Take the Obama administration’s plans for a $10 per-barrel tax on oil, which could translate into a whopping 25 cent per gallon fuel tax increase, more than doubling the current rate. That might not seem like an outlandish proposal given that the federal highway trust fund has been broke for years and the price tag to reconstruct aging interstate highways could be over a half a trillion dollars in the coming decades. But that’s not where all the money would be going. Instead, at least half of those funds, $32 billion a year, would go to “green infrastructure,” or any project that could plausibly reduce the country’s use of fossil fuels.

With 20% of the federal gas tax already going to transit, the link between the federal gas tax and federal highway spending is strained. The Obama administration’s plans would break the link and turn the federal gas tax into just another source of money to spend on grand plans for the American economy.

Contrast that with the efforts of the Missouri legislature. State lawmakers are proposing a modest 1.5 cent per-gallon gas tax increase (and a 3.5 cent per-gallon increase for diesel fuel) to correct serious funding issues at the Missouri Department of Transportation (MoDOT). Policymakers fear that without additional revenue, MoDOT may not be able to keep the highway system in a good state of repair or take on necessary reconstruction projects. Raising the fuel tax just a couple of cents per gallon would raise almost $60 million for MoDOT, and millions more for local road departments. [See here for a comprehensive analysis of the challenges facing Missouri's transportation infrastructure and several possible solutions.

Because Missouri’s constitution stipulates that all fuel tax revenue must be spent on roads, none of the money can go to transit or bike trails or “green infrastructure.” Raising the fuel tax would shore up the highway system’s user funding base and make sure that those who benefit from roads the most will pay for them.

Alternative state-level proposals, like Amendment 7 (the transportation sales tax), would have had Missourians pay for highways regardless of how much, or how little, they drive. Missourians overwhelmingly rejected Amendment 7, but even now some policymakers have proposed taxing tobacco and diverting general revenue to fund highways. While they are not fuel tax increases, policies like Amendment 7, which subsidize highways along with local pet projects, have more in common with Obama’s proposed oil tax than the proposed state gas tax increase.

In Missouri, a small tax increase would have drivers pay a little more for roads, and could also head off proposals that would force all Missourians to subsidize driving. At the federal level, the gas tax would more than double, with drivers bankrolling grand attempts to transform the economy.

Sometimes similar proposals have far different implications. Let’s hope that in this case, their legislative paths have very different endings.

The post A Tale of Two Taxes appeared first on Show-Me Institute.

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.

The post Legislature’s Gas Tax Increase Is Sound Policy appeared first on Show-Me Institute.

This finding probably surprised a few Missourians, but it shouldn’t. Missouri’s state sales tax may be relatively low at 4.225 percent, but locally imposed sales taxes nearly double the average sales tax paid in Missouri stores. This includes extra sales taxes in special taxing districts like Kansas City’s Power & Light District, which can pump the sales taxes actually paid by consumers to well over 10 percent. These sales taxes are, of course, in addition to the state’s income and property taxes, which aren’t exactly low either. This is why Missouri isn’t a “low tax state.”

The Tax Foundation released its 2015 sales tax rankings, and . . . well . . . Missouri still ranks 14th at a rate of 7.81 percent, well ahead of 29th-ranked Florida (6.65 percent), which, of course, doesn’t have an income tax. The Tax Foundation’s report makes special mention of the failure of Missouri’s transportation sales tax last year, which would have added another three-quarters of a percent to the state’s already-high sales tax. Had Amendment 7 passed and bumped the state’s average sales tax to over 8.5 percent, chances are very good that Missouri would have jumped into the top 10 of high sales tax states, ahead of states like California (8.44 percent) and New York (8.48 percent). Missouri’s sales taxes are already bad; this year it is cold comfort to know that they could have been worse.

Missouri needs substantive, across-the-board tax relief. There’s still time for the legislature to act this year—at least on the income tax—but the clock is ticking.

The post Tax Foundation: Missouri’s Sales Taxes Still Well Above Average appeared first on Show-Me Institute.

