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Illinois Gas Tax Increase Could Threaten Border Retailers

Proposed 20- to 30-CPG increase would drive customers across border, Moto executive warns
Photograph: Shutterstock

CHICAGO -- An Illinois retailer with locations near the state border is warning that a proposed 20- to 30-cent-per-gallon (CPG) increase in the state’s gas tax would hurt its residents and businesses.

MotoMart has 79 sites in six states, including its most recent location in its hometown of Belleville, Ill., less than 20 miles from the Missouri border; however, President Robert Forsyth told Illinois Policy that building the site was risky because Illinois’ higher-tax environment drives residents and companies out of state.

“This part of the state is not an attractive economic environment,” Forsyth said. “Manufacturing is not doing well. Lots of business are impacted by higher taxes.”

In December, outgoing Chicago Mayor Rahm Emanuel proposed a 20- to 30-CPG increase to Illinois’ gas tax to help fund a state transportation bill. This would give Illinois, which has a fuel excise tax of 19 CPG, one of the highest gas taxes in the country.

Should Illinois pass a 30-CPG increase, the combined fuel tax would be higher than bordering states. This includes Missouri, where the state gas tax would be 50 CPG lower than in Illinois, according to the Tax Foundation.

Illinois’ gas tax, including a general sales tax, totaled 37.32 CPG as of August 2018, according to the Tax Foundation. This is nearly 20 CPG higher than in Missouri. The price dynamic influences consumer behavior in border areas, said Forsyth.

“Go over to our MotoMart on Riverview Drive, the first stop in Missouri, and look at all the license plates from Illinois,” he said. “People underestimate the economic impact of people choosing to buy gas out of Illinois, and they will make a trip to do that.”

According to 2016 U.S. Census figures, more than 800,000 people live in Illinois counties that neighbor Missouri.

"It’s stupid. When you’ve got a state 15 miles away with cheaper gas, you’re not going to get any of that business here,” customer Art Gantner, a resident of Belleville, Ill., told Illinois Policy. “They need to remember they are driving people away from the state instead of bringing business in, same way as with the cigarette tax. All these taxes are on the middle-class people all the time.”

Forsyth said residents in border areas cross into Missouri to buy not only gasoline but also cigarettes, which cost nearly $2 less per pack than in Illinois. He argued that proponents of increasing the gas tax look only at potential additional tax revenue and don’t consider the loss of gasoline and other sales from border towns and cities to neighboring states. He also said that residents in urban areas who benefit from mass transit cannot understand how much gas taxes affect lower-income people in rural areas.

“Those folks can’t afford fuel-efficient vehicles like I’ve got,” he said. “Not only do gas taxes take a higher percentage of their resources, but they are driving the used gas guzzlers I was driving 10 years ago.”

 

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