Forget doubling gas taxes, Illinois lawmakers want to rev it even higher

By Vincent Caruso, Illinois Policy Institute | May 7, 2019

Illinois drivers get splashed with some of highest taxes and fees when filling up, but it could soon be worse: A pair of bills in Springfield would spike Illinois’ gas tax burden to the highest in the nation.

Senate Bill 2254 and House Bill 3823 would more than double the per-gallon motor fuel tax by setting the state tax level to 44 cents from 19 cents over a period of five years. This increase would come atop the layers of local gasoline taxes, sales taxes and special fees in Illinois. They would combine to unseat Pennsylvania for the nation’s highest overall gas tax burden.

The initial increase would take place July 2019, raising the state’s current 19-cent tax to 34 cents per gallon. The tax would rise by 2 cents per gallon annually until reaching 44 cents in 2024.

Electric cars won’t save drivers from higher state demands. The state currently requires owners of electric cars to register their vehicle for $35 every two years. The two bills would change that fee to up to “three times the amount for an equivalent” fuel-powered vehicle. The registration fee on a standard Illinois passenger vehicle is $101.

The proposals would add a $50 surcharge atop the annual registration fees for passenger vehicles and motorcycles, as well as raise by $50 the registration fees for antique cars and commuter vans.

Each of the state’s four sales and use taxes that apply to gasoline purchases would spike to 5.25% in 2020, before gradually decreasing back down to the current rate of 1.25% by 2024.

Pain at the pump

Illinois is one of just seven states that imposes a sales tax on gasoline. But that’s only one of the taxes hitting residents at the pump. For example, the typical Chicagoan’s gasoline bill includes the following taxes per gallon:

  • A federal motor fuel (excise) tax of 18.4 cents
  • State underground storage and environmental fees of a little over 1 cent
  • A slew of sales taxes that total 10.25%*:
    • 6.25% state sales tax
    • 1.25% Chicago sales tax
    • 1.75% Cook County sales tax
    • 1% Regional Transportation Authority sales tax
  • And more state and local motor fuel (excise) taxes:
    • 19 cent state motor fuel tax
    • 5 cent Chicago motor fuel tax
    • 6 cent Cook County motor fuel tax
*How these taxes are layered on matters. Illinois sales taxes are first applied on the base cost of gas plus the federal tax and environmental fees. Then, state and local excise taxes are layered on after the sales taxes are applied. The result is drivers are taxed on the taxes.

Despite not having hiked its gas tax since 1990, Illinois’ gas tax remains 10th-highest in the nation, according to the Tax Foundation.

In 2016, Illinois voters approved an amendment to the state constitution mandating revenue generated through motor fuel taxes only be used for transportation projects.

One tax hike could pave way for another

State, local and former officeholders have pressed for a gas tax hike since December, citing revenue needs for infrastructure improvements. This is where Gov. J.B. Pritzker likely sees a political opportunity.

Scrapping Illinois’ constitutional flat tax protection for a progressive income tax has long been at the top of the governor’s wish list. But polling has shown the tax to be highly unpopular among likely voters in key House districts, which could cost Pritzker the votes needed to pass the proposal.

A gas tax hike wrapped with a capital spending bill would allow state leaders to dole out special pork projects to districts in exchange for critical votes. Illinois’ last capital bill passed in 2009 was loaded with special favors. With Pritzker’s progressive tax ambitions, the next capital bill could be the same.

Given the state’s record of waste and abuse of existing capital funds, new revenues would not necessarily translate to sturdier bridges and smoother roads.

Other states have proven able to do more for roads and bridges with fewer tax dollars. Look at Texas: While it’s true that climate plays a role in infrastructure needs, Texas’ average gas tax burden is 46 percent lower than Illinois’. The Lone Star State regularly receives recognition for its best-in-the-nation infrastructure. Not to mention, Texans don’t pay a state income tax.

Moreover, state leaders should be able to demonstrate to taxpayers that they’re getting the best bang for their infrastructure buck. Illinois could achieve this by adopting a scoring model similar to Virginia’s SMART SCALE, which uses an objective scoring system to help lawmakers determine the most efficient way to allocate infrastructure funds.

Rather than hiking taxes on residents who already pay among the highest rates on gasoline, state leaders need to re-evaluate how existing tax dollars are spent.

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