On Top of Income Tax Hike, Pressure Building for Higher Illinois Gasoline Tax

On Top of Income Tax Hike, Pressure Building for Higher Illinois Gasoline Tax
April 16, 2014

Benjamin Yount

Benjamin Yount writes for Illinois Watchdog. (read full bio)

Most gas stations make more money on a $2 bag of ice than on a $3.55 gallon of gas. A tax increase, station owners say, would kill their businesses.

Yet a group of business leaders and labor unions, the Transportation for Illinois Coalition, wants lawmakers to raise one of Illinois’ two gas taxes — the per-gallon tax — by 4 cents a gallon to help pay for $1.8 billion in new roads and bridges.

This would come on top of a 67 percent increase in the personal income tax and a 46 percent increase in the corporate income tax lawmakers imposed in 2011. Those tax increases are supposed to roll back at the end of this year, but Democrat Gov. Pat Quinn and the House and Senate leaders of the Democrat-dominated General Assembly are calling for making the temporary income tax hike permanent. They are also promoting going from a flat-rate income tax to a “progressive” income tax that would impose higher tax rates on higher incomes.

Station Owners Fear Losses

Carl Adams is president of the Illinois Ayers Oil Co., which runs gas stations along Illinois’ western border. Station owners — and drivers — in Illinois can’t stand another tax, he said.

“Our company employs 265 people in the state of Illinois. We will not employ 266,” Adams said. “We will look for Iowa and Missouri to grow our business.”

Adams said Illinois’ already higher gas taxes have many people driving across the border for fuel and, as a result, other items.

“Illinois has always had a higher motor fuel tax than Missouri or Iowa. But Illinois (also) has a sales tax on gasoline,” Adams said. “As the price of petroleum rises, the difference between our price and Missouri or Iowa’s [price] gets larger and larger.”

West Quincy, Mo., Adams said, exists so Illinois drivers can buy cheaper gas, cigarettes and beer.

It’s already too much, some owners say.

Already Gone Out of Business

“After the last two to three years of fees and taxes and Obamacare proposals and whatnot, we decided to sell,” said Kyle Vaubel, who owned Baron-Huot Oil, a business that included four generations. “We just couldn’t continue to face what was coming our way.”

Vaubel said his company had about 115 employees, but there was no way he could turn a profit on the low margins.

The benefits of better roads outweigh any lost sales because of higher gas prices, the transportation coalition says in a statement.

“As the crossroads of the nation, Illinois’ geography will always attract business as long as our transportation infrastructure can move goods efficiently and safely,” a Coalition statement reads. “Other states will continue to compete for Illinois’ businesses and jobs, so give employers a reason to stay and relocate and residents a reason to be proud by investing in our transportation infrastructure.”

But Illinois hasn’t been investing as it should.

Road Funds Spent Elsewhere

A report released last May by Illinois Auditor General William Holland shows Illinois spent $12 billion of road funds on things other than roads in Fiscal Years 2011 and 2012. That’s less than half the road fund spending going to roads. Instead, money went to items including health insurance, workers compensation claims and salaries of state troopers and others in state government. The Illinois Department of Transportation disputes the report and says approximately $6.2 billion of road funds went to things other than roads.

Bill Fleischli, the director of Illinois’ petroleum marketers, said Illinois should get the road fund in order before asking for a tax increase.

“I do think we need to look at the auditor general’s report and make sure that the dollars raised through the motor fuel tax are going to the right places,” Fleischli said.

Gov. Pat Quinn has made building roads a part of his re-election bid to push for a new construction plan, and a handful of other proposals for tax increases continue floating around. Voters head to the polls in November, and lawmakers may be more than a little hesitant to raise gas prices before then.

Used with permission of Watchdog.org. Heartland Institute Managing Editor Steve Stanek contributed.

Benjamin Yount

Benjamin Yount writes for Illinois Watchdog. (read full bio)