Missouri sales tax is bad policy for improving roads

By Joseph Miller

In the 1929 Rose Bowl, the speedy Roy Riegel of the University of California football team achieved immortality in the annals of college sports when he picked up a fumble, bounced off a tackler, and raced 69 yards -- in the wrong direction.

In picking up another loose football -- namely, what to do about a sudden decline in revenues for transportation infrastructure -- it now seems Missouri may be about to duplicate "Wrong Way" Riegel's feat. In hoping to correct a severe budgetary problem at the Missouri Department of Transportation (MoDOT) through a statewide 10-year, 0.75 percent sales tax, Missouri is pointed in the wrong direction from a policy viewpoint -- one that can only result in inefficiency and waste and undermine the department's ability to maintain and improve the road system.

How bad is MoDOT's funding situation? Just a couple of years ago, MoDOT had $1.3 billion annually to spend on road and bridge improvements. By 2017, that amount could fall to $325 million -- or just a quarter of what it was a few years ago, when MoDOT had more than $250 million in federal stimulus money. The expiration of stimulus spending is just one of the problems.

Historically, the bulk of the department's 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. But instead of tapping this traditional funding source to plug the spending gap, the Missouri Legislature proposed implementing a statewide sales tax. That tax could raise $534 million a year or $5.4 billion over the course of 10 years. That might be a good deal more than the amount needed to keep Missouri's infrastructure from "crumbling."

Anticipating the funding bonanza, local governments around the state have put forward wish lists that would tap into sales tax money. Rather than confining themselves to critical transportation needs, cities and counties put forward lists filled with expensive wants.

For example, in Southeast Missouri, municipalities plan to spend money lengthening runways at the Poplar Bluff and West Plains airports. These small general aviation airports generally mostly serve recreational fliers, and local governments and federal and state grants heavily subsidize them.

They are in no need of additional sales tax money. Other requests are simply bizarre, such as the pedestrian bridge across a creek in the tiny rural community of Williamsville. Someone should explain why such a bridge is necessary when there are few homes and no sidewalks on either side of the creek in question. Certainly the shoulder state road, which sees only 700 cars a day, is an easy enough route for the occasional pedestrian seeking to traverse the creek.

While some sales tax money will be wasted on popular, if not useful, pet projects, most money will go to fixing MoDOT's highway funding crisis. And a 0.75 percent sales tax is not an economically sound way to fund roads and bridges.

Paying for highways based on how much people shop, and not how much they drive, creates a free-rider problem. It promotes congestion, road degradation, and sprawl. It also is fundamentally unfair to force occasional drivers to pay as much or more for new roads as interstate trucking companies.

There is a better solution: Raise the gas tax and/or implement tolls on major highways. These user-generated fees greatly reduce the free-rider problem inherit in a transportation sales tax. Adjusting the gas tax for inflation would increase road funding in Missouri while simultaneously reducing MoDOT's long-term costs. Tolling major highways and bridges, like I-70, would enable major improvements financed through public-private partnerships. By charging drivers for the roads they use, tolls and gas taxes are a fair and economically sound solution to MoDOT's funding problems.

If the Missouri Legislature and voters approve a statewide 0.75 percent sales tax, it will only be a temporary fix. When the tax expires, Missouri will face an even worse problem than it does today -- after 10 years of running in the wrong direction.

Joseph Miller is a policy researcher at the Show-Me Institute, which promotes market solutions for Missouri public policy.