Prop B departs from tradition of user fees

JEFFERSON CITY, Mo. -- Ever since Missouri began getting out of the mud with modern, paved highways in the 1920s, the users of state roads have paid for the improvements.

However, voter approval of Proposition B on Aug. 6 would break Missouri's tradition of relying primarily on user fees such as fuel taxes and license fees to fund transportation improvements.

Supporters say the proposal's inclusion of a half-cent general sales tax is the best way to generate the most revenue, with the costs to consumers more than offset by the economic development opportunities an improved transportation system would bring.

Some groups, however, worry that any increase in the state sales tax, regardless of purpose, decreases the ability of city and counties that rely on local sales taxes to increase their levies.

Proposition B would generate an estimated $483 million a year from new taxes. The sales tax component would provide $332 million of that, with a 4-cent fuel tax increase raising the remaining $151 million.

In order to produce a like amount of revenue relying solely with the fuel tax, the state would have to raise that levy by nearly 13 cents to 30 cents per gallon. That would give the state, which currently has among the lowest fuel taxes of surrounding states, the highest such tax in the region by far.

Proposition B would put Missouri's fuel tax at 21 cents, still in the midrange among surrounding states. The state sales tax, currently the lowest in the region at 4.225 percent, would go to 4.725 percent and second lowest in the area, just ahead of Oklahoma's 4.5 rate.

Dan Mehan, Missouri Chamber of Commerce president, said transportation improvements are synonymous with economic development. The tax increases are low enough, Mehan said, that they won't have an adverse impact on Missouri businesses.

"From a competitive standpoint, we would still be right in there with other states," Mehan said. "Proposition B would not give an advantage to other states."

No bright line

Dr. Bill Weber, an economics professor at Southeast Missouri State University, said a high sales tax can have a negative impact on businesses, but that there is no bright line determining how high is too high.

It becomes prohibitive when people can easily travel to a nearby jurisdiction with lower taxes, which wouldn't be an option for most Missourians. However, Weber said Internet purchases, which allow people to avoid sales taxes, are putting increasing pressure on taxing jurisdictions.

"If the sales tax gets too high, it is just as easy to pay shipping charges on some things," Weber said.

State and local sales taxes combine for levies in excess of 7 percent in some communities.

The accepted theory is that every cent the state raises its sales tax equals one cent cities and counties can't raise locally. That concerns groups like the Missouri Municipal League and the Missouri Association of Counties and is the primary reason those organizations are taking a neutral stance on Proposition B.

"The state continues to use sales taxes for more and more purposes," said Gary Markenson, a Municipal League lobbyist. "A rate of 7.2 percent is very common, and it's getting close to 9 percent" in some areas.

Neither Markenson nor Dick Burke, executive director of the Missouri Association of Counties, could say exactly how many cities and counties are asking voters to impose sales tax hikes or renew existing levies. However, they say the number is significant, with Proposition B posing a potential threat.

"Obviously, if you have a ballot loaded with tax increases, that's cause for concern," Burke said. "And Proposition B, I believe, is the largest tax increase in state history."

'There is a limit'

Burke said counties would be unable to pay for basic services without sales taxes, and he's worried about the squeeze the state is putting on local governments.

"There is a limit out there," Burke said. "Nobody really knows what it is, but you get to a certain point where people won't pay it. We keep inching in that direction."

State Sen. Larry Rohrbach, a leader in the grassroots effort to defeat Proposition B, said breaking with the tradition of using user fees for transportation is an unacceptable solution that would hurt lower income Missourians who may not even own cars or use state highways. However, his biggest fear is that future lawmakers would raid the transportation sales tax for other purposes.

The Missouri Constitution mandates that all fuel tax revenue, minus the cost of collecting the tax and enforcing traffic laws, be used for transportation. Proposition B's sales tax would be statutorily earmarked for transportation, but the General Assembly could change that without getting voter approval.

"We have to trust the legislature and governor to not divert that money in the future," said Rohrbach, R-California. "It is a tax we politicians control."

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