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If Missouri’s Fuel Tax Was The Same Percentage Of The Total It Was In 1996

August 14, 2014 Featured, Missouri, Politics/Policy, Taxes 10 Comments
Same view two years later
Gas station in Rock Hill, MO

When Missouri last increased the state fuel tax, in 1996, from 15-cents to 17-cents, the US average total price of a gallon of gasoline was roughly $1.084. The oldest records I could find for Missouri go back to 2003, but our are always less than the national average.

Assuming $1.07 per gallon in 1996, the 17-cent Missouri tax represents 15.89% of the price paid at the pump. In July 2008 Missouri gas prices peaked at $3.96, the state fuel tax representing only 4.29% of the total price paid. Recently Missouri’s average was $3.28/gallon, the fuel tax representing 5.18% of the total price per gallon.

How much would gas cost today if Missouri’s fuel tax was 15.89% of the total? To answer this we must do a series of calculations:

$3.28 – $0.17 = $3.11 (cost before Missouri tax)

1 – 0.1589 = .8411 (cost before Missouri tax = 84.11 % of total)

$3.11 / 0.8411 = $3.6975 or $3.70 (current cost if Missouri tax is 15.89% of total)

$3.70 – $3.11 = $0.59 (Missouri gas tax if 15.89% of total)

So there you have it, a gallon would cost $3.70 and the Missouri tax would be 59-cents. At 17-cents we’re only collecting 28.8% of the funding we did in 1996, relative to the total cost of a gallon of gas. To get to 59-cents we’d need to raise the tax 42-cents, or 347%! I’m not advocating we raise the state fuel tax this much, doing so would make ours the highest in the country. The purpose of this exercise is to show that relative to 1996 our revenue is about a third of what it was the last time our fuel tax was increased. A third!

In 1996 the average fuel economy of a new car was 28.5 mpg. Driven 15,000 miles per year the driver would buy 526.3 gallons of gas for a total cost, ignoring fluctuations in price, of $568.40. Of this, Missouri would’ve received $89.47. The average fuel economy for a 2013 model car is 36 mpg, a substantial improvement. Driven 15,000 miles per year the driver would buy 416.7 gallons of gas for a total cost, ignoring fluctuations in price, of $1,366.78. Of this, Missouri would’ve received $70.84. Eighteen years later the driver spends 140% more on fuel, but Missouri receives less. Of course, with inflation the cost to maintain roads & bridges is higher nearly two decades later.

As I’ve said previously, if we’d continue to raise the fuel tax 2-cents ever two years, like we did 1992-1996, we’d now be at 34-cents. Our bridges & roads would’ve been funded and maintained all along.

If our state tax was suddenly doubled from 17-cents to 34-cents the total price of a gallon would be $3.45, instead of the current $3.28. The 34-cent tax would be 9.855% of the total cost of a gallon. Not as much as in 1996, but much better than today.  Diesel fuel taxes need to be raised in a similar manner.

In the same example as above the driver of the 2013 car would still need 416.7 gallons, but now the total cost would be $1,437.62. Missouri would receive $141.68 from this motorist to maintain the bridges & highways.

The question now is how quickly can/should we raise the fuel taxes?

— Steve Patterson

 

  • JZ71

    I agree, completely. Unfortunately, our legislature is dominated by representatives who don’t want to / are afraid to increase ANY tax for any reason, no matter how rational the arguments for doing so may be. Increasing the tax by just one cent, every six months, for the next ten or fifteen years, would go a long way to restoring appropriate funding levels (trying to keep up with inflation and better fuel efficiency), and would be imperceptible to most consumers and voters. Regular, small, incremental increases are always easier to accept than large, “one time” increases – that’s the logic behind, and the appeal, of sales taxes, versus property and income taxes. And, unfortunately, as someone who has seen bad roads and congestion in other states, the reality is that MoDOT has managed to do, and continues to do, a very good job of maintaining all of our state highways, in spite of its funding challenges. Until we have bridges that actually collapse, much worse urban congestion and/or way more potholes than we have now, it’s going to be hard to convince voters that more help is really needed.

    • http://urbanreviewstl.com/ Steve Patterson

      MoDOT loves big highway projects, they sold bonds for the big I-64/40 rebuild. Now revenue is being used to pay off the bonds, leaving them with little revenue for basic maintenance — but they’re still pushing the massive I-70 rebuild.

