As we break piggy banks to pay our heating bills, we
can all give thanks that Springfield doesn’t tax natural gas. Or can we? At first glance, a tax on natural gas may seem
onerous, particularly in light of steep increases in gas prices that have
just taken hold. Bills of $200 or more aren’t uncommon for
residential customers, and this winter has been relatively mild. “What politician in their right mind is going to
walk in the door and say, ‘They [the gas company] just raised their
rate by $78 — I want to tack a tax on it, too,’?” asks
Ward 1 Ald. Frank Edwards. Mayor Tim Davlin was too busy to come to the phone,
but said, by way of spokesman Ernie Slottag, that his successful push to
add one-half percent onto the sales tax is preferable to a natural-gas tax.
His reasoning: People who don’t live in Springfield help with the
sales-tax burden, whereas a tax on natural gas tax would affect only city
residents. Fair enough. But get past the political posturing and
knee-jerk reaction against rendering unto Caesar, and a gas tax
doesn’t look so bad, especially compared with sales taxes. Under state law, municipalities have the authority to
put a 5-percent tax on natural gas (in Chicago, the city can levy an
8-percent tax on residential customers) — and many cities do. In
Normal, for example, the city last year collected nearly $800,000 from its
tax on natural gas. In Chicago, gas customers put a whopping $101 million
into city coffers. Springfield levies nada. Exactly how much Springfield could collect is a
mystery. A spokesman for Ameren Corp., the holding company for
Springfield’s natural-gas supplier, says that the company
doesn’t break out its sales by city, so it’s impossible to do the math. However, on the
basis of population and collections in Normal, which is less than half the
size of Springfield, a gas tax might boost city coffers by about $2
million. An across-the-board tax on gas would affect everyone,
and that’s not necessarily a bad thing, say Normal city officials.
“The natural-gas tax was initially implemented because Illinois State
University did not pay property taxes,” says Normal budget director
Ron Hill. “The utility tax was implemented so that they could pay a
portion of their share of the costs that we incur.”
Besides collecting money from schools, hospitals, and
other nonprofit institutions that now contribute little or nothing to
public coffers, the city could strike a blow for energy conservation by
taxing natural gas, says an expert with the Tax Policy Center in
Washington, D.C., a think tank under the auspices of the Urban Institute.
“It might cause people to conserve energy more — part of the
reason we like taxing gasoline is, we think there is a behavioral
effect,” says Kim Rueben, a public-finance economist with the Tax
Policy Center. “If
you’re trying to raise general revenues but not change behavior, a
general sales tax will change behavior less.”
Although evidence indicates that energy taxes can be
regressive, the blow can be softened by exempting seniors or anyone else
politicians care to favor, Rueben says. “If you have a tax on
something specific, like a natural-gas tax, you can include breaks for
low-income households,” she says. “There are ways of making it
less regressive that you can’t necessarily do with a sales
tax.”
It’s just something to think about. But no one
did amid the brouhaha that erupted last month when aldermen voted to make
permanent a half-percent hike in the sales tax. The politicians said the
usual things about leaving no stone unturned in their search for
alternative ways to balance the budget and finance the new power plant, but
a gas-tax proposal never came up. Republican aldermen, who uniformly voted against the
sales tax, suggested alternatives, including a telecommunications tax hike,
but a gas tax didn’t occur to them. “I’ve never thought about it,” says
Ward 10 Ald. Bruce Strom. “That’s interesting,” Edwards says. “It hasn’t been discussed since I’ve
been in office,” says Ward 5 Ald. Joe Bartolomucci. “It wasn’t apparent to me that this was
something that could be taxed,” says Ward 7 Ald. Judy Yeager. So much for thinking outside the box.
This article appears in Jan 12-18, 2006.
