of the story.

First, since compliance with the amendment’s limit is based on the net effect of all legislative changes in a year, we can’t know whether there’s a violation until Governor Parson finishes signing this year’s bills. It is also important to remember that if one bill raises enough revenue to violate the amendment, as long as there’s another bill that would simultaneously lower taxes or fees such that the net tax increase is below the threshold, the general assembly could still avoid violating the constitution.

Second, the gas tax bill is really the first of its kind. There haven’t been similar past efforts to raise taxes the way it does while avoiding a public vote. The gas tax bill has a refund mechanism, which is explained in the first post in this series. Given the potential complexity of a refund, this part of the bill appears to serve as a tactic to avoid triggering the Hancock Amendment rather than an effort to ensure Missourians pay less tax. Consequently, there are a variety of unanswered questions about how a potential Hancock Amendment violation would be handled. (See here for further breakdown of the questions at hand.)

One thing we do know is that Missouri voters are all too familiar with being asked to raise the state’s gas tax, and since the last approved increase in 1997have shot down every one of them, including a vote in 2018. While we wait to see what’s decided on the topic, it’s fair to wonder whether the legislature’s choice to avoid a public vote will prove to be a wise one.

The post Missouri’s Hancock Amendment and the Gas Tax appeared first on Show-Me Institute.

Six members of the House recently sent a letter to the governor stating their belief that the bill will violate Missouri’s constitution, specifically the Hancock Amendment. The provision in question limits the amount the general assembly can raise taxes in a given year without first being approved by a public vote. (See here for more information about the amendment).

If signed into law, SB 262 would raise the state’s gas tax by 2.5 cents per gallon for each of the next five years, for a total increase of 12.5 cents by 2027. But there’s a catch: residents can get a refund for the additional gas taxes paid due to this bill. The fiscal note for the bill estimates that once fully implemented in FY 2027, it could exceed the Hancock Amendment cap, which for this year is $111.8 million. Depending on how the bill’s fiscal impact is calculated and the number of refunds claimed, it is possible that in the years prior to 2027, the tax collected could also exceed the Hancock limits.

While there’s certainly more to the story regarding whether the legislature violated the Hancock Amendment, the gas tax bill becoming law certainly opens the door for a variety of questions and potential court challenges. The Hancock concerns are explained in more detail here, but here are a few of the major questions at hand:

• How much revenue will the gas tax hike raise?
• How many Missourians will take advantage of the available refund option?
• How will Hancock Amendment compliance be determined?
• How will the other bills signed into law by Governor Parson impact this calculation?

One way to avoid all this potential mess is to send the gas tax question to voters. In fact, a referendum petition has been filed that would accomplish just this, but it has yet to receive approval for circulation by the secretary of state. If the petition were to succeed, the Hancock Amendment concerns would be avoided because taxes approved by voters are not subject to the amendment.

Missouri may soon be raising the state’s gas tax, but there are a lot of questions to be answered before we know for sure. In the meantime, keep enjoying the second-lowest gas tax in the country.

The post What’s Happening with the Gas Tax? appeared first on Show-Me Institute.

The post Highlights of the Legislative Session appeared first on Show-Me Institute.

On May 13, David Stokes joined The Gary Nolan Show to discuss a gas tax increase that is headed to the Governor’s desk and a trend in Missouri local government – taxing outsiders.

Read David’s piece in the Springfield News-Leader and the Columbia Daily Tribune

Listen to more of The Gary Nolan Show

The post The latest on a Gas Tax Increase and are Tourists “Free Riders”? appeared first on Show-Me Institute.

In addition to a 17-cent-per-gallon state fuel tax, Missourians pay federal fuel taxes on gasoline and diesel fuel of 18.4 and 24.4 cents per gallon, respectively. This federal fuel tax revenue is deposited into the Federal Highway Trust Fund (HTF), from which money is sent to each state—and money from the federal government is the largest part of the Missouri Department of Transportation’s road and bridge budget. In 2020, MoDOT received almost a billion dollars from the HTF, making up nearly 40 percent of MoDOT’s road and bridge budget. In fact, for every $1 that Missouri drivers contribute to the HTF through federal fuel taxes, MoDOT gets $1.21 back. Obviously, it’s in Missouri’s best interest to keep the HTF healthy.

But the HTF isn’t looking so good these days, because its mechanism for generating revenue hasn’t aged well. Fuel taxes are charged by the gallon rather than as a percentage of the purchase price, so they don’t automatically keep up with inflation. The price of gas has gone up a lot since 1993, but regardless of whether you paid $1.25 or $2.50 per gallon during that time, the federal tax on each gallon has been stuck at 18.4 cents (or 24.4 cents for diesel fuel) for the past 28 years. Meanwhile, inflation has increased all the costs associated with road maintenance and repair. Worse yet, the costs of road construction equipment and materials have risen faster than overall inflation. As a result, each dollar raised from the fuel tax now has one third of the purchasing power it had in 1993.

