Road tax is running in wrong direction

In the 1929 Rose Bowl, the speedy Roy Riegels 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" Riegels' 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 has 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, Springfield is looking to spend money on greenway trails, the purpose of which is almost solely recreational. In addition, Springfield has requested funds for multiple projects at Springfield-Branson Airport. That airport is already self-sustaining and receives millions of dollars a year in federal grants. Quite the opposite of crumbling, Springfield's airport has a brand new terminal that opened five years ago. It is not in desperate need of additional sales tax support.

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 Interstate 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.