Dear Governor-elect Rauner,
I know you have a big economic plan to save the state, just like you’ve been saying all along. You just haven’t wanted to spring it on us.
Not after your election, because it might spoil our holidays.
And not before, because it might have spoiled your election.
Illinois finances are a mess and cleaning things up will be hard on all of us.
But I have one small suggestion, which would have seemed a terrible idea six months ago. Today it’s almost like found money. It’s something that would help fund much needed infrastructure repairs and upgrades and, if you act fast, taxpayers won’t feel the bite much.
It’s the gasoline tax. You need to raise it.
Now, I can imagine what you’re thinking, sir.
No. Absolutely not. We already tax gas plenty in Illinois. Why am I reading this? I wonder if “Ask Amy” is ever going to print my letter. Where’s the Jumble?
Breaking BusinessMissouri first state to see average gas price below $2See all related
But, please, hear me out.
Because the price of gasoline has declined so much lately, the simple truth is you could tack on more tax per gallon and people would still be saving a huge amount over what they’ve been conditioned to pay. It’s a small thing, but it’s a start.
Don’t believe me?
Give a call to Rick Snyder, the Republican governor of Michigan. Gov. Snyder is one of those who wants to seize the opportunity he sees. Several other states are weighing gasoline tax hikes, as well.
“If you’re ever going to do it, this is the time to do it because you are going to see cheap prices for a long period of time,” said Phil Flynn, Chicago-based senior energy analyst at the Price Futures Group.
What has happened is that, in a Saudi-led bid to discourage efforts in the United States to both increase domestic fuel production and decrease reliance on fossil fuels, the multinational oil cartel OPEC has production at a torrid pace. This has resulted in pump prices at around a five-year low here.
“OPEC realizes with new technologies coming on line … if they don’t compete with natural gas (and oil recovery through shale) or make alternative fuels less attractive, they’re going to be out of business,” Flynn said.
“So I think the reason why the Saudis have been so aggressive is it’s really a fight for their survival. If they can’t kill the shale revolution and the alternative (fuel) revolution, they want to do everything they can to at least slow it down so they can regain their bearings a little bit.”
The U.S. Energy Information Administration, which tracks weekly Chicago retail gas prices — all grades, all formulations — pegged the average at $2.556 last week. Back in mid-June, the figure was $4.161.
That’s a decrease of more than 38 percent, or more than $1.60 a gallon. Therein lies the opportunity, so long as you and the legislature move fast.
Tack on a dime tax on each gallon sold and the blow to everyone would be softened by the fact that motorists — and everyone whose livelihoods rely on people, products or raw materials being transported efficiently and cheaply — still will be paying a lot less per gallon than only a few months ago.
Based on Illinois’ gasoline consumption, adding a dime per gallon would raise around $500 million a year, and yet drivers would still save $30 or so each tankful, a 36 percent reduction in cost from about half a year ago.
An add-on of 20 cents — a little more than doubling the state excise tax — could mean $1 billion, yet the consumer would still be paying only about two-thirds of what he or she was paying just before the official start of summer.
But that’s probably as much as you can squeeze out of drivers. Some already sputter across the state line with empty tanks when they think they can save money. No sense making, say, gas stations in Missouri more attractive than they are to Illinois drivers.
“The one thing you have to remember. Here in Illinois, when you’re talking about a gas tax … our taxes are among the highest in the country,” Flynn said.
It is a well we have tapped and tapped again, so to speak.
Illinois already hits gasoline with a per-gallon excise tax of 19 cents for gasoline and 21.5 cents for diesel fuel, plus other state taxes and fees to the tune of 20.1 cents per gallon, 21.73 cents for diesel, according to October figures from the American Petroleum Institute, the most recent available.
That’s not the end of it, of course, because there are federal excise taxes of 18.4 cents per gallon of gas and 24.4 cents for diesel. Plus API notes that counties can impose their own taxes. Cook County, for example, takes 6 cents per gallon, while DuPage, Kane and McHenry counties grab 4 cents.
There are opportunistic cities of 100,000 or more levying their own tax. Chicago hits people for a nickel a gallon. There are sales tax discounts the state has seen fit to accord certain biofuel blends. But you get the idea.
Add in the fact that overall fuel consumption is declining, and take it as a warning that — like lottery revenue, tobacco tax money, or oil itself — this isn’t a bottomless resource.
In the past, when oil prices dipped, there was a surge in the sales of gas guzzling vehicles. Flynn believes that won’t be the case this time.
Some states, apparently sensing the same, are looking at possibly taxing vehicles on the basis of how far they travel rather than fuel purchased. Many will watch a pilot program that Oregon plans to launch next year, including critics concerned with whether such an initiative will compromise citizens’ civil liberties and privacy rights.
But in the here and now, there is still a lot of gasoline being sold.
The Saudis oversupply gambit may undercut newly energized efforts to get more oil out of the ground in this state and others, so we have to take advantage of what we can.
“Obviously, when we talk about gasoline prices, they can be influenced by geopolitics and stuff, but less now than ever,” Flynn said. “In fact, when we saw that big spike up in oil prices earlier in the year because we were worried about (the Middle East extremist group) ISIS and Iraq, what did we see happen?
“Well, the world just raised production, the U.S. raised production, and that may be why we’re seeing this price crash. We raised production to an extent that we never did before for a disruption that never happened and so now we have a lot of oil.”
Is $500 million going to solve Illinois’ problems? Is $1 billion? No. But it’s a start and people deserve that money specifically earmarked for the roads and bridges that are so badly in need and so likely to get overlooked in the mad rush to deal with this state’s many other holes.
So that’s that, sir. Happy to help.
Now what have you got for us on income tax and state pensions?