NCPA - National Center for Policy Analysis


August 15, 2006

Gas prices hit a record high over the past three weeks, with Chicago leading the way.

According to the Lundberg Survey released Sunday, the national average price for self-service regular rose just over one cent to nearly $3.03 a gallon -- while the Chicago average was $3.29 a gallon, the highest average in the country.

But don't blame the oil companies for singling out Chicago, says Dave Sykuta of the Illinois Petroleum Council.  The real culprit is taxes.

  • While only nine states and the District of Columbia allow sales taxes on gasoline at all, Illinois not only has a sales tax but it has the biggest one -- 5 percent.
  • Illinois is also the only state that allows local taxing bodies to pile on; that means the city of Chicago and the Regional Transportation Authority get an additional 4 percent, bringing the sales tax in Chicago to 9 percent.
  • Then Chicago also grabs an additional 5 cents a gallon and Cook County takes an additional 6 cents a gallon.
  • Add in the federal and state motor fuel taxes, which are earmarked to fund roads, and you get nearly 80 cents a gallon for taxes.

But it's the sales taxes that bring on the big hurt, according to Sykuta.  Because they are a percentage, more taxes get paid as the price of gas goes up.

"We're the biggest tax collector outside of the IRS," Sykuta said of the service station industry.

Source: Art Golab, "Chicago taxes its way to highest gas prices," Chicago Sun-Times, August 15, 2006.

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