Gas tax brass tacks: What drove Missouri’s first fuel tax increase in 25 years

Friday marks a noteworthy day at the gas pump in Missouri. For the first time in 25 years, the state’s fuel tax — a critical revenue source for transportation infrastructure — is increasing. In that time period, the tax rate has remained stagnant, causing the quality of Missouri’s roads and bridges to flounder as inflation torpedoed the purchasing power of the tax revenue.

The 2.5 cent-per-gallon hike is part of a 12.5-cent increase that will be phased in over five years, bringing the tax up to 29.5 cents per gallon in 2025. The increase is expected to generate $500 million when fully implemented, but there is a catch. Anyone, including businesses, is allowed to claim a refund on the tax if their vehicle is under 26,000 pounds. That means most vehicles other than buses, semi-trucks and some construction vehicles will qualify for the refund.

Hear more: The Market Dives podcast examines the gas tax increase

To get a sense of the financial impact of those refunds on state revenue, proponents of the tax increase point to South Carolina, which recently increased its fuel tax.

“In the first year of that program, they saw about a 15% claim rate on those refunds,” said Jeff Glenn, executive director of Missourians for Transportation Investment, an advocacy group that supported the tax increase. “And so here in Missouri, we expect that claim rate to be a little bit higher. We made the refund mechanism a little bit easier here in Missouri.”

To claim a refund, Missouri residents must have their vehicle identification number, date of the purchase, name and address of the customer and seller, number of gallons purchased and the charged Missouri fuel tax. Drivers must also keep their receipts for three years. Missourians will be able to get the first refund on July 1, 2022 and can only submit a claim once a year.

Glenn said he expects about 20-25% of Missourians to claim refunds, meaning the revenue could drop to around $400 million. Still, that would almost halve the $825 million shortfall that the Missouri Department of Transportation runs annually, providing critical funding for a network of roads and bridges that ranks as one of the worst in the country.

The American Society of Civil Engineers provides report cards every four years for the quality of infrastructure in each state. Its latest report graded all of Missouri’s systems somewhere between a D- and a C. The report also lists about 12.5% of Missouri’s bridges as being rated as structurally deficient, compared to 8.9% nationally.

This can force freight and delivery trucks to use less efficient routes when delivering goods, Glenn said. That means less time-efficient and more costly delivery of goods, which then translates to more disruptions along the supply chain for businesses in Missouri. And for a state economy that is heavily reliant on agriculture and the shipment of farming products, that can have a highly detrimental impact.

On an individual level, a Missouri motorist spends about $71 more annually than the average American motorist on repairs due to mechanical failures, according to Brian Porter, an engineer for Terracon, an engineering firm in the Kansas City area. The poor road conditions also lead to increased congestion, which can cause longer commute times, frustrate motorists, and waste fuel and time.

Porter sees the need for better infrastructure increasing in the future due to Missouri’s extensive roadway system, which includes 34,000 miles of highway, the seventh most in the country, and its geographic positioning at the center of the U.S.

“Our state’s at the crossroads of the nation.” Porter said. “Each year, about $470 billion in goods are shipped to and from sites in Missouri.”

The value of this freight, in inflation adjusted dollars, is expected to increase 81% by 2045, according to Porter.

“So, we have to be prepared with a robust transportation infrastructure in order to compete economically,” he said.

The tax increase comes at a time when the federal government is also considering increasing funding for infrastructure. The Biden administration is pushing its own infrastructure funding bill, under which Missouri could be in line to receive $9 billion.

While all of Missouri’s gas tax revenue is reserved for funding for roads and bridges, the federal funding would be split among other parts of the state’s infrastructure, like waterways, airports, broadband internet and energy.

Reporter Colman Mitchell contributed to this story

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