Whatever the reasons Amendment 7 failed, it was good for Missouri that it did, because it was not wise policy. Using a general sales tax to pay for highways is both unfair and economically unsound. Instead, the state should modernize the user-tax base that currently funds MoDOT. That could mean increasing the fuel tax, raising the motor vehicle sales tax, indexing licensing fees to inflation, implementing tolling, or some combination of those methods. That way, those who use the roads would pay for them, and in proportion to their use. Using general sales tax to fund roads subsidizes driving and interstate trucking that passes right through Missouri. As we wrote before:

… the fact is the vast majority of trucking freight in Missouri is not bound for Missouri. For example, of the 500 million tons of freight traffic in 2011, only 39 percent of that freight is either inbound or intrastate trucking. Forty-six percent of traffic by weight simply passes through Missouri. In terms of value of the goods transported, only 26 percent has a destination within Missouri while 61 percent of goods by value transit the state.

Unfortunately, a new bill in the Missouri House (HJR 33) would simply revive Amendment 7, albeit in a different form. Instead of raising the state sales tax by 0.75 percent, the bill would divert 0.10 percent of the state sales tax into the road fund for five consecutive years until the amount diverted reached 0.50 percent (two-thirds of Amendment 7). If that came to pass, it would mean that 12 percent, or $233 million in 2014 numbers, of state sales tax revenue would be diverted to the state road fund. That is likely to lead to budget cuts in other state programs or higher taxes for Missourians.

As we have written before, the defeat of Amendment 7 opened the door for sound, user-based policy solutions to MoDOT’s funding problems. HJR 33 is not one of these.

The post The Return of the Transportation Sales Tax appeared first on Show-Me Institute.

The failure of Amendment 7, the proposed transportation sales tax, in August has left the Missouri Department of Transportation (MoDOT) in a financial bind. In the next few years, the department will no longer have the funds necessary to maintain the quality of the state highway system, much less improve it.

Former proponents of Amendment 7 claim that sales taxes are the best solution for MoDOT’s problems because they are the most politically feasible method of raising large amounts of money. Raising the state gasoline tax (currently 17 cents per gallon)—MoDOT’s principle revenue stream, they say—is not good policy because it is a declining source of funds and it does not poll well. But as we have shown before, fuel consumption has been declining very slowly, and it actually increased in the last year. The erosion in the gas tax’s purchasing power is mostly the result of inflation; Missouri last increased its fuel taxes in 1996, since which time prices have increased an average of 34 percent.

Far from being politically unfeasible, raising the gas tax is actually the simplest method for the state legislature to raise more money for MoDOT. That is because the provision that forces tax increases to go to the voters, the Hancock Amendment, has exceptions for small increases of existing revenue streams. Under the amendment, the legislature can increase revenue in any given year as long as new revenue does not exceed $106 million ($50 million in 1980 indexed to personal income growth) or 1 percent of state revenue looking back two years ($84.2 million for last year), whichever is lower.

Using 1 percent of previous state revenue as a cap, the legislature can collect around an additional $84 million in fuel taxes next year. Missouri currently generates about $29 million per cent from fuel taxes, meaning the state could raise fuel taxes by more than two cents without triggering Hancock requirements. Or, if Missouri followed the example of the federal government and many other states in charging diesel at a higher rate than regular gasoline, the state could raise the diesel fuel tax rate by five cents and the regular fuel tax by one cent and remain under the cap. That would generate an addition $78 million for MoDOT next year.

What’s more, because state revenue has been growing and per-cent fuel receipts have been declining recently, the state legislature could raise the fuel tax in successive years, which could give MoDOT the needed funds to maintain and make necessary improvements to state highways. In fact, this is precisely how Missouri last increased its fuel taxes in the 1990s.

Fuel taxes, as indirect user fees, are a preferable and possible way of funding highways in Missouri. If more money truly is required, the legislature has the option to raise fuel taxes without sending the issue to a ballot and without resorting to new, inappropriate funding mechanisms.

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

The post Highway Funding in Missouri: The Fuel Tax Option appeared first on Show-Me Institute.

Former proponents of Amendment 7 claim that sales taxes are the best solution for MoDOT’s problems because they are the most politically feasible method of raising large amounts of money. Raising the state gasoline tax (currently 17 cents per gallon)—MoDOT’s principle revenue stream, they say—is not good policy because it is a declining source of funds and it does not poll well. But as we have shown before, fuel consumption has been declining very slowly, and it actually increased in the last year. The erosion in the gas tax’s purchasing power is mostly the result of inflation; Missouri last increased its fuel taxes in 1996, since which time prices have increased an average of 34 percent.

