Regional Report: Midwest

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Regional Report: Midwest

By Hank Behar

There's good news from North Dakota where a healthy budget surplus has kept the tax man away from the state's petroleum marketers. Illinois, on the other hand, is facing the prospect of becoming the state with the highest gross receipts tax in the nation. In Missouri, a drive is on to untangle the state's minimum wage mandate from federal regulations, while Nebraska is given an inadvertent boost by neighboring Iowa.

With North Dakota sporting a $600 million surplus in its operating budget this year, there's little reason for the state's petroleum retailers to look over their shoulders for impending tax increases. But, Mike Rud, president of the North Dakota Petroleum Marketers Association (NDPMA) said, "That's no reason for us to relax. We have to stay alert to any legislation that's brewing in Bismarck and Washington that could undercut our good times at any minute -- which is exactly what's happening in Congress right now on the price-gouging issue.

"The fact is that whenever gasoline prices skyrocket because of an emergency the first ones the public blames for price gouging are the retailers," said Rud. "We think that's grossly unfair and the FTC concurs, since its own investigation found that price gouging charges against the nation's 170,000 petroleum marketers are bogus. So one of our current initiatives is to take the retailer out of the energy bill that's up before Congress. The 317-page proposal fails to define just what constitutes price gouging, yet it levies a fine up to a half-million dollars for charging 10 percent above market prices in emergencies."

There were 240,000 petroleum marketers six or seven years ago, noted Rud, and one of the reasons the number has fallen is the difficulty in running a business these days. "Price gouging charges will only make the terrain rougher for petroleum marketers, so we're going to do all we can to get Congress to understand that simple fact; don't blame the messenger," he said.

Thus far only the Senate has passed the energy bill. And President Bush has indicated he will veto it in its present form.

Illinois faces the distinction of having the highest gross receipts tax in the nation if the Illinois General Assembly approves the Governor's request for a 1 percent tax on the gross receipts of every business in the state. Bill Fleischli, executive vice president of the Illinois Petroleum Marketers Association/Illinois Association of Convenience Stores (IPMA-IACS) said, "Not only is it unfair, but 1 percent is only the beginning, since it would be levied on every movement of a product. That means that a gallon of gas, which goes through five to seven movements from the refinery to the pump, could go up eight to 12 cents a gallon -- easily."

And if that isn't enough to shake up the states' drivers and business owners, the budget also contains a 3 percent tax on payrolls to pay for a state subsidized health insurance program.

"We've been fighting both initiatives ever since they were proposed by the Governor, and we'll continue the fight right up to the moment the budget is voted on," said Fleischli. That vote is expected later this month (July).

Missouri may be one of the most neighborly states in the Union, with eight states hugging its borders, but when it comes to minimum wage it's almost isolated. Of the eight bordering states (Illinois, Iowa, Nebraska, Kansas, Oklahoma, Tennessee, Arkansas and Kentucky) only Illinois has a higher minimum wage, and one of the reasons is that Missouri must abide by its state law tying its minimum wage to the cost of living, while also complying with the Federal minimum wage.

"That means we sometimes have to boost our minimum wage twice a year, first to comply with the cost of living and again when Washington chimes in as it did recently when it decreed a three-stage increase in the minimum wage, stretching out to the summer of 2009, when it will be $7.25," noted Dan Shaul, state director of Missouri Grocers Association (MGA).

Missouri's present wage is $6.50 -- ahead of the Federal rate, which won’t reach $6.55 until the summer of 2008. By then the cost of living will kick in another boost in the Missouri rate.

"What we want is for the cost of living mandate to be dropped," said Shaul. "That's the only way we can stay competitive with our bordering states. So we'll be encouraging our state legislators to take another look at how the law can be made more equitable."

Another initiative on MGA's agenda, starting in November, is to get credit card companies to disclose a complete set of their rules. "As incredible as it seems, it's impossible to get those rules," said Shaul. "Even government agencies haven't been able to get their hands on them. And since credit card companies are benefiting tremendously from the rise in gasoline prices, we think it's only fair that they tell us exactly how they structure their fees."

Nebraska may be the Cornhusker State to most, but at Nebraska Petroleum Marketers and Convenience Store Association (NPMCSA) a more appropriate soubriquet these days might be the "Teflon State."

"While other states are raising taxes on pet items such as cigarettes and gasoline, our legislature has mercifully left us alone," said Tim Keigher, NPMCSA executive director. "There was a small push to raise the cigarette tax, but that died out before it even got to the floor, and right now our retailers are not facing any significant new taxes in the coming year."

If that hasn't been enough of a blessing, neighbor Iowa increased its cigarette taxes, which not only eliminated its 28-cents-a-pack advantage over Nebraska, but ended up giving Nebraska a whopping 72 cents advantage over Iowa. "What we saw," said Keigher, "was an immediate jump in cigarette sales by our stores in the Omaha area, as Iowa smokers came streaming across the border."

Next year may see a renewal of taxing initiatives, but for now Nebraskans and their petroleum marketers are enjoying the hiatus.