As opposed to cutting expenses and rooting out waste, Springfield once again discusses another tax on the already burdened citizens of Illinois to “solve” a funding issue. This time it’s gas tax hikes, as if the people don’t already pay double at the pump–sales tax and motor fuel tax. The following from the Heartland Institute offers a compelling counter-argument:
Hiking Illinois’ Gas Tax Will Not Solve the State’s Transportation Funding Problem
Funding transportation projects has become a major problem for Illinois, as it has for many other states. In 2017, Illinois passed its first budget in years, yet the record $5 billion income tax hike did not include basic funds for infrastructure. Traditionally, Illinois has funded new infrastructure projects through a separate capital bill, which generates a different series of dedicated funds and liabilities for the state. The last capital bill in Illinois passed in 2009, when state legislators allocated $31 billion for infrastructure projects.
Now, several proposals to generate new funds for Illinois’ transportation network have been put forward by organizations across the state. One plan introduced by the Illinois Economic Policy Institute (IEPI) would move the state in the wrong direction by increasing the state’s motor fuel tax to $0.85–$1.00, up from the current gas tax rate of 34 cents per gallon, which ranked 11th-highest among all states in 2017, according to the Tax Foundation.
IEPI’s proposed hike would make Illinois’ gas tax the highest in the nation, at least one-and-a-half times Pennsylvania’s 58-cents-per-gallon rate – the highest in 2017. The IEPI proposal would also increase Illinois’ annual vehicle registration fee from $101 to $578. Another of the plan’s misguided ideas is a vehicle-miles-traveled fee of 4–5 cents per mile.
One of the main reasons Illinois’ gas taxes are amongst the highest in the nation is Illinois is one of only seven states that also applies a sales tax to gasoline purchases, which is added on top of state and local motor fuel taxes. In 2011, residents in the Prairie State paid the third-highest combined local, state, and federal gas tax in the nation.
Any proposal that would increase Illinois’ gas tax ignores the mounting evidence showing gasoline levies are a regressive form of taxation that shortchange transportation networks. In recent years, the rise of fuel-efficient cars has decreased motor-fuel-tax coffers and disproportionately shifted the burden to low-income drivers, a group that typically owns older, less-fuel-efficient vehicles.
On the other side of the debate, the Illinois Policy Institute (IPI) argues legislators should consider the inflated costs of public construction projects in Illinois before they hike taxes or fees. Austin Berg, a writer for IPI, points to Illinois’ high workers’ compensation costs – Illinois has the highest workers’ compensation costs in the Midwest – and prevailing-wage requirements as key cost drivers for Illinois transportation projects. As an example, Berg compared Illinois to Indiana and found Indiana’s average workers’ compensation insurance premium costs made up only four percent of an average payroll, compared to 22 percent in Illinois.
It is not practical to increase taxes or fees on households that are already cash-strapped. A tax hike would raise prices on goods and services throughout the economy, not just on gasoline because virtually all consumer goods are transported using gasoline-powered transportation. Businesses will simply pass the added costs on to consumers.
Illinois should explore more modern and efficient methods to fund road construction and other infrastructure projects. Illinois lawmakers ought to consider options such as privatizing roads or establishing toll systems. In several cities, transportation agencies are also implementing congestion pricing – varying toll prices based on congestion – to manage demand and limit traffic problems. A similar approach in the notoriously congested streets of Chicago is another viable option Illinois policymakers should carefully consider instead of simply increasing the already onerous taxes on Windy City residents and commuters.