April 29, 2004
SPRINGFIELD (April 29)—Linking hands with a broad coalition of business, labor, transportation and public-interest groups, the UTU’s Illinois Legislative Board today called on Gov. Rod Blagojevich to drop his proposal to impose the state’s 21.5-cent Motor Fuel Tax on non-highway users such as railroads and towboat operators.
Szabo said the proposed levy would increase the tax burden of the railroad industry by more than 50% in Illinois and cost the industry more than $40 million each year. Class I carriers would move their fueling stations and fueling jobs out the of state and several intrastate short-line railroads trapped in the middle of the state would have no choice but to endure the burden.
“The short-line industry as a whole is marginally profitable,” Szabo said. “Subjecting these carriers to the additional burden of a fuel tax will only serve to weaken the short lines further, reducing their ability to serve their customers and forcing them to cut their payrolls. Virtually all of Illinois industry will be rendered less competitive by this unfair tax, which will cause more jobs to migrate out of state in search of lower-tax environments.”
Szabo made his statement at a news conference held by the Illinois Coalition for Fair Fuel Taxes, an ad hoc group organized by rail unions, rail carriers, the Illinois State Chamber of Commerce, the Chicagoland Chamber of Commerce, Chicago Metropolis 2020, the Associated General Contractors, the Illinois Coal Association, and the Metropolitan Planning Council.
Szabo said the anti-fuel-tax coalition attracted a broad coalition because the proposed tax will negatively impact so many different kinds of industries.
“In its 75-year history the Illinois Motor Fuel Tax has applied only to vehicles that use the highways because the proceeds of the tax flow solely to streets and highways built by the state,” he said.
“But under the Governor’s proposal, the highway tax would now receive contributions from non-highway users, including railroads, which own their own infrastructure and fund it out of their earnings.
“That’s unfair,” Szabo said. “The non-highway users pay just as much as the highway users but get nothing back. For the railroad industry it would be a double whammy, as they would still pay to maintain their own infrastructure and would also be forced to subsidize the infrastructure of their competitors – trucks.”
Szabo said mining companies, which are important railroad customers, would be very severely impacted by the tax.
“They operate all sorts of diesel-powered machinery that never leaves their own property,” he said. “Why should they pay into a fund that builds roads? The same goes for building contractors, factories, grain elevators, stone quarries, warehouses, lumber yards, and even highway contractors. They already pay the highway tax whenever they buy fuel for a vehicle that uses the public roads. Now every fork-lift in the state will have to pay a ‘highway tax’ even though it never uses a highway.”
Szabo said the biggest economic damage probably would come in the railroad industry, because it is the biggest user of non-highway diesel fuel.
“Illinois short lines would be particularly hard-hit,” Szabo said. “The Illinois & Midland – a tiny railroad with a total of only 75 employees – would have to pay an extra $1.2 million a year, which would put them in a very difficult position. They would have to lay off some of their employees and probably reduce their capital investment as well, either of which would reduce the quality of service and weaken the overall attractiveness of rail transportation in Illinois. Job losses would ripple through our economy.”
Szabo said even bigger job losses might result if the impact of the fuel tax forces the Class I rail carriers to withdraw from the CREATE program of rail infrastructure improvements in the Chicago area.
“The Class I carriers have agreed to contribute $212 million of the $1.3 billion it will cost to implement CREATE,” he said. “But if the off-highway fuel tax goes into effect, the rail-carrier revenues earmarked for CREATE improvements will have to be redirected toward paying the new tax. There’s a chance the carriers may have to pull out of CREATE—which means there won’t be any CREATE.
“And that would mean very serious job losses,” Szabo said. “If CREATE is not built and trains are not speeded up, the railroads are going to lose business and they’ll have to cut jobs. As rail service deteriorates, rail-dependent industries will migrate out of Chicago, and they will take their jobs with them.”
“The real irony is, the loss of CREATE – or any attempt by railroads to recoup this additional cost through higher shipping rates – would force more freight shipments on to trucks which would further deteriorate and congest our highway system and result in the need for even more MFT dollars,” Szabo said.
“There is nothing good about this tax,” Szabo concluded. “Short-term, it may provide the state with a quick boost in revenue. But within a very short time all of the revenue gains contributed by the off-highway fuel tax will be offset by declines in economic activity, job losses and the movement of businesses out of the state.
“This is a self-defeating tax. All UTU members should call or write their state legislators and Gov. Blagojevich and tell him not to extend the Motor Fuel Tax to railroads.”