Pain at the Pump
July 21, 2011
National surveys continually find that Chicago tops the list of highest average gas prices in the country, says the Illinois Policy Institute.
Most consumers understand that the forces of supply and demand are largely responsible for setting gas prices. But people are often shocked to find that Illinois has the fifth highest gas taxes in the nation. Even worse, the state reaps "windfall profits" when gas prices rise.
- Specifically, the state applies a 6.25 percent sales tax on gasoline, in addition to a flat-rate excise tax.
- When gas prices go up, so does the state's "take" from sales taxes.
- Over time, this can significantly increase the tax burden on motorists.
- In 2002, the Illinois sales tax accounted for 12 percent of all taxes applied to a gallon of gasoline in Chicago, or 7.2 cents.
- Illinois is one of only seven states that fully or partially apply general sales taxes to gasoline, and this tax hits the poor and disadvantaged particularly hard.
Illinois should eliminate the five percent state share of the sales tax on gasoline (the rest goes to localities), thereby taking the tax from 6.25 percent to 1.25 percent.
- Under this scenario, the average motorist would save $2.83 each time he filled up his tank at the current prices.
- Over the course of a year, the savings could top $180.
A permanent reduction of motor fuel sales taxes would be welcome relief to struggling families, as would a temporary moratorium.
Source: "Pain at the Pump: How Illinois Taxes Drive up the Cost of Gas," Illinois Policy Institute, June 2011.
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