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Illinois Raises Gas Tax to Nation’s Third Highest

September 18, 2019

After Illinois Doubled Its Gas Tax, the State Trails Only California and Pennsylvania.

Illinois’s state tax on gasoline doubled from 19 cents to 38 cents per gallon and the diesel fuel tax increased from 24 cents to 44.5 cents per gallon on July 1.

Gov. J. B. Pritzker signed into law on June 28 a $45 billion infrastructure plan which included the fuel tax hikes, making the burden paid by Illinois drivers among the heaviest in the nation.

The typical Illinois driver will pay at least $100 more for gasoline each year under a doubled gas tax, states an Illinois Policy Institute analysis published on July 26.

Ratcheting Up

The infrastructure law also increases the state’s vehicle registration fees, putting them among the highest in the nation, says Adam Schuster, director of budget and tax research at the Illinois Policy Institute.

“This move bumps Illinois’ total gas tax burden to at least the third-highest in the nation and—along with additional costs on licenses—will cost the typical family about $200 a year,” Schuster said.

Illinois car owners will pay $148 every year for vehicle registration, up from $98, starting in 2020.

In addition to the immediate pain at the pump, the gas tax will now rise by almost a penny a year in perpetuity.

“By 2025, drivers could face a state gas tax of 43.5 cents per gallon,” Schuster said.

Sales Taxes Top Off

Illinois drivers also pay a sales tax on gasoline, and the new law allows local governments to raise their local excise tax on gas.

“Before the hike, Illinois drivers already paid among the highest taxes in the nation, because Illinois is one of only seven states that applies a sales tax to gasoline purchases, which is added on top of state and local motor fuel taxes,” said Matthew Glans, senior policy analysist at The Heartland Institute, which publishes Budget & Tax News.

Including wholesale excise taxes passed along to consumers, and sales taxes that apply to the purchase of gasoline, California has the highest average state tax on gasoline at 61.2 cents per gallon, followed by Pennsylvania (58.7 cents) and Illinois (54.98 cents), according to a Tax Foundation report published on July 31.

Crossing Borders

Increasing the cost of motor fuel will have many bad effects, Glans says.

“A gas tax hike will raise prices on goods and services throughout the economy, not just on gasoline, because virtually all consumer goods are transported using gasoline-powered transportation,” Glans said. “These additional costs are inevitably passed on to consumers, with an especially negative impact on lower- and middle-income families.”

The economic impact will be particularly hard for communities near the borders with other states, Schuster says.

“This tax is dangerous for businesses and cities on the border who may see local families choose to commute to a different state to fuel up, taking more commerce with them,” Schuster said.

“The new hikes give Illinois the third highest gas tax rates of all the states, higher than all neighboring states,” Glans said. “With so many Illinois residents living near state borders, many drivers will vote with their feet and cross borders to purchase gas in Indiana, Iowa, Kentucky, Missouri, and Wisconsin.”

‘Littered with Wasteful Spending’

Not all the additional revenue will be used to improve roads, Schuster says.

"Our original research found billions of dollars of waste in Gov. J. B. Pritzker's capital plan,” Schuster said. “Illinois families were sold on these increased taxes going to fix crumbling roads and bridges, but the plan is littered with wasteful spending on private grants, snowmobile paths, swimming pools, and more. Lawmakers hijacked the plan to benefit their own interests, and Illinoisans should be demanding more transparency about how their hard-earned money is being used."

Illinois spends transportation funds inefficiently and should reform its labor policies, Glans says.

“Two reforms Illinois should consider are the elimination of project labor agreements (PLAs) and prevailing wage laws,” Glans said. “PLAs unfairly benefit organized labor and increase project costs borne by taxpayers. Prevailing wage laws are a form of centralized planning and wage control that increases government-contracted construction costs, reduces competition, and politicizes public projects.”

Kenneth Artz (kennethcharlesartz@gmx.com) writes from Dallas, Texas.

Internet Info

Matthew Glans, “How Do Gasoline Tax Hikes Effect Cross-Border Competition?” FAQ, The Heartland Institute, September 11, 2019: https://www.heartland.org/publications-resources/publications/faq-how-to-gasoline-tax-hikes-effect-cross-border-competition

Adam Schuster, “Gas Tax Hike Moves Illinois’ Pain at the Pump to No. 3 in U.S.,” Illinois Policy Institute, July 26, 2019: https://www.illinoispolicy.org/gas-tax-hike-moves-illinois-pain-at-the-pump-to-no-3-in-us/

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Taxes
Sub-topic
Taxes: Gas Tax
Author
Artz has more than 20 years’ experience in nonprofit organizations, publishing, newspaper reporting, and public policy advocacy.
iamkenartz@hotmail.com @@KennethArtz