State budget deal may cost drivers at the pump

State budget deal may cost drivers at the pump

CHAMPAIGN — In the bill that raised state income taxes earlier this month, lawmakers removed a sales-tax incentive for retailers to sell gasoline with 10 percent ethanol.

The group representing the state's gas-station and convenience-store owners came out against this move, arguing it will increase gas prices by a few cents and reduce sales, especially near state lines.

"The consumer will pay more," said Bill Fleischli, executive vice president of the Illinois Petroleum Marketers Association.

"The problem is the borders," he said. "It really makes a difference when people are thinking about planning to go buy fuel."

The Illinois Corn Growers Association, which represents farmers who have seen increased demand for corn because of ethanol, supported getting rid of the tax subsidy, arguing that the incentive is no longer needed.

"Ten percent ethanol gas is about 99 percent of the gas in Illinois," said Rodney Weinzierl, the group's executive director. "It works good when, say, 50 percent of gas retailers are selling 10 percent ethanol. It gives them a competitive advantage. But now, everyone is selling ethanol, and it's no longer helping to incent the market for ethanol blends."

By removing the incentive, which had been scheduled to expire at the end of 2018, the state could save $50 million to $90 million.

On the other hand, gas prices could increase by a few cents a gallon.

The incentive, which has been around since at least 1990, reduced the state sales tax on gasoline with 10 percent ethanol from 6.25 percent to 5 percent. It was designed to increase use of ethanol-blended gasoline, especially before the federal government began adding ethanol requirements in the 2000s.

It was removed in Senate Bill 9, the tax bill that was part of the budget package approved July 6 when the Illinois General Assembly overrode Gov. Bruce Rauner's veto.

For a $2.19 gallon of gas — the price Thursday at a Marathon station in Champaign — the missing incentive in theory increased the price by about 2 cents.

But Weinzierl said that with fluctuating gas prices, its hard to say what causes an increase.

"It's a negligible amount when you think about how much the price of gas moves on any given day," he said.

Fleischli warned that gas stations could revert back to gas with no ethanol if the price is right.

The federal government mandates that a certain number of gallons of ethanol have to be used, and if oil companies missed their quota, they would have to pay a penalty of sorts.

Weinzierl said he doesn't expect that to happen.

"To me, it's hypothetically possible. Practically, it's not," he said.

The Illinois Corn Growers Association also wants to push the market toward gas with higher percentages of ethanol. While the budget got rid of the incentive for 10 percent ethanol gas, gasoline that is mostly ethanol (E85) and biodiesel will be exempt from state sales taxes until 2023.

Fleischli said this isn't realistic, as new infrastructure and regulations would be needed.

Weinzierl acknowledged this could take awhile.

"Think about E10. That probably took 10 to 15 years to go from very little to maybe 50 to 55 percent," he said. "So it's not like tomorrow, everything's going to change."

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ohnooo wrote on August 05, 2017 at 3:08 pm

Illinois citizens being nickel dimed.........Illinois goverment spending business, out of control ( as usual )