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14 December 2011

Oxford: Gas Tax Report Connects To Toll Road Proposals

Attached please find a release about a report about the erosion of gas tax and rising construction/maintenance costs issued by the Institute on Taxation and Economic Policy (ITEP) today. This is especially relevant here in Missouri where MoDOT has made deep cuts and a proposal for an I-70 toll roll is under discussion.

I am on the executive committee for Missourians for Tax Justice (MTJ) which has joined ITEP in issuing the report. Media contact for this release in MO is Ben Martin.

Here are descriptions of Missourians for Tax Justice and ITEP:

Founded in 1980, the Institute on Taxation and Economic Policy (ITEP) is a 501 (c)(3) non-profit, non-partisan research organization, based in Washington, DC, that focuses on federal and state tax policy. ITEP's mission is to inform policymakers and the public of the effects of current and proposed tax policies on tax fairness, government budgets, and sound economic policy

Missourians for Tax Justice (MTJ) is a statewide grassroots advocacy organization comprised of more than 30 religious, labor, and community organizations. MTJ Justice supports a fair and balanced state tax structure that will produce adequate revenue for needed public services.

I have also attached the full text of the report.

New Report: Stagnant State Gas Taxes Costing States $10 Billion Each Year, Undermining Commerce and Forcing Raids on General Funds

Consideration of Toll Roads in Missouri Is One Local Consequence

ST. LOUIS, MO – A first of its kind, 50-state analysis from the Institute on Taxation and Economic Policy (ITEP) reveals that state governments are losing out on over $10 billion in transportation revenue each year, contributing to an estimated $130 billion drain on the economy resulting from higher vehicle repair costs and travel time delays. State lawmakers reluctant to update gas taxes have cost their states, on average, $201 million in annual revenues “Building a Better Gas Tax: How to Fix One of State Government’s Least Sustainable Revenue Sources” documents state-by-state figures including the costs and benefits of proposed remedies.

“Unfortunately, many politicians won’t consider touching the gas tax,” said Carl Davis, senior analyst at ITEP and author of the study. “They are raising sales taxes, fees on vehicles, tolls on roads, even looting education funds, all to make up for the stagnant gas tax. But they can’t bring themselves to modernize the biggest source of transportation revenue that’s actually under their control. It makes no sense.”

Missourians for Tax Justice (MTJ) joined ITEP in releasing the study. According to ITEP’s calculations, Missouri could recoup $400 million by updating its gas tax rates to match current transportation construction costs. It would take a 9.6-cent increase in the tax to return the rate to its previous level of purchasing power related to the costs of transportation projects.

Missouri has not updated its gas tax rate for 15 years, paralleling the national average of more than a decade. But while state gas taxes remain flat, the cost of paving roads and building bridges inevitably rises almost every year, often at a rate higher than general inflation. “It’s basic math,” said Davis. “The road repairs you could buy in 1996 with 17 cents are going to cost almost 27 cents today. But Missouri has levied the same 17 cent tax this whole time.”

Bob Quinn, executive director of Missouri Association for Social Welfare and a member of the executive committee of MTJ said, “This report has special resonance in Missouri since there is a projected shortfall of $600-800 million in the budget that the General Assembly will soon begin debating for the next fiscal year. Will the costs of maintaining our highways force cuts in other parts of our already lean budget?”

Missouri Department of Transportation (MoDOT) Director Kevin Keith pushed for legislative approval of its new plan to rebuild Interstate 70 and convert it to a toll road at a Nov. 16 hearing. MoDOT estimates rebuilding I-70, which has surpassed its intended operational lifespan by decades, would cost between $2 billion and $4 billion – a price well beyond the department’s means. Because MoDOT issued billions of dollars in bonds during the 2000s to fund a short-term onstruction boom, much of its revenue is now dedicated to paying off the debt and what remains is barely sufficient to maintain the existing highway system.

The transportation challenge in Missouri is echoed in other states, according to the ITEP report. Adjusting for construction cost growth, the average state’s gasoline tax rate has effectively fallen by 20 percent, or 6.8 cents per gallon, since the last time it was raised. Diesel taxes have fallen by a similar 18 percent, or 6.0 cents per gallon.

Today’s state gas taxes make up a smaller portion of family budgets than at any time since the tax was first widely instituted in the 1920’s. A ten cent per gallon increase, as explained in the report, would cost today’s average driver $4.31 per month, and the 6.8 cent per gallon increase needed in the average state would cost the average driver $2.93 per month.

Davis points out, however, that because these amounts are not negligible to consumers, one of the report’s three recommendations is to institute a targeted tax credit to offset the disproportionate effects of a higher gas tax on low-income families’ budgets.

Seven states already offer low-income tax credits designed to mitigate the effect that consumption taxes (like the gas tax) have on the poor, and a majority of states offer similar credits that accomplish broadly the same goal. Quinn said, “Missouri would do well to join the states offering a refundable tax credit to help low-wage workers and others on fixed incomes afford essentials.”

Building a Better Gas Tax” offers three specific policy recommendations for modernizing state gas taxes:
  1. Increase gas tax rates to (at least) reverse their long-term declines. The appropriate contemporary rate for each state will depend on transportation funding needs as determined by lawmakers and the public.
  2. Restructure state gas taxes so that their rates rise automatically alongside the inevitable growth in the cost of transportation construction projects. If every state had restructured the last time it raised its gas tax, total state gas tax revenues would be over $10 billion higher per year.
  3. Create or enhance targeted tax credits for low-income families to offset the impact of gas tax reform.
Gas tax erosion in states is exacerbated by the fact that the federal gas tax, which also supports state transportation projects, has lost 41 percent of its value since it was last raised in 1993. Full text and tables of the “Building a Better Gas Tax: How to Fix One of State Government’s Least Sustainable Revenue Sources” report are available at

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