PI Original Adam Doster Friday December 5th, 2008, 11:32am

Hiking The Gas Tax

Municipal leaders and government agencies have long-overdue infrastructure projects ready to go.
State legislators just haven't provided the money. All summer, Gov. Rod
Blagojevich, House Speaker Michael Madigan, and now-retired Senate
President Emil Jones clashed over a ...

Municipal leaders and government agencies have long-overdue infrastructure projects ready to go. State legislators just haven’t provided the money. All summer, Gov. Rod Blagojevich, House Speaker Michael Madigan, and now-retired Senate President Emil Jones clashed over a funding stream for the capital improvement bill, with Jones and Blago favoring a massive gambling expansion and Madigan’s Democratic caucus standing in opposition. Now, with the state budget in disarray and income and sales tax revenue slowing, coming up with the requisite resources may be even harder.

Crain’s Greg Hinz has a plan. In a post yesterday, he floated an interesting, albeit controversial, proposal to jump start the capital plan and take advantage of any matching funds available when President-elect Barack Obama sends federal assistance to the Prairie State: it’s time lawmakers raised Illinois’ gas tax:

Everyone in Springfield knows there’s a problem: that the current 19-cent-a-gallon charge (last raised in 1990) just isn’t producing. That’s why various parties have floated any number of funding schemes, from casino gambling in Chicago to privatizing the state lottery. [...]

Some surely would squawk. But at my corner gas station, the price of a gallon of regular is half what it was just a few months ago. Bumping the price up a nickel or a dime a gallon wouldn’t draw nearly the reaction it would have a few years ago.

Hinz does gloss over some crucial context with regards to the price of gas in Illinois. While it is true that the gas tax itself hasn’t been raised in 18 years, it’s not the only charge drivers pay at the pump. The state imposes its 6.25 percent sales tax on gasoline and various counties -- Cook among them -- tack on their own. A recent study (PDF) by the American Petroleum Institute estimated that Illinoisans pay 64.4 cents per gallon in combined local, state, and federal taxes, the third highest state total in the nation.

That said, raising the 19 cents per-gallon charge has its definite advantages. For one, it disincentivizes the carbon-emitting act of driving, meaning more people will consider car-pooling and mass transit as viable options. At the same time, the state could net a boatload of cash -- the big-business civic group Chicago Metropolis 2020 estimates that a 12.5-cent-a-gallon hike could sufficiently fund a $14-billion statewide capital bill. Those dollars would subsidize the very mass transit projects in need of repair, which would lead to big environmental and economic benefits (PDF).

As one might expect, hiking the gas tax has its downsides, too. Unlike restructuring the income tax, such a move would disproportionately affect middle and low-income taxpayers reliant on cars to get to work and the store. In times of economic crisis, taking more from people’s pocket books is rarely a smart move.

Hinz’s suggestion might be academic. Madigan’s resistance to the capital bill had as much to do with trust as it did with funding. As Rich Miller wrote yesterday, “the real problem is guaranteeing that the capital plan money will be spent fairly and equitably. Nobody trusts the governor, plain and simple.” But it’s an interesting proposal nonetheless and one that should be taken seriously.

Image used under a Creative Commons license by Flickr user abraxas3d.

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