MIDWEST REGIONAL REPORT: Taxes and Budgets Dominate News
By Hank Behar
The Missouri state legislature filed 1,835 bills and resolutions in its 2009 session ended May 5, and the Missouri Petroleum Marketers and Convenience Store Association (MPCA) was busy actively tracking more than 60 of them.
"We have to make sure of three things whenever the legislature meets—that the bills we support get passed; that the bills we oppose don’t get passed; and that the bills people are thinking about that we don’t agree with don’t even get a chance to be voted on," said MPCA executive director Ronald Leone. "And for the ninth year in a row, MPCA has had a highly successful legislative session."
Here are some of the bills MPCA supported that passed:
-- All cigarettes sold after Jan. 20, must be fire safe or self-extinguishable.
-- Wholesalers are required to make product information, including price, available to retailers no later than five days prior to the first day of the month in which pricing will be effective. And the price will be in effect from the first day of the month to the last. No change in wholesaler pricing, and wholesalers will still be prohibited from price discrimination among retailers, i.e., the same price to big box retailers and single-store retailers.
-- A person may now hold five liquor licenses, up from three.
-- 3.2 percent alcohol beer will be licensed and regulated the same as regular 5 percent beer, with no new fees, regulations, paperwork or bureaucracy.
Bills MPCA opposed that failed to pass:
-- Would have increased the tax on a pack of cigarettes from 17 cents to 33 cents.
-- Would have required fuel prices be posted 24 hours in advance
-- Would have required all tobacco products and tobacco paraphernalia be kept behind the counter.
-- Would have replaced the state tax on food with a "massive" tax increase on wine and liquor.
Bills that were never filed, due in part to MPCA lobbying efforts:
-- Permit or mandate automatic temperature compensation at retail.
-- An increase in state tax on gasoline and/or diesel fuel.
-- A cap on retail fuel prices or price increases.
MICHIGAN
Michigan has a 9-cent tax on gasoline and a 5-cent tax on diesel fuel, but some legislators are proposing to replace them with a percentage levied on the wholesale price of each. But the proposal doesn’t make sense to Mark Griffin, president of the Michigan Petroleum Association and Michigan Association of Convenience Stores (MPA/MACS).
"They’re trying to raise money to build and repair our roads, which is a perfectly laudable objective, but gasoline sales are going down, so why would you base your revenue stream on falling sales?" he asked.
"Gasoline purchasing already decreased 17 percent since 1997, and we estimate the proposed percentage-based plan will raise the current 9-cent tax to 34 cents over seven years, which will reduce sales even more. They’re also trying to raise registration fees on cars, so that by 2014 we’ll be paying $265 on a $27,000 car, compared to $136 today."
All this will hurt Michigan motorists in one of the worst recessions in years, and do irreparable harm to the gas station owners represented by MPA/MACS, Griffin explained.
"More than 90 percent of Michigan gas stations are locally owned and family-operated businesses, not Big Oil, and when consumers are forced to pay more at the pump, they spend less in the store," he said. "That will only hurt the 1,500 independent gas stations in our association, not to mention the 5,000 workers we employ."
In the meantime, state legislators will be looking for some means to raise the $1.8 billion needed to keep Michigan roads in decent repair, and to qualify for $2 billion in federal road funding through 2013. Without the match, Michigan will lose the $2 billion, which will go to other states for their roadwork.
ILLINOIS
One of the most enduring questions surrounding cigarette taxation is whether boosting the tax on cigarettes increases or decreases tax revenues. A study commissioned by the Illinois Petroleum Marketers Association and the Illinois Association of Convenience Stores found raising cigarette taxes can result in lower tax revenues.
The study cited New Jersey as "the first state to see an actual reduction in cigarette tax revenues in the same year the tax rate was increased."
This happened in fiscal year 2007, when the New Jersey tobacco tax rate was increased. What followed was a $22 million decrease in cigarette tax revenues compared to the previous year. And while conventional wisdom holds that tax collections will rebound in the second year of a cigarette tax, this was proven wrong when tax revenues continued to decline, resulting in an overall loss to New Jersey of $24 million.
The study also found a cigarette tax is regressive, in that it punishes the lower income tax brackets more than upper income groups. It also has a negative effect on retailers, leading to lower sales and reduced profits.
