Illinois gas tax set for automatic increase July 1
State lawmakers last summer doubled Illinois’ gas tax to help pay for capital projects. Each year the gas tax automatically rises, shielding lawmakers from responsibility for hikes.
Illinois drivers are scheduled to see their first automatic annual gas tax increase on July 1, as the state’s share of tax on fuel purchases will rise to 38.7 cents per gallon from 38 cents.
Last spring, state lawmakers approved a bill to double the state’s tax on gasoline to 38 per gallon from 19 cents to help fund Gov. J.B. Pritzker’s $45 billion capital plan. It also included a provision to automatically raise the tax every July 1 by the rate of inflation prior to March of that year, and not to exceed 1 cent. This year, that means an increase of 0.7 cents, according to the Illinois Department of Revenue.
Matt Schrimpf, owner of Piasa Motor Fuels near Alton, Illinois, says increasing the state fuel tax puts Illinois’ gas stations at a severe disadvantage compared to their peers just across state lines.
“It’s been quite devastating, and the reality is that it’s not going to get any better because every year it’s going to get higher,” Schrimpf said.
Schrimpf’s business has largely been unaffected by the tax increase because he transports fuel from Illinois to Missouri, but the stores he delivers to in Illinois have seen their demand decline because it’s easy for Metro East residents to fill up on gas nearby in the St. Louis area.
Schrimpf said Illinois’ stay-at-home order and slow reopening also hinders business. His business has seen a 70% decrease in the volume of gas sold in Illinois during the past few months, while business in Missouri is back up and running at 85% of normal operations.
“We’re still greatly handicapped on normal business. Just one little decision continues to push more business off of our borders.”
Gas station owners have been especially hard hit during the past year. Pritzker signed a gradual minimum wage increase last year that will see minimum wages jump from $8.25 on Dec. 31, 2019, to $10 on July 1. Cigarette taxes were also increased by $1.
“We will have to see but there will be a lot of bankruptcies, mostly in the gas business. Across all the towns near the borders, there will be a lot of business closures,” said Sam Dharni, who owns a Shell station in Antioch, just yards from the Wisconsin border.
While this year’s increase may seem small, pennies add up. If the gas tax rises at the same rate it did this year from 2021-2025, compound interest at the current inflation rate will take the tax to 42.4 cents per gallon in 2025.
By doubling the gas tax last summer, lawmakers charged Illinois drivers an extra $100 per year in gas. If the inflation projection holds true, tack on another $23 per year in 2025. Gas taxes also drag down businesses and drive consumers out of the state – all while state leaders avoid responsibility for the gas tax increases because they are “automatic.”
Former state Sen. Martin Sandoval was behind the gas tax. Sandoval plead guilty to tax fraud and bribery in January after federal investigators charged him with filing false tax returns and accepting $250,000 in bribes from a red-light camera vendor. As the chair of the Senate Transportation Committee, Sandoval was instrumental in passing the gas tax through the General Assembly and was a strong supporter of the progressive income tax amendment, which is on the Nov. 3 ballot.
Illinois drivers in July will hand over more in gas taxes, then in November will be asked to give lawmakers more authority to raise income taxes. The progressive tax question asks voters to remove the Illinois Constitution’s flat tax protection, opening the door to taxes on retirement income, higher taxes on the middle class as well as up to 47% higher taxes on more than 100,000 Illinois small businesses that create 60% of the state’s jobs – just as those businesses are trying to recover from the COVID-19 recession.