In theory, a per-gallon fuel tax can still bring in increasing revenue over time as more drivers hit the road and log more miles every year. This is exactly what would have happened, except that improvements in vehicle fuel efficiency (not to mention the advent of electric cars) have decreased the amount of gas we buy for each mile we drive.

So where does that leave us? Fuel tax revenue is no longer sufficient to cover the HTF’s expenditures, and Congress has resorted to transferring money from the general revenue fund just to keep the fund solvent. This is at best a short-term fix that doesn’t solve the HTF’s core problem, adds to the national debt, and should hardly make Missourians feel comfortable. The fund we depend on for almost 40 percent of our road and bridge budget can’t support itself anymore. Up to this point, the federal government has covered the shortfall, but can we count on that to continue?

At the federal level there appears to be some recognition of the problem. A bipartisan group of 58 members of Congress has proposed indexing the federal fuel tax to some combination of inflation, construction costs, and fuel efficiency to keep it current with the times. The exact mechanism for the indexing hasn’t been determined, but the proposal is a promising start. Perhaps of more interest to Missourians is that several states have already indexed their own fuel taxes to measures like these. Policymakers here should consider indexing our fuel tax as well, since state fuel tax revenues have stayed practically the same for the last 17 years.

If we believe that quality roads and bridges are important for Missouri’s economy, then it makes no sense to allow the funding source that pays for them to remain stuck in the past.

The post Indexing Fuel Taxes appeared first on Show-Me Institute.

Instead of raising the fuel tax by 2 cents per gallon each year for five years, the bill would raise the fuel tax 2.5 cents per gallon each year for five years. If it were to become law, Missouri’s fuel tax would be raised from 17 cents per gallon now to 29.5 cents per gallon in 2025. The bill’s sponsors estimate that, once the increases are fully phased in, these measures would raise an additional $462 million per year starting in 2026.

The tax increase would eventually cover a little more than half of the annual $745 million MoDOT claims it needs for high-priority road and bridge needs. Increased transportation funding is needed, Show-Me analysts and other organizations have pointed out.

There’s another new wrinkle added to the bill: residents can claim an exemption and refund for the additional tax amounts they paid as a result of the fuel tax increase. This exemption would only apply to vehicles that weigh less than 26,000 pounds, effectively ruling out commercial trucking companies from receiving the refund. The recordkeeping and reporting requirements for the exemption and refund are onerous particularly if you have more than one vehicle. Under the current draft of the legislation, the claim for a refund shall at a minimum include:  (1) Vehicle identification number of the motor vehicle into which the motor fuel was delivered; (2) Date of sale; (3) Name and address of purchaser; (4) Name and address of seller; (5) Number of gallons purchased; and (6) Number of gallons purchased and charged Missouri fuel tax, as a separate item.

It’s hard to know how many Missourians would take advantage of this refund mechanism, but available evidence suggests that most won’t. The fuel tax refund is modeled after South Carolina’s fuel tax rebate, and only $3.4 million in rebates were issued out of over $500 million raised.

Perhaps the most interesting change is that the bill would establish an Electric Vehicle Task Force to study how to ensure drivers of electric vehicles (EVs) adequately pay for the damage they cause to roads. As more people use EVs and don’t fuel their cars with gasoline, this will become a salient question for future legislation. The task force would also study how the charging of EVs will impact the state electric system, the role of utilities and the Public Service Commission in overseeing charging stations, and ensuring that electric customers without EVs don’t end up subsidizing those who do.

The bill still faces another vote in the Senate, so things could change once again. Hopefully, we see a final bill that addresses transportation funding issues in Missouri in a fair and equitable way.

The post Gas Tax Bill Undergoes Several Changes appeared first on Show-Me Institute.

Currently, local roads are funded by a combination of fuel taxes and local property and sales taxes. Sales taxes are the worst way of the three to fund road maintenance.

Paying for roads with taxes only tangentially related to road usage promotes inefficient vehicle and travel choices, which leads to faster road deterioration, wasted fuel, congestion, and air pollution. If people aren’t exposed to the true cost of something, they will overconsume it. For a market to work properly, true price signals are needed.

Instead of a TDD, Kirkwood officials should consider implementing a local fuel tax. Local fuel taxes allow markets to work by connecting how much you drive with the cost of driving. Buying a gallon of gasoline has more to do with driving than buying a TV or a loaf of bread.

Additionally, money raised from local fuel taxes is constitutionally required to be spent on road maintenance and safety, reducing the risk of the money being spent on other, potentially wasteful projects. The biggest challenge in implementing local fuel taxes is that they require a two-thirds majority among voters to pass. Kirkwood’s TDD would only need a simple majority.

Seven cities in Missouri currently have local fuel taxes. Most are just one cent per gallon and, depending on traffic, can raise hundreds of thousands of dollars annually. Kirkwood is significantly larger than any of these cities and thus may be able to raise even more money.

If Kirkwood officials want to raise money for local transportation fairly, they should kick the TDD to the curb and become the eighth city in Missouri to adopt a local fuel tax.

The post Kirkwood Should Consider a Local Fuel Tax to Fund Its Transportation Needs, Not a TDD appeared first on Show-Me Institute.