Illinois budget ends tax break early, cost of gas to go up

As part of the just-enacted state budget, the General Assembly has moved up the expiration of a tax break for sales of gasoline mixed with ethanol. This will likely make the price at the pump go up.

A little-known provision in Illinois’ new budget is going to make the cost of gasoline go up.

But unlike the $4.8 billion income tax hike included in the budget, lawmakers aren’t actually increasing the tax rate on gasoline. Instead, a gallon of gas will soon cost more because politicians amended a little-known tax break for gas distributors that sell certain types of gasohol, including E10.

Gasohol is the name for the product that includes gasoline mixed with some percentage of ethanol, a fuel made from corn and other plant materials. About 40 percent of all corn grown in America is used to produce ethanol.

Illinois’ about 12 million acres of corn make it the country’s second-ranked state for corn production.

To promote the use of gasohol, Illinois lawmakers have partially exempted some types sold in the state from the state sales tax. Previously, gas station owners only paid sales taxes on 80 percent of sales from gasohol.

The gasohol tax break was set to expire on Dec. 31, 2018. In the new state budget, however, lawmakers moved that date up to July 1, 2017.

With the sunset of the exemption, the tax on each gallon of certain types of gasohol sold will increase about 2 cents according to Illinois Policy Institute calculations. It’s likely that as the tax rises, gas station owners will pass the increase along to consumers. For a car with a 20-gallon tank, this adds up to 40 cents per fill-up.

It’s not clear why lawmakers changed the date. But what consumers need to know is that the price at the pump is going up.