Missouri lawmakers agreed to raise the state’s gas tax for the first time in 25 years during their 2021 session, but Gov. Mike Parson has not signed the bill amid concerns about its constitutionality under the state’s Hancock Amendment.
The 1980 Hancock Amendment requires Missouri to refund money to income tax payers when a new tax or fee exceeds a percentage of total state revenues unless approved by voters in a statewide referendum.
Named after the late Taxpayer Survival Association founder and four-term Republican U.S. Rep. Mel Hancock, under amendment, lawmakers set that percentage. During fiscal year 2022 (FY22) budget deliberations, it was 1%, about $111 million.
The amendment was raised repeatedly in floor debates on Senate Bill 262, which called for the state to raise its Motor Fuels Tax (MFT) from 17 cents a gallon to 29 cents a gallon by 2026 to generate an additional $513 million for Missouri roads, according the state’s Department of Revenue (DOR).
SB 262 – approved by the Senate 21-13 on March 11 and the House 104-52 on May 11 – increases the state sales tax on a gallon of gasoline by 2.5 cents starting in October followed by five annual increases of 2.5 cents per gallon until it is 29 cents.
SB 262 was transmitted to Parson’s desk on May 25. The Missouri Constitution gives the governor 15 days to veto bills during a legislative session and 45 days after adjournment.
Therefore, Parson has until mid-July to veto SB 262. Otherwise, it goes into effect after 45 post-session days regardless if signed.
On May 13, Republican House Reps. Jered Taylor, Tony Lovasco, John Simmons, Jason Chipman, Justin Hill and Dottie Bailey penned a letter to Parson raising objections to SB 262.
“The Missouri Constitution in Article X, Section 18 limits the increase in revenue the Legislature can bring into the treasury through a tax to a specified dollar amount or 1% of the total state revenues,” they wrote. SB 262 “will bring in revenue which exceeds that amount.”
SB 262, carried by Sen. Dave Schatz, R-Sullivan, was originally accompanied by a resolution to place the proposed MFT hike before voters in a referendum. Lawmakers agreed to raise the MFT in 2014 and 2018 but voters shot both down.
The proposed 2018 hike, which called for a 10-cent per gallon increase, was opposed by 54% of voters despite a $5.4 million campaign by builders, labor unions and business groups to get it adopted.
But the resolution calling for a ballot measure was nixed after a “revenue-neutral” provision was incorporated into SB 262.
Under the provision, adopted from a 2017 South Carolina program, drivers can apply for refunds from the DOR for anything they pay above 17 cents per gallon if they provide receipts.
But opponents, including the six House reps in their May 13 letter to Parson, say SB 262’s fiscal note projects the increased tax will exceed 1% of total state revenues by FY26 and, perhaps, much sooner.
Potential legal challenges aren’t the only obstacles that could prevent the gas tax hike from going into effect in October.
In May, Americans For Prosperity-Missouri (AFP) Director Jeremy Cady filed a referendum petition with the Secretary of State’s Office seeking to put the recently passed gas tax hike before the people in a November 2022 ballot measure.
To qualify for the ballot, the petition would need to collect 110,000 signatures in 90 days after the proposed measure and its ballot language is approved by the Secretary of State’s Office.
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