Illinois’ Gas Tax Set To Double On July 1st

A chaotic final week of legislative session in Springfield has resulted in a flurry of tax hikes and new spending.

Illinois state representatives introduced and passed a $45 billion infrastructure plan on June 1. It will hit up drivers almost immediately, pending expected approval from the Illinois Senate and Gov. J.B. Pritzker. Revenue to pay for that plan comes from higher taxes on gasoline, vehicle registration, cigarettes, parking and more.

Senate Bill 1939, which hikes the state’s motor fuel tax and vehicle registration fees, was approved by a bipartisan 83-29 vote in the Illinois House of Representatives. Senate Bill 690, which hikes taxes on cigarettes and vaping, as well as parking garages, passed on a bipartisan vote of 87-27. SB 690 also increases the number of casinos in Illinois, legalizes sports betting, and hikes taxes on video gaming, among other changes.

Illinois Policy:

The plan doubles Illinois’ state gas tax to 38 cents from 19 cents per gallon, which will vault the total tax burden on Illinois gas beyond states such as New York and California to second-highest in the nation, according to 2018 data from the Tax Foundation. The increase will be effective July 1.

The state motor fuel tax will also be tied to inflation, meaning it will automatically rise in future years without lawmaker approval. The hike will cost the typical driver around $100 more in its first year.

Drivers will see a $50 annual increase in vehicle registration fees for most cars and motorcycles next year – up to $148 from $98. Illinois’ vehicle registration fee was just $79 as recently as 2009.

According to the Illinois Department of Revenue, tax dollars generated by cigarette sales have declined every year since fiscal year 2015. Cigarette taxes are highly volatile, as shown in the Tax Foundation’s recent analysis of cigarette tax revenues from 1955 to 2018 across all 50 states. This can be attributed in part to a general decline in smoking, as well as the ability of smokers in high-tax states to buy smuggled tobacco from bordering low-tax states.

Oh, and the state passed something about marijuana, too: