Missouri lawmakers push forward tax hikes amid competing Republican agendas

Missouri lawmakers pushed for two sales tax hikes this week — for gas and for online purchases — but Republicans ran into opposition from conservative colleagues on raising state revenue.

A measure to tax online sales from out-of-state retailers was given initial approval in the House Tuesday. It needs one more floor vote before going to the Senate.

The Senate, after stalling for a night, on Wednesday gave similar approval to raise the state’s 17-cent per-gallon gas tax for the first time in more than two decades. Conservatives staunchly opposed to tax increases forced a nine-hour delay in debate that forced the measure to be tabled Tuesday night.

The measure would raise $616 million over the next seven years for the Missouri Department of Transportation and local governments to make highway and bridge repairs. Starting in October, drivers would pay an additional 2.5-cents per-gallon. That additional tax would rise to 12.5-cents in five years, down from 15 cents in the original bill.

Attempts to hike the gas tax have proven unpopular with Missouri voters, who rejected an increase in 2018. The state has the nation’s second-lowest gas tax, after Alaska, according to the Tax Foundation. It also has the seventh largest highway system. Kansas’ tax is 24 cents per gallon for gasoline and 26 for diesel.

The Senate bill would allow Missouri drivers to opt out by claiming a refund on their gas taxes, backed up with receipts. It’s not clear how many would claim that — in South Carolina, 79,000 claimed a total of $3.4 million in gas tax refunds in the 2020 tax year, four percent of what was eligible to be claimed. The bill given approval Wednesday removed a sunset provision of the refund program that was in the original bill.

The debate Tuesday came after Senators failed to adopt a bill to gradually eliminate the personal property tax, which is raised mainly by local governments on items such as cars, boats, trailers and machinery.

It set up a clash between the Senate’s conservative caucus and their Republican colleagues, who raised concerns that the measure was too risky and could harm local government services such as police. The measure would have removed $1.4 billion from local government budgets over five years.

Sen. Bill Eigel, a Weldon Springs Republican and the bill’s sponsor, said the lost revenue could be made up with inflation-driven increases to real estate taxes. But only 13 Republican Senators voted for the measure. Eight joined the chamber’s 10 Democrats in defeating it.

Eigel and others responded Tuesday by stalling debate on the gas tax bill, which has been pushed by Senate leaders.

“As a conservative I appreciate a low tax rate,” said Dave Schatz, a Sullivan Republican and the Senate President Pro Tem. “What I do not appreciate is inadequate funding of the fundamental responsibilities of government.”

Eigel sparred with Schatz, railing against continually increasing state revenue.

“There’s never an amount of money the government can find that’s acceptable as a rate of taxation for the people of the state,” he said.

Gov. Mike Parson supported the gas tax hike that voters defeated in 2018. Several bills to hike the gas tax were introduced in the House this year, but none have been assigned to committee.

Earlier Tuesday, the House moved forward one of Parson’s highest priorities when it voted on the so-called “Wayfair” tax (named for the online furniture retailer).

The bill has been introduced annually since the Supreme Court ruled in 2018 that states can charge such a tax even if the online store doesn’t have any physical presence in the state. Missouri is one of only two states with a sales tax that has not yet moved to collect Wayfair tax.

Proponents, which include the Missouri Chamber of Commerce and other business groups, say the bill would even the playing field for local businesses, which already must charge customers a sales tax while competing with online retailers. E-commerce experienced a boom during the coronavirus pandemic

But some Republicans have opposed any hike in taxes and demanded a corresponding decrease elsewhere in state revenue.

The bill taken up by the House on Tuesday, sponsored by Maysville Republican John Eggleston, would pair the tax with gradual cuts in the income tax rate for all but the lowest-earning Missourians.

“Obviously with Covid it’s been a lot more difficult and we’ve seen a lot of our small business go by the wayside,” he said on the House floor, adding, “Average Joe citizens, moms and dads, they’ve had a hard time this last year as well … And so we must take care of them in this bill at the same time.”

A fiscal analysis shows the full measure would cost the state revenue in the long run. In six years, the income tax cut could outweigh the taxes collected from online sales by up to $120 million.

The online tax would grow funds for schools, parks and conservation. Cities, too, could gain $30 million in the first 10 months and up to $71 million in six years from the online taxes -- but only if they ask local voters to approve it, a catch that drew opposition from municipal officials around the state.