Far from being politically unfeasible, raising the gas tax is actually the simplest method for the state legislature to raise more money for MoDOT. That is because the provision that forces tax increases to go to the voters, the Hancock Amendment, has exceptions for small increases of existing revenue streams. Under the amendment, the legislature can increase revenue in any given year as long as new revenue does not exceed $106 million ($50 million in 1980 indexed to personal income growth) or 1 percent of state revenue looking back two years ($84.2 million for last year), whichever is lower.

Using 1 percent of previous state revenue as a cap, the legislature can collect around an additional $84 million in fuel taxes next year. Missouri currently generates about $29 million per cent from fuel taxes, meaning the state could raise fuel taxes by more than two cents without triggering Hancock requirements. Or, if Missouri followed the example of the federal government and many other states in charging diesel at a higher rate than regular gasoline, the state could raise the diesel fuel tax rate by five cents and the regular fuel tax by one cent and remain under the cap. That would generate an addition $78 million for MoDOT next year.

What’s more, because state revenue has been growing and per-cent fuel receipts have been declining recently, the state legislature could raise the fuel tax in successive years, which could give MoDOT the needed funds to maintain and make necessary improvements to state highways. In fact, this is precisely how Missouri last increased its fuel taxes in the 1990s.

Fuel taxes, as indirect user fees, are a preferable and possible way of funding highways in Missouri. If more money truly is required, the legislature has the option to raise fuel taxes without sending the issue to a ballot and without resorting to new, inappropriate funding mechanisms.

The post Highway Funding in Missouri: The Fuel Tax Option appeared first on Show-Me Institute.

With the defeat of Amendment 7, officials are looking for ways to fund Missouri’s highway system. MoDOT needs adequate funding, not only to maintain existing highways, but also to fund future multibillion-dollar projects, principal among these is the reconstruction of I-70. One possible solution is to introduce tolls on I-70, which would allow those who benefit from the highway to pay for its improvement.

Those who directly benefit from I-70 are drivers, especially from companies that own commercial vehicles (interstate trucks). According to MoDOT, at least 25 percent of the traffic on I-70 is attributable to commercial vehicles (more than two axles). These vehicles also make up much of I-70’s cross-state traffic, with 70 percent of commercial vehicles passing straight through Missouri. If the state would toll I-70, both passenger and commercial vehicles would pay to use the interstate based on their size and distance traveled. In other states, commercial vehicles typically pay four to five times more than passenger vehicles. They pay extra to compensate for the extra damage they cause to the roadway. In fact, toll roads in other states generate much, if not most, of their revenue from commercial vehicles.

Toll Road System	commercial vehicles as a % of total vehicles	% miles on road from commercial vehicles	% of toll revenue from commercial vehicles
Ohio Turnpike	21.00%	33.10%	55.69%
New York Thruway	11.02%	15.59%	47.10%
Pennsylvania Turnpike	12.88%	20.30%	42.62%
Oklahoma Turnpike	8.72%	18.18%	38.86%
Kansas Turnpike	11.60%	17.80%	36.88%
Illinois Tollway	11.71%	–	34.01%
North Texas Tollway System	1.87%	–	22.39%
Florida Turnpike System	3.95%	5.06%	19.12%

If Missourians decide to rebuild I-70 using toll revenue, it is likely that much, or even most, of that revenue would come from commercial vehicles. That’s a fair solution, because commercial trucking entities cause the most wear on highways and benefit the most from good roads. In fact, a well-maintained highway saves trucking companies money, because it reduces delays and vehicle damage. The failure of Amendment 7 doesn’t mean that Missourians want bad roads; it means they want good roads paid for in a sensible way. A sound tolling solution would allow drivers and interstate truckers alike to invest in the highway from which they so benefit.

The post Tolls On I-70 Could Be Solution To Modot’s Funding Problems appeared first on Show-Me Institute.

