July 31, 2019
Special Guest Perspective by Dan O’Donnell
Earlier this month, I took my family to the championship match of the CONCACAF Gold Cup between the United States and Mexico at Soldier Field in Chicago. On the way home, we stopped for snacks at a gas station a few blocks from the stadium.
Posted on the door was an eye-catching sign.
“Attention: customers,” it read. “Unfortunately, the State of Illinois recently passed increases to the gas and diesel taxes (SB 1939, Amendment 2), effective July 1st, 2019. Regrettably, there will be an immediate increase to fuel prices to cover the additional taxes imposed. We share in your frustration and suggest contacting your State Representative to express your concern. Thank you!”
Clearly the owner of the gas station was not happy about the new law, which doubled the state’s gas tax to 38 cents per gallon and allowed the City of Chicago to increase its municipal gas tax by an additional three cents per gallon. Other local governments are allowed to double their four-cent-per gallon gas taxes to eight cents.
“These additional hikes may end up making Illinois’ average state and local gas tax burden the highest in the nation,” the Illinois Policy Center grimly notes. “As of May 13, the wholesale price of gasoline in Chicago was $2.46 per gallon. If Chicago City Council approves a local increase on top of the state’s increase, drivers at Chicago filling stations would pay 99 cents in taxes and fees on each gallon of gasoline – an effective tax burden of more than 40%.”
According to AAA, the average price of a gallon of gasoline in Chicago hit $3.30 on July 30, a staggering 17% higher than the national average of $2.72 per gallon. Drivers across Illinois are now paying an average of $2.99 a gallon.
Needless to say, I waited until I was back in Wisconsin to fill up.
Just two days before Illinois’ new Democratic Governor signed his state’s massive gas tax increase, Wisconsin’s State Legislature passed a budget that stripped the new Democratic Governor’s plans to raise this state’s gas tax even higher—to 40.9 cents per gallon.
Instead, Wisconsin’s gas tax held steady at the still-high rate of 30.9 cents per gallon and drivers here are paying a lower price than the national average at $2.71.
If the competition for my gasoline dollars was a soccer match, Wisconsin won $54.32 to nil. Because I had a choice in where to spend my money and knew that it would cost much more in Illinois, I waited until I was safely across the state line before I filled up.
This is a basic economics lesson that our neighbors to the south seemingly don’t understand: The higher the price, the more likely consumers are to try to avoid them and seek a better deal elsewhere. They may drive across the street to a different gas station, if possible they may drive across state lines before filling up, or they may stop driving gas-powered vehicles altogether.
Yet even as consumers are purchasing electric vehicles in greater and greater numbers, Wisconsin Transportation Secretary Craig Thompson is still determined to hike a gas tax that is growing more and more obsolete each year.
“Under any scenario, I think the gas tax for the foreseeable future is still the fairest way to raise the money,” he told WisconsinEye on Friday. “It’s in place. There’s less than a 1% administrative cost of collecting it and when you get our out-of-state people that come in to golf on our golf courses and fish in our lakes and go to sporting events, they help pay for that.”
Except when they don’t. Like I didn’t.
When I went to a sporting event in Illinois six days after a gas tax hike triggered massive price increases, I shopped for a better deal back home. Tourism is one of Wisconsin’s largest industries and if out-of-state people decide that it is simply too expensive to golf on our golf courses and fish in our lakes, they won’t.
And more troublingly for a Transportation Secretary who isn’t satisfied with the $600 million budget increase his department received just weeks ago, in-state people hit with a massive increase in the cost of driving will find ways to escape that cost.
They may buy an electric car, they may use ride-sharing apps, they may take a bike or a Lime scooter for shorter trips, or they might even finally think about riding Milwaukee’s trolley (okay, maybe not). But they will consume less gasoline, just as they do every time there is a significant increase in gas prices.
Thompson himself admitted this.
“We are going to get to a point that we have more of a critical mass of electric cars or cars, even if they have gas, getting much better gas mileage [such as] hybrids,” he said while admitting he also favors a mileage fee for drivers.
Thompson is, of course, talking out of both sides of his mouth. A gas tax increase obviously isn’t the fairest way to raise transportation revenue since a growing percentage of vehicles that use Wisconsin’s roads no longer use gasoline.
Thompson merely wants more money any way he can get it; consequences be damned. Such a lack of long-term planning and fiscal recklessness directly led to the Transportation Department’s massive budget shortfall in the first place.
This is precisely why the Legislature must hold firm on refusing raise the gas tax any further. The sign I saw on that gas station door in Illinois is a warning sign for Wisconsin, as we can’t afford to follow our neighbors down that dead-end road.