Dr. Rajeev K. Goel, Ph.D., Illinois State University, and William D. Keip, President of Keip Government Solutions, a consulting firm in Powell, Ohio, conducted the study.
The complete study, dated March 6, 2009, can be found at www.ipma-iacs.org. Click What's New, then click "Analysis of the Impact of an Increase in the Illinois Cigarette Excise Tax."
IOWA
Right now seven states have set biodiesel fuel quality standards. Iowa will be the eighth if bill SF 464 is passed, requiring every gallon of diesel fuel sold in Iowa to contain at least a 5 percent blend of biodiesel.
The Iowa Senate approved SF 464, and in January 2010, when the legislature reconvenes, the House Ways and Means Committee will pick it up.
The Petroleum Marketers and Convenience Stores of Iowa (PCMI) will be there when it does, to continue its fight against the bill. "We believe incentives, not mandates, are the proper approach to promoting and sustaining renewable fuels in Iowa," said Dawn Carlson, PCMI president.
She cites several problems with the bill:
-- It mandates usage of B5, which will result in an increase in the price of diesel fuel, since biodiesel is more expensive than regular diesel. And in colder months, when fat-derived biodiesel is not suitable for use, consumers will have to use soy-based biodiesel, which is also more expensive.
-- The bill eliminates tax credits for retailers.
-- It makes it more difficult to achieve state renewable fuel standards.
-- It doesn’t require biodiesel pumps to be labeled as such, which will result in consumers buying product they don’t want.
"The petroleum marketers of Iowa are strong supporters of the biofuels industry, but we oppose any effort to mandate the use of any type of fuel," Carlson said. "Let the market make its needs known, and we will fill those needs, as we always have."
INDIANA
Indiana has no budget for the next two years as the House rejected the spending plan passed by the Senate. As a result, the legislature is meeting again this month for another try. In the closing days of the session, two pieces of legislation favored by the Iowa Petroleum Marketers and Convenience Store Association (IPCA) fell by the wayside.
One covered changes in how the state calculates and collects prepaid sales taxes on gasoline, and the other was aimed at helping retailers collect from drive-offs.
The full Senate approved the drive-off bill in a 49-1 vote, but for "unknown reasons" the chairman of the Courts and Criminal Code Committee refused to schedule it for a hearing. That forced the IPCA to find another bill in which to insert the language, but that too didn’t make it to a vote as it continued through the process without a conference report.
On the sales tax issue, the changes in how the state calculates and collects prepaid sales taxes on gasoline would have given the state the authority to recalculate the prepaid rate, if there was a 25 percent change in gas prices from the original price used to set the prepaid amount.
It would have also provided retailers with a break by lowering the amount of sales taxes they have to prepay to 80 percent from 90 percent.
There’s one ray of sunshine, however, in that there’s a good chance the legislation will be acted on when the legislature reassembles this month, since the bills contain a number of tax provisions that are needed.
Meanwhile, the IPCA will again partner this year with the Riley Children’s Foundation in a fund-raising campaign from June 26, to July 2. Riley’s Hospital for Children has the distinction of being Indiana’s first and only comprehensive hospital dedicated exclusively to the care of children. To join the campaign and help, visit www.ipca.org/Riley09.pdf for more information.
OHIO
There’s a new look, and a new outlook, at the Ohio Association of Convenience Stores (OACS).
"As an affiliate of the Ohio Council of Retail Merchants, we already offer our members a wide range of services that include workers’ compensation coverage, health insurance and business services such as credit card processing," noted Gordon Gough, executive director of OACS. "But we felt it was time to increase our membership and reach out to the more than 1,000 independent local retailers that have no real organizational representation in Ohio."
Echoing Gough’s statement was Vail Miller Jr., chief marketing officer of Heidelberg Distributing Co., the state’s largest wine and beer distributor. "We hadn’t really made a strong effort to recruit new members and we needed to bring our Web site and materials up to date," he said.
The result has been a new logo and a revised mission statement, aimed at "Providing knowledge, solutions and connections;" "Improving the image of the convenience store industry in Ohio;" and "Impacting government action beneficial to our industry" among other goals.
