Groups such as the Mississippi Economic Council, the Mississippi Association of Supervisors and the Mississippi Municipal League told lawmakers recently more money needs to be appropriated for infrastructure needs.
With gasoline tax income largely flat thanks to increased fuel economy of cars and trucks and a federal Highway Trust Fund that will run out of money by 2022, new revenue sources will need to be found in the decades to come.
In fiscal 2021, the Mississippi Department of Transportation will have a total appropriation of $1.086 billion, with $545.6 million coming from federal funds. The Office of State Aid Roads, a separate agency, will receive $195.4 million to help maintain 25,857 miles of county roads that are considered “feeder” routes between the state highways. These appropriations are also used to maintain 5,368 bridges on these routes.
The state levies an 18.79 percent tax on gasoline that hasn’t increased since 1987, when the Legislature passed the Four Lane Highway Program. Mississippi has the lowest gasoline tax among its neighbors, with Louisiana (20.01 cents per gallon), Arkansas (24.8 cents), Tennessee (27.4 cents) and Alabama (27.21 cents) having higher levies.
One place lawmakers won’t be able to look for more money is in the recently passed Initiative 65, which will create a medical marijuana program in the state. According to the language of the new amendment, the funds generated by the program will have to remain in the state Department of Health.
The amendment means that calls for “Pot for potholes” as some lawmakers joked will go unanswered.
The Mississippi Infrastructure Modernization Act of 2018 was designed to shift 35 percent of the state’s use tax revenues starting this year to cities and counties to help with infrastructure. The bill authorized $300 million in borrowing, with $250 million for MDOT and $50 million for local infrastructure not administered by MDOT.
Use tax is a 7 percent levy on out-of-state purchases. The Mississippi Department of Revenue collected $483 million in fiscal 2020 after collecting $420 million in fiscal 2019. Internet sales taxes spread nationwide after the U.S. Supreme Court’s 2018 decision in South Dakota v. Wayfair Inc. allowed states to levy them on online sellers.
The passage of the Mississippi Marketplace Facilitator Act that requires third party sellers with annual sales of more than $250,000 such as Amazon, Walmart and Etsy will add more revenue to this total since purchases with marketplace affiliates will be taxed just like those directly sold by the retailer.
The other part of the package was the creation of a lottery, the first $80 million in tax revenue annually going to the state highway fund until 2028 and the rest put into the Education Enhancement Fund. So far in fiscal 2021, which began July 1, the Mississippi Lottery Corporation has transferred $26.5 million to the state after transferring $70.7 million for fiscal 2020.
After 2028, the first $80 million of lottery tax revenue will go to the general fund, with any additional funds going to the EEF. The Legislature could always change the law if more money is needed for
One alternative is a Vehicle Miles Traveled tax, where vehicle owners would be assessed by how many miles they travel. The Congressional Budget Office says that for a VMT to fill the gap in the Highway Trust Fund, it would need to be assessed at 1.7 cents per mile.
Oregon has had a voluntary pilot program for 5,000 drivers since 2015 using a device emplaced in the vehicle. These participants pay 1.7 cents per mile and receive a credit on state gasoline tax paid. According to a 2019 story in the News Tribune, only 611 drivers had signed up for the program. Illinois has a similar program for trucks that assesses a fee for maximum annual mileage and an excess rate for every mile over the maximum.
A VMT could be assessed through several methods, including an electronic logging device, radio frequency identification readers (RFID) on highways and roads and periodic odometer reporting.
According to the CBO report, odometer reading would require high government costs for enforcement to keep evasion at an acceptable level. Another high-cost option would be RFID, since putting a system just on the nation’s interstate highways (which comprise less than 3 percent of the nation’s lane miles) would cost tens of billions of dollars. Electronic logging devices would have privacy concerns.
“In ’87, when we created the four-lane highway program, we created an economic boom for Mississippi,” said Scott Waller, the CEO of the Mississippi Economic Council, which is the state’s primary business advocacy group. “But the failure to maintain that system is beginning to hurt us and it’s beginning to show.”
He said increasing the state’s gasoline tax would save drivers money, due to the costs to repair damage from poorly maintained roads and bridges.
Right now, drivers in Mississippi pay 37.19 cents in state and federal taxes on every gallon of gasoline, about 11 cents a gallon less than the national average. The state’s gas tax was last increased in 1987.
The federal gas tax has been 18.4 cents per gallon since 1993. For every one cent increase, the state’s gasoline tax revenue ($416 million in fiscal 2020) would increase by about $22.3 million.
The good news for Mississippi policymakers is that the main source for maintaining the state’s roads, the excise tax on gasoline, has not been prone to wild swings in revenue. Since 2002, the state’s revenue from the gasoline tax have averaged more than $419.8 million per year.
In the last five years, the average had been running about $10 million above the 18-year average before this year’s receipts bottomed out at $416 million, the lowest since 2010, when the gas tax netted only $391 million.
According to the latest data from the DOR, petroleum tax receipts are up by 1.2 percent in September compared to the same time last year, improving from $112 million in $113.4 million.
While a gasoline tax might help in the short term, change is coming to the automobile industry as more hybrid and fully electric vehicles are being sold. The only tax increase in the 2018 infrastructure deal was a $75 fee on owners of hybrid vehicles and $150 for owners of electric cars when they register their vehicles.
If the fee revenues are any indication, hybrids and electrics in Mississippi are as popular as wearing an Atlanta Falcons jersey in the Superdome in New Orleans. Nationally, according to the Bureau of Transportation Statistics, hybrids and electrics make up 2.1 percent of the light vehicle market in the U.S.
“I’m concerned about the gas tax because how many cars are going to be running on gasoline in 10 years, in 20 years?” said state Sen. David Blount, D-Jackson. “Is this a long-term, sustainable solution to our problem even if we were able to get something passed in here?”
Blount joked that seemingly everyone in his district with a Toyota Prius has called him to complain about the registration fee. He also said it was wise that the Legislature passed the fee since politically it will only get harder to pass when more of those vehicles are on the road.
In 2019, the first year of the registration fees, they netted $460,608 for MDOT and $85,912 for counties for a total of $546,520. This fiscal year, revenue from the fees added up to $1.055 million, with $891,153 going to MDOT and $164,720 for counties.