Missouri Voters Reject Regressive Sales Tax Increase

Yesterday voters in Missouri soundly defeated Amendment 7, a ballot measure that would have raised the sales tax by three-fourths of a cent to fund transportation needs.

Sales taxes are largely regressive, capturing a larger share of income from the poor than from more affluent people. The move to temporarily raise the state sales tax to pay for roads and bridges comes just months after the state legislature overrode Gov. Jay Nixon’s veto and passed income tax cuts that overwhelmingly benefit high-income taxpayers.

The vote defeating the sales tax increase sends a message to lawmakers to go back to the drawing board in terms of finding ways to pay for needed infrastructure. Lawmakers projected the new sales tax to generate $5.4 billion over ten years for transportation projects across the state. Now that the sales tax hike has been defeated critical work won’t begin on the more than 800 projects the Missouri Department of Transportation identified as “critical safety improvements.”

In what has been called “a study in bad behavior” the fact that lawmakers put a tax hike before the voters after just passing income tax cuts boggles the mind. Lawmakers in Jefferson City recently approved mammoth income tax cuts that overwhelmingly benefit high income taxpayers, yet seemed to have few qualms about asking voters to support a regressive sales tax hike that would have actually raised taxes on low income families. The income tax cuts that were contentiously passed this year included a drop in the top income tax rate and a new deduction for business income. ITEP found that under this legislation the poorest 20 percent of Missourians will see a tax cut averaging just $6, while the top one percent of families will enjoy an average tax cut of $7,792 once the cuts are fully phased in.

Lawmakers clearly see the need for increased transportation funding–why put a sales tax on the ballot if that isn’t so–but they arguably wouldn’t need to raise $500 million in new sales tax revenue if they hadn’t just cut an even larger amount of income tax revenue.

Lawmakers’ procrastination on this issue is the root cause of Missouri’s transportation funding shortfall. The state’s has raised it current 17-cent gas tax in 18 years, and it isn’t generating the revenue necessary to keep up with demands on Missouri’s infrastructure. If lawmakers don’t act, ITEP estimates that Missouri’s gas tax rate will reach an all-time inflation-adjusted low by 2020. In 2011, ITEP found the state’s gas tax rate would need to be increased by 9.6 cents just to return its purchasing power to the level it had when it was last raised back in 1996. Right now, Missouri’s gas tax is lower than the tax in all of its neighboring state except Oklahoma. Increasing and indexing the gas tax is a better solution for Missouri’s transportation woes because fuel taxes are a very good proxy for the wear and tear vehicles put on the road. However, the gas tax would also have a worrying impact on tax fairness that can be overcome by introducing a targeted low-income tax credit.

Given the defeat of Amendment 7 what’s to happen to Missouri’s crumbling infrastructure? Transportation commissioners are set to meet to discuss next steps. Let’s hope Missouri lawmakers also regroup and look toward other funding alternatives. Surely it’s not too much to ask that Missourians have safe bridges and quality roads that are paid for in fair and sustainable ways.