Illinois Industrials Fight 5% Natural Gas Sales Tax Proposal

The Illinois Manufacturers Association (IMA) is fighting the Illinois governor's proposal to extend a 5% sales tax to all deliveries of natural gas in the state. The proposal, which has not been fully developed, is under discussion in the Illinois legislature as part of the budget plan announced by Gov. Rod Blagojevich April 9 to overcome a deficit expected to total $5 billion over two years.

The governor had estimated the natural gas sales tax would bring the state about $70 million. That is based on $3.00 gas, however. It would amount to considerably more on gas at $5-6. "That's [the state administration] estimate. I'm trying to get them to drop the proposal, so I'm not going to tell them they'd likely be letting go of $120 million," said Boro Reljic, vice president of government affairs for IMA. He said he is hopeful the natural gas tax "will be left on the cutting room floor. We're very hopeful it will not be in the final budget."

The additional gas tax, which would apply mainly to large users of gas including industrials, hospitals, universities and apartment buildings, is just one part of the $655 million in proposed new taxes and fees that would impact Illinois' large industrial sector.

The state currently has a 5% sales tax on natural gas, which by default mainly applies to residential and small commercial users who buy their gas from the local utility. Large users who buy their gas out of state currently are not subject to the tax. The format for extension of the 5% tax has not been publicly disclosed, but is likely to be applied when gas is delivered in the state.

A tax package is likely to be acted on by the Illinois legislature by the end of the regular session May 31, since it would require only a simple majority to pass. Tax measures that go to a vote in a supplemental session require a two/thirds majority and are not likely to be approved. The budget proposals are being negotiated behind the scenes in an effort to come up with a package that can be approved by the end of the month.

One source said there has been talk for years about extending the tax, and he has heard it might happen, but at a 2% rate.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.