August 31, 2012

As Illinois motorists hit the road for Labor Day weekend, they’ll shell out an average of $4.14 for a gallon of gas.

In Chicago, motorists are paying $4.31 a gallon, according to the AAA.

That’s a whopping 48 cents more than the national average at $3.83 a gallon.

At these prices, motorists in Chicago are paying a staggering 80.2 cents per gallon in taxes, or nearly 20 percent.

But it doesn’t have to be this way.

The graphic below shows the breakdown of the various federal, state and local taxes on gas.


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.

In addition to these motor fuel taxes, the State of Illinois, Cook County and the City of Chicago also charge sales taxes on gas. Illinois is one of only seven states that charge a sales tax at the gas pump!

Currently, the state’s 6.25 percent sales tax adds nearly 20 cents per gallon to the price of gasoline in Chicago. The county and city sales taxes add an additional 11 cents per gallon to the price. The 31 cents of sales taxes account for nearly 40 percent of total taxes on gas.

These sales taxes don’t appear on your receipt like they would in a restaurant or store. Instead, they are hidden by being built into the price. And unlike the motor fuel taxes, which are a fixed amount per gallon, the sales taxes are set as percentage rates. So as gasoline costs rise, the amount of sales taxes you pay increases.

Additionally, revenue generated by the state sales tax on fuel goes toward different purposes than 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.

This looks like double taxation to me.

As for consumers, what difference does it make paying a few cents more in sales tax? If you fill up your car’s 15-gallon tank twice a month, you are paying more than $110 annually in sales taxes on gas at the current price because Illinois chooses to implement regressive double taxation of gas.

Illinois should follow the lead of the 43 states that don’t charge a sales tax on gasoline and end this practice, saving taxpayers millions of dollars.

Something to think about when you fill up your tank.