Forget fuel tax, Missouri pushes sales tax increase to fund MoDOT

May 7, 2014

Lloyd Anderson, of Kansas City, Mo. shops for detergent in Walmart. Missouri residents could vote on a one percent sales tax increase this November to fund transportation projects.
Lloyd Anderson, of Kansas City, Mo. shops for detergent in Walmart. Missouri residents could vote on a one percent sales tax increase this November to fund transportation projects.
Credit Walmart / Flickr

Summer is coming, and Missourians are hitting the open road, which, after a brutal winter, has taken quite a beating. The Missouri Department of Transportation is looking into making Missouri roads safer, not just by filling in potholes but also widening shoulders on rural roads and expanding Interstate 70 from two lanes to three. That sounds expensive, but the Missouri state legislature has a plan for drumming up close to $800 million a year over the next ten years for Department of Transportation projects – a one percent increase in sales and use tax.

On the surface, raising revenue to improve roads with just a one percent sales tax increase sounds like a great idea. But Jeanette Mott Oxford of the Missouri Association for Social Welfare worries about who a sales tax increase will hurt the most.

“Sales taxes hit people who have no discretionary income,” says Oxford.

Oxford, who was a Democratic member of the Missouri House of Representatives from 2005-2012, says that the 20 percent of Missourians who are making $17,000 or less already pay 5.9 percent of their incomes in sales tax. For the wealthiest one percent making over $366,000, sales tax makes up just .9 percent of their income.  

“Adding any sales tax to that one out of five Missourians living at less than $17,000 a year, means someone might not be able to afford to keep their heat on in the winter, or might not be able to afford a co-pay on a prescription.”

Instead, Oxford says, why not modernize the state’s fuel tax – the 17 cent tax that consumers pay on gasoline, diesel fuel, kerosene, and blended fuel that hasn’t changed in over 18 years.

“Our fuel tax is 17 cents and next year it will be 17 cents and the next year after that it'll be 17 cents, unless the legislature or the people in our state act in some manner to increase it,” she says.

The current fuel tax rate was set in 1996 and hasn’t fluctuated even as the cost of asphalt, concrete, and labor has gone up.

“It would take around a dime to get us back up to the purchasing power of this size of that fuel tax in 1996.”

Oxford admits that any tax increase has the potential to hit low income Missourians hard, but says a fuel tax could be easier for them to manage.

“In the case of sales taxes it’s hard to avoid most weeks shopping for several things that are gonna have the sales tax on it,” she says. “But you can make some decisions about how much you drive.”

Republican representative Dave Hinson, from Missouri’s 119th district, sponsored the amendment proposing the sales and use tax increase. He says even a 10 cent increase in the fuel tax wouldn’t generate nearly enough revenue to meet the needs of Missouri’s Department of Transportation.

“It would take a 25 cent fuel tax increase to be able to fund the projects that MoDOTs planning to do in the next two years,” says Hinson. 

Of course this could all be moot by November. It’s actually really difficult to raise taxes in Missouri. According to Missouri state law, any tax increase that would generate a certain amount of revenue must be put to a vote of the people. It’s another reason lawmakers prefer a one percent sales tax increase over a 10 or 20 percent increase in fuel tax – they think it’ll be easier for the average Missouri voter to stomach when the measure shows up on the ballot this November. 

Oxford disagrees. In 2002 when Missouri voted on a sales tax increase of just a half a percent, it was defeated at the polls by a 3 to 1 margin. A 4 cent increase on the fuel tax was also defeated that year.

So it’s not the actual percent increase that seems to matter to Missouri voters. No, the key to winning voter approval, Oxford says, is to keep them educated about the issue.

“I think people would be just as likely to vote for [a fuel tax] as for a sales tax, as long as we explained why we're doing it this way, what the impact is and also as long as we did create a mechanism by which we protected the families that are most vulnerable to an increase in fuel tax,” she says.

The downside to voter approved tax increases is that in order to educate the public, to have a chance at passing an increase of any size, lawmakers and advocacy groups would have to spend lots of money campaigning for the issue before Election Day.