In the Missouri State Freight Plan, drafted by the Missouri Department of Transportation (MoDOT), 2011 data showed that truck freight totaled over 500 million tons, carrying goods valued at approximately $711 billion. Proponents of using sales taxes to pay for highways argue that if it costs more to move those 500 million tons (by increasing user fees for commercial vehicles), shipping companies will charge higher prices to haul goods, leading to higher prices for Missourians.

However, setting aside the counterargument that charging shipping companies for the highways they use promotes efficient supply chains and local production, the fact is the vast majority of trucking freight in Missouri is not bound for Missouri. For example, of the 500 million tons of freight traffic in 2011, only 39 percent of that freight is either inbound or intrastate trucking. Forty-six percent of traffic by weight simply passes through Missouri. In terms of value of the goods transported, only 26 percent has a destination within Missouri while 61 percent of goods by value transit the state.

This means that if Missouri were to use general sales taxes—or any other type of non-user fee—to subsidize highways, the downstream price benefits would mostly accrue to consumers and producers in other states. Having commercial vehicles pay the actual costs of maintaining the highways might mean that prices rise on Missouri goods, but most of the effect would be exported to other states.

That’s why user fees are almost always preferable, when feasible, to general taxation; the cost of using the highway is internalized into the cost of the good, no matter where the final consumer lives. The use of general taxation to pay for highways would lead to higher prices for Missourians, who would provide a subsidized ride for shipping companies and artificially cheap products to residents of other states.

The post User Fees Stop Pass-through Traffic from Getting Free Ride appeared first on Show-Me Institute.

The St. Louis Streetcar project, which did not receive a TIGER grant, has garnered less attention. The plan would have built a 6.9-mile streetcar system from downtown Saint Louis to the Central West End, at a cost of $270 million (likely a low estimate).

You may not have heard much about this project, because Metro never mentions adding streetcars in its Long-Range Transit Plan. Their long-term improvements are focused on expanding MetroLink or adding bus rapid transit, but not adding a streetcar network. Nor was the project part of East-West Gateway’s (the Saint Louis metropolitan planning agency) Regional Transportation Plan when it was released in 2011 (it was added in 2013). City leadership did not discuss the plan until it was suddenly to receive tens of millions of dollars from the ill-fated Amendment 7.

The downtown streetcar is primarily the creation of Partnership for Downtown St. Louis, an organization whose membership is mostly made up of corporate representatives and whose budget comes from property taxes collected from a Community Improvement District (CID) located downtown. They created the plan and lobbied the city to submit the TIGER grant application. Although the process used to create the streetcar plan did not come from city residents, the methods of payment would have. The proposed methods of payment included a Transportation Development District (with accompanying sales and property taxes), Tax Increment Financing, tax credits, and parking fees.

Those new taxes and fees would have been a hard sell for a transportation mode that shadows the MetroLink and does not provide rapid transit. However, Saint Louis residents should be upset that non-elected corporate representatives were promising residents’ local tax dollars in order to get a piece of residents’ federal tax dollars. This episode also should be a warning that local non-governmental organizations have the ability to push forward wasteful civic projects with taxpayer money.

The post Light Rail Never Sleeps: The Saint Louis Edition appeared first on Show-Me Institute.

MoDOT has exposed the need to rebuild I-70 for years. Its oldest sections are more than 55 years old, and much of the highway requires rebuilding from the ground up. But MoDOT is not just looking to rebuild I-70, they are also planning to expand it. MoDOT’s preferred plan would replace the pavement, expand the highway to at least three lanes on each side, construct a wide median, and replace interchanges. The plan is estimated to cost $3 billion. If Amendment 7 had passed, more than $1 billion (a quarter of all sales tax dollars going to the state road system) would have gone to improve I-70. Of that, $500 million would have gone to expanding the highway to three lanes from Wentzville to Independence.

MoDOT is so concerned with expanding I-70 because they projected traffic would almost double from 2007 to 2030. If I-70 does not add lanes, it would mean stop-and-go traffic across the state. Here is a chart of MoDOT’s projections:

MoDOT expected average daily traffic to increase roughly 2.5 percent per year from 2007 to 2030. If the growth in I-70 traffic follows the trend above, MoDOT is more than justified in its drive for more lanes. However, these increases are failing to materialize. For instance, in 2013, traffic should have been around 16 percent higher than it was in 2007. However, at most points along I-70, traffic was down. And lest one think this is a trend of the recession, 2007 traffic was around the same as 2000 traffic.

