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Five Things You Need To Know About Transportation Tax
Originally published on Wed July 30, 2014 11:42 am
Missourians will vote Aug. 5 on a 0.75 percent sales tax increase for transportation projects. The proposal — commonly known as the transportation tax — would generate billions of dollars over the next decade to fix roads, repair bridges and improve mass transit.
The stakes are high. Supporters say Missouri needs more money for its aging transportation infrastructure. With gas tax revenue dwindling and federal funding uncertain, some policymakers see the sales tax as a guaranteed way to fund transportation needs.
But the proposal has attracted opponents from all sides of the political spectrum. Some on the right have bristled at the sheer size of the tax hike. Others on the left argue that sales taxes fall disproportionately on the poor and elderly. And then there are those who don’t like that most of the tax proceeds would go roads and highways – as opposed to other forms of transportation.
In an attempt to streamline a complicated topic, we’ve tried to answer the five key questions about how the tax works and what its impact could be for the next decade:
What is the transportation tax?
The transportation tax is a 0.75 percent sales tax. on the ballot. If the voters approve, the state’s sales tax would increase to 4.975 percent from 4.225 percent for 10 years. It would also freeze gas taxes for a decade and bar tolls from being implemented. The tax wouldn’t be collected on food or medicine.
Earlier in the decade, a so-called “Blue Ribbon Commission” studied options for increasing transportation funding. Some – like state Sen. Mike Kehoe, R-Jefferson City – said that the state needed to look at alternative ways to raise money.
“Missouri’s relying heavily on their gas tax and gas efficiency standards have caused those revenues to go down,” said Kehoe, a sponsor of the transportation tax. “So we’ve seen a decline in revenue by as much as 70 percent on what we spent on the construction program. So I think Missourians believe and understand that we need to somehow raise funding to take care of our system.”
A legislative fiscal note estimates that the tax would raise about $539 million every year. That means it would bring in about $5.4 billion over its 10-year lifespan. It’s money that Missouri Department of Transportation director Dave Nichols said could become a big economic development driver for communities across the state
“We have the seventh largest highway system in the United States in Missouri. Yet we are funded at 43rd in the country,” said Nichols. “And that is a huge challenge in dealing with the road and bridge program that we have in Missouri as it relates to the condition of the system and also our ability to continue to make safety improvements on the highway system.”
Where will the money go?
About 10 percent of the funds – or about $54 million a year – would go directly to cities and counties. Those jurisdictions have the power to decide on their own transportation priorities. About $5 million of the proceeds would be spent on administrative expenses for the Department of Revenue to collect the tax.
The rest of the money — about $480 million a year — would go into a statewide road fund. The Missouri Highways and Transportation Commission will decide on July 9 how the money is dispersed over the state.
The St. Louis region — which in MoDOT’s case means St. Louis, St. Louis County, St. Charles County, Jefferson County and Franklin County — would receive about $1.49 billion over the 10 years. Most of the projects on a draft list are aimed at shoring up roads and highways, including major work on Interstates 270, 70 and 170.
But unlike the gas tax – which is restricted to roads and highways — the sales tax can be used for mass transit programs, bike trails and ports. Nichols said this amount to a “refreshing item” for the proposal, since the gas tax doesn’t fund those types of projects.
St. Louis has arguably taken advantage of this possibility the most.
“This is something that’s not just about roads and bridges, which is what we’ve done in the past,” said St. Louis Mayor Francis Slay. “Because it’s a sales tax, we can use it for a lot of other things. The biggest chunk of the city’s portion of this is $111 million that really addresses people, pedestrians, and through a lot of different ways.”
Who supports the tax?
The transportation tax has received backing from organized labor and business organizations, such as the Missouri Chamber of Commerce. Prominent Republicans like Senate President Pro Tem Tom Dempsey and Franklin County Presiding Commissioner John Greisheimer support it — as do some high-profile Democrats like Slay and U.S. Sen. Claire McCaskill.
“Is it my first choice on how to fund transportation? Probably not. But it doesn’t mean that I’m not willing to support it. I will support it. Because we’ve got to get some additional revenue for our roads in Missouri,” McCaskill said earlier this year.
A campaign committee known as Missourians for Safe Transportation & New Jobs Inc. formed to support the tax. It’s received nearly $1.5 million in donations of more than $5,000 since the beginning of the year. Most of this money has come from contractors who could potentially see more work as a result of the tax.
