House committee passes bill that would make Illinois gas tax burden highest in the nation

The Illinois House Revenue and Finance Committee approved a bill that would more than double the state gas tax. Illinois may soon have the nation’s highest gas tax burden.

Illinoisans may be planning summer vacations to another state, where they can buy gas.

A proposal advancing in the Illinois General Assembly would spike Illinois’ gas tax burden to the highest in the nation. If it passes, drivers in July would see the state gas tax more than double.

On May 9, the Illinois House Revenue & Finance Committee approved by a 9-6 vote an amendment to House Bill 391, which would more than double the per-gallon motor fuel tax by setting the state tax level at 44 cents from 19 cents. This increase would come atop layers of local gasoline taxes, state and local sales taxes, and other special fees in Illinois. Illinois is one of just seven states to apply both general sales taxes and fuel-specific excise taxes to gasoline.

All this would combine to unseat Pennsylvania for the nation’s highest overall gas tax burden. From there it could rise with relative ease: HB 391 would allow the Illinois Department of Transportation to raise the gas tax annually, insulating state lawmakers from political backlash for raising the tax.

The bill would hike a number of additional fees, including raising annual license plate registration fees to $148 from $98. Owners of electric vehicles would pay $1,000 a year for registration, a dramatic increase from the current $35 they pay once every two years.

The gas tax hike, which comes as part of a capital spending plan, will advance to the House floor for a vote, where lawmakers may send it to the Senate. Gov. J.B. Pritzker has made enacting a capital spending plan a high priority.

A previous version of the bill would have phased in the 44-cent hike gradually over a period of five years. HB 391 as amended, however, would spike the per-gallon rate directly to 44 cents in July 2019.

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% 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.