"We’re excited at the opportunity this presents not only for our association, but for c-store owners all over the state," said Gough.
The Missouri state legislature filed 1,835 bills and resolutions in its 2009 session ended May 5, and the Missouri Petroleum Marketers and Convenience Store Association (MPCA) was busy actively tracking more than 60 of them.
"We have to make sure of three things whenever the legislature meets—that the bills we support get passed; that the bills we oppose don’t get passed; and that the bills people are thinking about that we don’t agree with don’t even get a chance to be voted on," said MPCA executive director Ronald Leone. "And for the ninth year in a row, MPCA has had a highly successful legislative session."
Here are some of the bills MPCA supported that passed:
-- All cigarettes sold after Jan. 20, must be fire safe or self-extinguishable.
-- Wholesalers are required to make product information, including price, available to retailers no later than five days prior to the first day of the month in which pricing will be effective. And the price will be in effect from the first day of the month to the last. No change in wholesaler pricing, and wholesalers will still be prohibited from price discrimination among retailers, i.e., the same price to big box retailers and single-store retailers.
-- A person may now hold five liquor licenses, up from three.
-- 3.2 percent alcohol beer will be licensed and regulated the same as regular 5 percent beer, with no new fees, regulations, paperwork or bureaucracy.
Bills MPCA opposed that failed to pass:
-- Would have increased the tax on a pack of cigarettes from 17 cents to 33 cents.
-- Would have required fuel prices be posted 24 hours in advance
-- Would have required all tobacco products and tobacco paraphernalia be kept behind the counter.
-- Would have replaced the state tax on food with a "massive" tax increase on wine and liquor.
Bills that were never filed, due in part to MPCA lobbying efforts:
-- Permit or mandate automatic temperature compensation at retail.
-- An increase in state tax on gasoline and/or diesel fuel.
-- A cap on retail fuel prices or price increases.
MICHIGAN
Michigan has a 9-cent tax on gasoline and a 5-cent tax on diesel fuel, but some legislators are proposing to replace them with a percentage levied on the wholesale price of each. But the proposal doesn’t make sense to Mark Griffin, president of the Michigan Petroleum Association and Michigan Association of Convenience Stores (MPA/MACS).
"They’re trying to raise money to build and repair our roads, which is a perfectly laudable objective, but gasoline sales are going down, so why would you base your revenue stream on falling sales?" he asked.
"Gasoline purchasing already decreased 17 percent since 1997, and we estimate the proposed percentage-based plan will raise the current 9-cent tax to 34 cents over seven years, which will reduce sales even more. They’re also trying to raise registration fees on cars, so that by 2014 we’ll be paying $265 on a $27,000 car, compared to $136 today."
All this will hurt Michigan motorists in one of the worst recessions in years, and do irreparable harm to the gas station owners represented by MPA/MACS, Griffin explained.
"More than 90 percent of Michigan gas stations are locally owned and family-operated businesses, not Big Oil, and when consumers are forced to pay more at the pump, they spend less in the store," he said. "That will only hurt the 1,500 independent gas stations in our association, not to mention the 5,000 workers we employ."
In the meantime, state legislators will be looking for some means to raise the $1.8 billion needed to keep Michigan roads in decent repair, and to qualify for $2 billion in federal road funding through 2013. Without the match, Michigan will lose the $2 billion, which will go to other states for their roadwork.
ILLINOIS
One of the most enduring questions surrounding cigarette taxation is whether boosting the tax on cigarettes increases or decreases tax revenues. A study commissioned by the Illinois Petroleum Marketers Association and the Illinois Association of Convenience Stores found raising cigarette taxes can result in lower tax revenues.
The study cited New Jersey as "the first state to see an actual reduction in cigarette tax revenues in the same year the tax rate was increased."
This happened in fiscal year 2007, when the New Jersey tobacco tax rate was increased. What followed was a $22 million decrease in cigarette tax revenues compared to the previous year. And while conventional wisdom holds that tax collections will rebound in the second year of a cigarette tax, this was proven wrong when tax revenues continued to decline, resulting in an overall loss to New Jersey of $24 million.
The study also found a cigarette tax is regressive, in that it punishes the lower income tax brackets more than upper income groups. It also has a negative effect on retailers, leading to lower sales and reduced profits.
