by Amanda Griffin-Johnson
As Illinois motorists shell out more and more for the rising cost of gas, many people want to know: what am I paying for? In Illinois, especially in Chicago and Cook County, drivers may be surprised to find out that they’re paying significantly more in taxes on gas than drivers do in other states.
At the end of March, Chicago had some of the nation’s highest gas prices at $4.67, compared to a national average of $3.90 per gallon. At these prices, motorists in Chicago are paying a staggering 86.6 cents per gallon in taxes. The graphic below shows the breakdown of the various federal, state and local taxes on fuel.
Traditional gas taxes like "motor fuel taxes" are a fixed amount per gallon. These taxes generally pay for road maintenance and other transportation expenses. Combined, the federal, state, county and Chicago motor fuel taxes total 48.4 cents per gallon. The state also charges environmental taxes of 1.1 cents per gallon.
But in addition to these motor fuel taxes, the State of Illinois, Cook County and the City of Chicago also charge sales taxes on gas. In fact, Illinois is only one of seven states that charge sales taxes at the gas pump. Currently, the state’s 6.25 percent sales tax adds nearly 24 cents per gallon to the cost of gasoline in Chicago. The county and city sales taxes add an additional 13 cents per gallon to the price. These sales taxes account for more than 40 percent of the total taxes on gas.
These sales taxes don’t appear on your receipt like it would in a restaurant or store. Instead, it is hidden in plain sight by being built into the price. And unlike the motor fuel taxes which are a fixed amount per gallon, the sales taxes are a percentage of the price. So as gas prices rise, the amount of taxes you pay increases. Additionally, revenue generated by the state sales tax on fuel goes toward much different purposes than the motor fuel taxes. Rather than being spent on roads and transportation services, a significant portion of sales tax revenue goes to the state's General Fund, which can be spent on a variety of purposes from pensions to human services.
What difference does it make paying a few cents more in sales tax? If you filled up your car's 15 gallon tank twice a month, you’d be paying over $130 annually in state and local sales taxes on gasoline at the current prices. But it doesn’t have to be this way. Illinois could take a cue from the other 43 state that do not charge a sales tax on gasoline and end this practice, saving taxpayers hundreds of millions of dollars. For more details on gas taxes in Illinois, check out the Institute’s policy brief on gas taxes. If you’d like to join the Budget and Tax email list to receive emails on this and similar issues in the future, click here.