      • JZ71

        MoDOT has identified (and prioritized) many projects that they would like to have funding for, not just I-70. Are you saying that I-70 does not need to be rebuilt? Or just that it should be done in smaller chunks / contracts? So that it’s not so “massive”? Or, are you saying that all big highway projects are bad? That all we should spend tax dollars on is “basic maintenance”?

        As for bonds, they truly are the elephant in the room when it comes to government budgets. To maintain a good bond rating, existing bonds need to be paid before any money is spent on current needs. Much like under-funded government-employee pensions, you can only duck the issue, kick the can down the road, for so long. Bonded projects let current elected officials “do something”, “deliver on campaign promises”, but end up tying the hands of future leaders.

        • http://urbanreviewstl.com/ Steve Patterson

          Most of the projects listed are needed, the rebuild/widening of I-70 isn’t needed.
          It’s an engineer’s/trucker’s dream highway!

          • Fozzie

            So your evidence counters professional engineers and the designed lifespan of the highway?

            Your personal bias against cars and trucks ignores the economic reality of how great of commercial catalyst that highway is for the state.

            Having driven the highway this weekend, there is too much congestion, narrow medians, and crumbling overpasses. The highway is dangerous and too important to ignore.

          • http://urbanreviewstl.com/ Steve Patterson

            MoDOT hasn’t invested in I-70 incrementally to help justify the widening. We can’t afford to maintain our existing infrastructure, yet they want to build much more. Either way, the fuel taxes must be raised.

  • Mark

    My comment is that, given all the waste in government today, traditional families raising kids just don’t need to have their gas taxes increased– juggling a myriad of other daily, routine-living expenses, scores of other taxes, some of which appear to benefit “society” more than the individual tax payer, college funds, music lessons, hockey skates, eye glasses, the escalating costs of medical insurance, co-pays and deductibles, dental checkups and follow-up treatments, clothing, food, house insurance, real estate taxes, tuition payments, “special” school assessments, home maintenance…..even the buck to put air in your car tires when the temps change…………Missouri/US citizens have reached a saturation point, in my opinion. Those who park their cars and use them on weekends and special holidays may be able to afford higher gas taxes, but those who use their cars out of necessity on a daily basis may not be able to afford higher gas taxes and until Washington/Jeff City begin to spend money as if it were their own, IMO gas taxes should stay where they are!.

    • JZ71

      Some days, like last week, gas prices changed by 30 cents a gallon – how do you “deal” with that? Drive less? Park your car? I agree, we all pay a myriad of taxes. But I agree with Steve, more funding needs to be dedicated to maintaining our transportation infrastructure – inflation has had a HUGE impact on everyone’s buying power. If we’re not going to raise taxes (so that you’ll have more money to spend on music lessons and private-school tuition for your kids), which government services should we reduce or eliminate? Public schools? Social Services? Parks? Law Enforcement?

      What you view as priorities are (as they should be) different that what I view as priorities. We all are, however, each a part of “society” – it’s not all about just you, or me, and what we, individually, see as important, today. There are things that I’ll never use (because I don’t have kids) or that I rarely use (fire department, public library, public transit), but I still see as benefiting our larger “society”. Individual taxpayers make up “society”, and no taxpayer will directly benefit from every government service, but as a group, we all lead better lives.

      I also agree that waste happens in government. I’d argue that more happens at the national level than at the state or local levels. We could easily cut our military spending by half, and that would have a much greater impact on my tax burden than increasing the state gas tax. It all boils down to priorities, as individuals and as a society.

      • Mark

        Actually my comment was intended to carry a general tone vs. a personal one. Personally, if necessary, I would work two jobs to afford private education, music lessons, hockey and summer camps for my kids. I deem those experiences more important than driving a current model year vehicle, purchasing (and operating) a boat, smoking, drinking, clubbing and all the other “ings” that cost lots of $. But a good portion of those whose work ethic drives them out the door each morning to their job might have to give up food, clothing, medical attention, etc, sacrifices much more far-reaching than private education and music lessons. It is those individuals whom I was referring to. And yes, music lessons could easily apply even to those families, because prodigies are found in lower socio-economic groups as well as among the top earners. And even if the term prodigy doesn’t apply to a certain kid, he still deserves music lessons (vs higher priced gas in his dad’s tank) if he wants them. In exchange for extending that and similar rights to the kids of Missouri and elsewhere, governors and other public servants need to tighten their belts, avoid extending patronage positions to family and friends, and run their “business” just like the principals of my firm run their business, where the security of a job is based on job performance, not on other entangling alliances .

  • ScottF

    I would have no problem with raising the gas tax by 42 cents. On top of raising more revenue, it would also incentivize people to drive less.

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