Dr. Rajeev K. Goel, Ph.D., Illinois State University, and William D. Keip, President of Keip Government Solutions, a consulting firm in Powell, Ohio, conducted the study.
The complete study, dated March 6, 2009, can be found at www.ipma-iacs.org. Click What's New, then click "Analysis of the Impact of an Increase in the Illinois Cigarette Excise Tax."
IOWA
Right now seven states have set biodiesel fuel quality standards. Iowa will be the eighth if bill SF 464 is passed, requiring every gallon of diesel fuel sold in Iowa to contain at least a 5 percent blend of biodiesel.
The Iowa Senate approved SF 464, and in January 2010, when the legislature reconvenes, the House Ways and Means Committee will pick it up.
The Petroleum Marketers and Convenience Stores of Iowa (PCMI) will be there when it does, to continue its fight against the bill. "We believe incentives, not mandates, are the proper approach to promoting and sustaining renewable fuels in Iowa," said Dawn Carlson, PCMI president.
She cites several problems with the bill:
-- It mandates usage of B5, which will result in an increase in the price of diesel fuel, since biodiesel is more expensive than regular diesel. And in colder months, when fat-derived biodiesel is not suitable for use, consumers will have to use soy-based biodiesel, which is also more expensive.
-- The bill eliminates tax credits for retailers.
-- It makes it more difficult to achieve state renewable fuel standards.
-- It doesn’t require biodiesel pumps to be labeled as such, which will result in consumers buying product they don’t want.
"The petroleum marketers of Iowa are strong supporters of the biofuels industry, but we oppose any effort to mandate the use of any type of fuel," Carlson said. "Let the market make its needs known, and we will fill those needs, as we always have."
INDIANA
Indiana has no budget for the next two years as the House rejected the spending plan passed by the Senate. As a result, the legislature is meeting again this month for another try. In the closing days of the session, two pieces of legislation favored by the Iowa Petroleum Marketers and Convenience Store Association (IPCA) fell by the wayside.
One covered changes in how the state calculates and collects prepaid sales taxes on gasoline, and the other was aimed at helping retailers collect from drive-offs.
The full Senate approved the drive-off bill in a 49-1 vote, but for "unknown reasons" the chairman of the Courts and Criminal Code Committee refused to schedule it for a hearing. That forced the IPCA to find another bill in which to insert the language, but that too didn’t make it to a vote as it continued through the process without a conference report.
On the sales tax issue, the changes in how the state calculates and collects prepaid sales taxes on gasoline would have given the state the authority to recalculate the prepaid rate, if there was a 25 percent change in gas prices from the original price used to set the prepaid amount.
It would have also provided retailers with a break by lowering the amount of sales taxes they have to prepay to 80 percent from 90 percent.
There’s one ray of sunshine, however, in that there’s a good chance the legislation will be acted on when the legislature reassembles this month, since the bills contain a number of tax provisions that are needed.
Meanwhile, the IPCA will again partner this year with the Riley Children’s Foundation in a fund-raising campaign from June 26, to July 2. Riley’s Hospital for Children has the distinction of being Indiana’s first and only comprehensive hospital dedicated exclusively to the care of children. To join the campaign and help, visit www.ipca.org/Riley09.pdf for more information.
OHIO
There’s a new look, and a new outlook, at the Ohio Association of Convenience Stores (OACS).
"As an affiliate of the Ohio Council of Retail Merchants, we already offer our members a wide range of services that include workers’ compensation coverage, health insurance and business services such as credit card processing," noted Gordon Gough, executive director of OACS. "But we felt it was time to increase our membership and reach out to the more than 1,000 independent local retailers that have no real organizational representation in Ohio."
Echoing Gough’s statement was Vail Miller Jr., chief marketing officer of Heidelberg Distributing Co., the state’s largest wine and beer distributor. "We hadn’t really made a strong effort to recruit new members and we needed to bring our Web site and materials up to date," he said.
The result has been a new logo and a revised mission statement, aimed at "Providing knowledge, solutions and connections;" "Improving the image of the convenience store industry in Ohio;" and "Impacting government action beneficial to our industry" among other goals.
"We’re excited at the opportunity this presents not only for our association, but for c-store owners all over the state," said Gough.