The idea that people are driving less, or at least not driving much more, should not surprise MoDOT. After all, they repeatedly say just that when requesting more dollars to spend on expanding rail and transit projects. If traffic on I-70 is not growing much now, and MoDOT expects people to drive less in the future, why hasn’t MoDOT updated its projections and plans for I-70? Claiming to need more money because people are driving less, while simultaneously needing money to handle traffic growth, seems like trying to have it both ways.

A more economical solution to the I-70 problem may be to rebuild the two-lane structure while addressing bottlenecks around places like Columbia. That might fit the needs of Missourians, while lessening some of MoDOT’s financial strain.

The post Are Outdated Projections Driving I-70 Rebuild Plans? appeared first on Show-Me Institute.

Those who directly benefit from I-70 are drivers, especially from companies that own commercial vehicles (interstate trucks). According to MoDOT, at least 25 percent of the traffic on I-70 is attributable to commercial vehicles (more than two axles). These vehicles also make up much of I-70’s cross-state traffic, with 70 percent of commercial vehicles passing straight through Missouri. If the state would toll I-70, both passenger and commercial vehicles would pay to use the interstate based on their size and distance traveled. In other states, commercial vehicles typically pay four to five times more than passenger vehicles. They pay extra to compensate for the extra damage they cause to the roadway. In fact, toll roads in other states generate much, if not most, of their revenue from commercial vehicles.

If Missourians decide to rebuild I-70 using toll revenue, it is likely that much, or even most, of that revenue would come from commercial vehicles. That’s a fair solution, because commercial trucking entities cause the most wear on highways and benefit the most from good roads. In fact, a well-maintained highway saves trucking companies money, because it reduces delays and vehicle damage. The failure of Amendment 7 doesn’t mean that Missourians want bad roads; it means they want good roads paid for in a sensible way. A sound tolling solution would allow drivers and interstate truckers alike to invest in the highway from which they so benefit.

The post Tolling I-70: A Semi-Solution to MoDOT’s Funding Problems appeared first on Show-Me Institute.

In the aftermath of the transportation sales tax (Amendment 7) defeat, former supporters are still on a misinformation campaign. They claim that Missouri’s roads are in dire straits (they aren’t), and of course, that a sales tax was the only good option. They claim increasing a user fee such as Missouri’s gas tax, which is the sixth-lowest in the nation, is not possible. Bill McKenna, one of the principle supporters of Amendment 7, stated:

“You’ve got to realize how much money [the Missouri Department of Transportation] MoDOT needs,” he said. “You’re not talking 2 cents. You’re talking 16 to 20 cents.”

That’s a significant tax increase, but former Amendment 7 supporters seem to have different estimates. Missouri Sen. Mike Kehoe (R-Dist. 6), who introduced the Senate version of Amendment 7, said the gas tax would have to increase by 20 to 25 cents a gallon. Luckily for Missourians, these numbers appear to be disconnected from any real assessment of MoDOT’s needs.

According to MoDOT Director Dave Nichols, MoDOT needs a $485 million construction budget to maintain Missouri’s highways. This year, MoDOT’s construction awards are greater than $720 million. MoDOT assumes that the federal government will scale back its support in the future, leaving MoDOT with less than $485 million by 2017. That scenario may not come to pass, but if it does, MoDOT’s construction budget would fall to $325 million, about $400 million less than today and $160 million less than the ability to maintain the roads. If the federal government continues to maintain current support, Missouri officials only need to ensure that the state has matching funds, necessitating less than $130 million in extra revenue.

The amount the Missouri fuel taxes would have to increase is nowhere near sales tax supporters’ claims. Last year, Missouri sold more than 3.9 billion gallons of fuel. Therefore, to raise $400 million, the state would have to raise the fuel taxes 11 cents. That maintains current spending ($300 million more than maintenance only) under dire circumstances. If the federal government does not reduce funding, a 5-cent increase likely would be sufficient to maintain matching funds. Missouri officials also could increase the diesel rate more than the regular gasoline rate, a practice in place nationally and in many states to account for the disproportionate damage trucks do to highways. McKenna’s 20-cent increase would raise $705 million for MoDOT and Kehoe’s 25-cent increase would raise $882 million (remember, Amendment 7 would have raised $397 million for the state highway system).

