A Hidden Tax in the New Illinois Budget

Illinois residents have been watching closely as their lawmakers took the state to the brink of having its debt downgraded to junk status last month. It was a white-knuckle ride and there were no winners. But in the final compromise there was a hidden clause that made Illinois residents the undoubted losers of the final budget.

In 2011 Illinois granted ethanol a tax exemption, saving Illinois residents around 7 to 10 cents per gallon on their gasoline. The new budget quietly removed that exemption, and now gasoline wholesalers and consumers are crying foul. Cole Lauterbach writes at Watchdog.org:

Bill Fleischli, Executive Vice President of the Illinois Petroleum Marketers Association, said his members could stop using the E10 gas if straight fuel gets cheap enough.

“There will probably be a movement to bring straight gasoline back into the state,” he said. “If that happens, it will hurt the sale of ethanol, in turn, hurting farmers.”

But Patrick DeHaan, senior analyst with GasBuddy.com, said the wholesalers aren’t likely to drop ethanol since federal renewable fuel standard laws require a minimum amount of the corn-based combustible to be sold.

“I don’t really expect a shift at all,” he said. “Stations are still incentivized to sell ethanol.”

Fleischli disagrees, saying his members will ship straight gas in if it’s cheap enough. The fuel producer would simply buy ethanol credits to offset the federal penalty.

“Our members know the cost of every penny,” he said.

Read more here.