Proponents may need the resources. Back in 2002, a series of tax increases for transportation projects failed miserably at the polls. Jack Cardetti – a Democratic political consultant who works for transportation tax proponents – said having a good base of support helps the tax’s cause.
“This is such an unusual issue,” Cardetti said. “Just because transportation’s such a core governmental service. And it’s something both Republicans and Democrats support. It’s something that, frankly, business and labor support, which is something we don’t see a lot of here in Missouri. And it’s something that while urban, suburban and rural Missouri have different transportation needs, they all sort of coalesce around wanting to do something on transportation.”
Who opposes the tax?
A coalition of liberal Democrats and conservative Republicans have vowed to kill the tax.
Right-of-center lawmakers like state Sen. Ed Emery, R-Lamar, are put off by the size of the tax increase. He was one of three GOP senators who blocked a similar proposal in 2013.
“It’s a definite impact on people’s pocketbooks,” Emery said. “They’ll feel it. They know they’ll feel it. The money will be out there in large measure to promote it because that’s where all the big money is – in those contractors and others who have a lot to win and to gain if this passes. Because it will be their employees that are hired and their equipment that is put to work.”
Some of Missouri’s left-leaning political figures say the sales tax increase is inherently regressive against the poor and elderly.
That’s one reason Nixon decided to oppose the tax. He said in a statement it would fall on “Missouri’s working families and seniors by increasing the cost of everyday necessities like diapers and over-the-counter medication, while giving the heaviest users of our roads a free pass.” (Tax opponents argue that truckers wouldn’t be affected by a sales tax as by a gas or diesel tax increase.)
If the tax passes, some parts of St. Louis and St. Louis County with special taxing districts could have sales taxes over 11 percent. Sales taxes could go over 10 percent in other parts of the region.
Some opponents — particularly in the St. Louis area — say that the proceeds are going toward road construction at the expense of other modes of transportation.
“We really need to be rethinking our land use patterns and how we use land and whether land should be auto-centric,” said Thomas Shrout, the treasurer of a group opposing the transportation tax. “And a lot of people say, ‘Hey those days are waning.’ Miles driven in the state of Missouri has declined, I think, for the last eight years. It’s a national trend.”
Shrout said his group isn’t planning to spend that much money to oppose the tax. Nor does he expected an “angel” donor to give prodigiously to his group.
Rather, he said opponents are looking to a unsuccessful medical research tax increase in Jackson County as inspiration. Even though supporters of that effort had plenty of funds, it still failed miserably.
“We won’t have money,” Shrout said. “But Eric Cantor had a lot of money. And he lost.”
What happens if the tax doesn’t pass?
Both Kehoe and Nichols had a gloomy outlook for the state’s transportation system if the tax doesn’t receive voter approval.
For instance: Kehoe predicted that bridges across the state will close if the sales tax increase fails.
“I hope it doesn’t come to that,” Kehoe said. “But unfortunately, sometimes it takes folks to see that in order to believe that we really need to fix something and pass some kind of funding mechanism. Like I said, the problem’s not going to go away. So the solutions are going to continue to be talked about.”
Nichols said without some sort of new funding mechanism, the state won’t be able to put up matching funds for federal money. He also said roads around the state will continue to deteriorate, which could make economic development opportunities harder.
“It’s going to turn us in the other direction in that we will not be able to respond when those companies are being lured in to Missouri to try to get them to locate here,” Nichols said. “So it will have a drastic effect, not just on the economy, but on the condition of the system.”
“This funding mechanism has been discussed for a long time,” he added. “There’s been a lot of discussions about other funding mechanisms. And this is the one that seems to have the most appetite.”
One skeptic of Kehoe and Nichols’ line of thinking is Les Sterman, the former executive director of East-West Gateway and a critic of the transportation tax.
Sterman said the proposal represents a “significant overreach” at a time when governments are “hard-pressed” to fund essential services.
“The issue for me is we’re asking people for a lot of money at a time when we are taking away essential state services,” Sterman said. “Whether it be public education or health care or what have you. Why is this one function, one that is actually been quite well funded for the last decade or so, in such need of money?”
He also didn’t buy the argument that transportation infrastructure will suffer if the proposal fails.
“And basically we’re looking to pay for projects here that many of them are pretty discretionary, frankly,” Sterman said. “And of course, the source of the revenue, the sales tax, is one that most of know really hits families the hardest and is regressive.”
“There are a lot of things to me that suggest this tax increase is excessive and unfair,” he added.