The defeated transportation sales tax proponents’ fuel tax estimates are exaggerated, much like their claims about the imminent collapse of the Missouri highway system.

The post MoDOT Vastly Overstates Its Need For Funding appeared first on Show-Me Institute.

“You’ve got to realize how much money [the Missouri Department of Transportation] MoDOT needs,” he said. “You’re not talking 2 cents. You’re talking 16 to 20 cents.”

That’s a significant tax increase, but former Amendment 7 supporters seem to have different estimates. Missouri Sen. Mike Kehoe (R-Dist. 6), who introduced the Senate version of Amendment 7, said the gas tax would have to increase by 20 to 25 cents a gallon. Luckily for Missourians, these numbers appear to be disconnected from any real assessment of MoDOT’s needs.

According to MoDOT Director Dave Nichols, MoDOT needs a $485 million construction budget to maintain Missouri’s highways. This year, MoDOT’s construction awards are greater than $720 million. MoDOT assumes that the federal government will scale back its support in the future, leaving MoDOT with less than $485 million by 2017. That scenario may not come to pass, but if it does, MoDOT’s construction budget would fall to $325 million, about $400 million less than today and $160 million less than the ability to maintain the roads. If the federal government continues to maintain current support, Missouri officials only need to ensure that the state has matching funds, necessitating less than $130 million in extra revenue.

The amount the Missouri fuel taxes would have to increase is nowhere near sales tax supporters’ claims. Last year, Missouri sold more than 3.9 billion gallons of fuel. Therefore, to raise $400 million, the state would have to raise the fuel taxes 11 cents. That maintains current spending ($300 million more than maintenance only) under dire circumstances. If the federal government does not reduce funding, a 5-cent increase likely would be sufficient to maintain matching funds. Missouri officials also could increase the diesel rate more than the regular gasoline rate, a practice in place nationally and in many states to account for the disproportionate damage trucks do to highways. McKenna’s 20-cent increase would raise $705 million for MoDOT and Kehoe’s 25-cent increase would raise $882 million (remember, Amendment 7 would have raised $397 million for the state highway system).

The defeated transportation sales tax proponents’ fuel tax estimates are exaggerated, much like their claims about the imminent collapse of the Missouri highway system.

The post Gas Taxes And Funding MoDOT appeared first on Show-Me Institute.

However, this defeat of Amendment 7 is just the start of creating a sustainable funding source for the Missouri Department of Transportation (MoDOT). In the very near future, the department may not have enough funds to maintain the existing state highway system. A deteriorating highway system would be damaging for both residents and the state economy. It is time for policymakers and opinion leaders in the state to convince Missourians not just about the amount of money MoDOT needs, but also about the proper and most efficient way of raising revenue for those needs: user fees. Whether that means raising the gas tax or implementing tolling, the basis of good policy is an informed, not a frightened, electorate.

While these future challenges remain, yesterday was a defeat for poll-driven policy and a victory for Missouri.

The post Amendment 7 Defeated appeared first on Show-Me Institute.

Federal dollars for highway improvements is a fixed amount that comes for the federal Highway Trust Fund, which the federal fuel taxes mainly support. The amount that Missouri currently receives is fixed by federal obligation limitations and the proportion that the state received in the past. State lane mileage and vehicle activity mostly determined the portion the state received in the past. Simply put, the amount of money available for state highway projects is mostly fixed, and currently, Missouri does not leave any money on the table. If Missouri decided to spend an extra billion dollars this year, it is unlikely that federal money to the state would increase.

According to MoDOT’s cautious projections, in which the federal government reduces its support to Missouri, the state will begin failing to match federal funds in 2020, leaving $186 million on the table. But to meet that match (of 80 percent federal, 20 percent state) Missouri would only have to increase local revenue by just less than $50 million, nowhere near the current $534 million proposal.

If we assume that the federal government fixes the federal highway funding problems and support does not decrease, the problem of matching funds is larger. By 2022, Missouri would be leaving about $530 million of federal dollars unmatched. However, under that scenario, Missouri would only have to increase local revenue by $130 million per year to get that money.

When it comes to federal dollars, unless there are major policy changes in Washington, the amount Missouri could get for the highways is relatively fixed whether or not Missouri raises taxes. While Missouri may lose the ability to match those dollars in the future, Missouri will eventually need to raise annually between only $50 million and $130 million. If Amendment 7 passes, the federal government will not make it rain; if the amendment fails, the sky is not going to fall.

The post Do We Need Amendment 7 To Match Federal Highway Dollars? appeared first on Show-Me Institute.

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.

The post Proposed Amendment 7 Is Bad Policy appeared first on Show-Me Institute.

Take the example of the Saint Louis area. The City of Saint Louis is set to get $25 million for a streetcar that goes from downtown to the Central West End. That might not be such a bad deal, if it were not contingent on Saint Louis coming up with an additional $271.5 million to complete the plan. The sales tax will also provide $40 million to the city for bus rapid transit, but only if Metro can come up with an additional $40 million. In return for $20 million for an I-64/22nd St. Parkway interchange (mostly to the benefit of the Northside Redevelopment Project), the city and developers have to provide an additional $8.9 million. All told, in return for $270 million in state sales tax money, the City of Saint Louis has to find an additional $323 million from other funding sources. That’s $1,016 for every man, woman, and child living in the city.

The story is similar in Kansas City. The city will get $144 million for the streetcar, contingent on it finding the rest of the half billion needed to make the project happen. While Kansas Citians have long been aware of, and been familiar with plans to fund, the streetcar, this is not so for other projects. Kansas City will receive $24 million for a bike path from Pleasant Hill to Kansas City, if it can find $48 million locally. For those counting, that’s a $72 million bike path. Altogether, projects that the sales tax would fund require $459 million in additional funding from the Kansas City area.

The result of these policies is that after taxes have gone up statewide, purportedly to save our “crumbling” highways, local governments may have to increase taxes even further to secure funding for projects on MoDOT’s list. Amendment 7 is the tax that keeps on taxing.

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The op-ed corrects some of the misconceptions that exist about Missouri’s highway system, particularly the idea that the state’s roads and bridges are “crumbling.” While Missouri’s transportation infrastructure can improve in many areas, the fact is that the highway system is in good shape whether you compare it to other states or simply the condition of Missouri’s roads 10 years ago. There is no crisis that should scare Missouri voters into supporting a policy that is destructive and inequitable.

The Missouri Department of Transportation (MoDOT) does have a funding problem, but paying for highways based on how much people shop, instead of how much they drive, is unfair and economically unsound. A better solution is to raise the gas tax or implement tolls on major highways.

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Pictured: Missouri’s Highway System – 8/6/2014

We have often commented that Missouri is “middle of the pack” in various state rankings. Not so with our state highway system. According to the Reason Foundation, our highway system is the eighth best in the nation, in part due to the good condition of our interstate highways and rural roads. The National Chamber Foundation has ranked our road quality seventh best in the nation, with only 6.3 percent of Missouri roads in mediocre or poor condition.

This is not surprising to those familiar with Missouri’s recent infrastructure expenditures. In the last 10 years, Missouri’s highway system added more lane miles while increasing the percentage of major highways in good condition to 88.5 percent and repairing a third of the state’s deficient bridges. And as transit supporters are wont to point out, Kansas City and Saint Louis hold first and second place on a list of cities with the most highway miles per capita. Missouri was able to perform so many projects in the last decade because it issued more than $3 billion worth of bonds and received more than $600 million from the federal Stimulus Act. That allowed the Missouri Department of Transportation (MoDOT) to implement the “Smoother, Safer, Sooner Road and Bridge Program” and the “Safe and Sound Bridge Improvement Program,” among other projects.

When we look at Missouri’s highway infrastructure today, the reasonable conclusion is that the system is in good condition, the best it has been in decades. While Missouri’s highway infrastructure has specific needs (I-70 rebuild, Broadway Bridge), by no definition is the system “crumbling.” MoDOT does have a funding problem, but there is time to select the right funding solution. There is no imminent crisis which would force us to accept an unfair, and economically unsound, transportation sales tax.

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