Is Illinois’ Gas Tax Running On Empty?

Apr 12, 2019
Originally published on April 15, 2019 11:28 am

While gas prices fluctuate, one charge at the pump has stayed the same since 1990. Illinoisans have paid the same gas tax – the charge per gallon the state collects. But that could soon change.

Lawmakers are considering at least one proposal that would double the tax from the current 19 cents, and then increase it automatically by small amounts every year.

It’s sometimes referred to as a variable rate, and proponents of the change say it will create a more sustainable funding source for fixing the state’s interstates, roads, railways and bridges. But opponents argue the legislature should negotiate and vote on each increase incrementally, versus letting the increases happen automatically.

The debate comes as lawmakers are putting together a plan to deal with years of backlogged maintenance on not only its transportation infrastructure, but also buildings and facilities at state universities, schools and prisons. Gov. J.B. Pritzker has said he wants a plan done by May, when the spring legislative session ends.

State Sen. Martin Sandoval, the Chicago Democrat who heads of the Senate Transportation Committee, filed the proposal . It’s one of two measures in Springfield that would up the gas tax and other license and registration fees to pay for repairs to the transportation infrastructure. A more expansive deal that includes funding for state buildings and facilities could be negotiated by May.

Under the variable rate proposal, the per-gallon charge would double, to 38 cents, and be tied to the Consumer Pricing Index and income growth in the state. So, each year, the rate would be evaluated and could be bumped up by up to a penny. Indiana instituted similar changes last year when it hiked the gas tax by 10 cents.

Eight states in the last five years have adopted variable gas tax rates, according to research from the Washington, D.C.-based Institute on Taxation and Economic Policy (ITEP).

If Illinois had had a variable rate in place over the last ten years, the per-gallon charge would have increased by 8 cents without any action by the legislature. That’s according to Carl Davis, research director at ITEP.

He said the varying rate addresses two challenges. First, as more people are buying cars with better fuel efficiency, they’re paying less at the pump, and therefore less money is going toward road maintenance. Davis said the small bump in the gas tax could help offset that.

The indexed gas tax ensures budgets for road improvements rise over time as costs rise.

“Basically you can think of the gas tax as the price people are being charged to use roads and bridges and infrastructure,” Davis said. “And if roads and bridges become more expensive over time [to maintain] because asphalt costs more, diesel fuel to run machinery costs more, then, charging people that same flat gas tax is going to become a problem.”

Stagnant Fuel Taxes & Crumbling Roads

That has been a problem for Craig Fink, engineer for Tazewell County and former head of the Illinois Association of County Engineers. He oversees the county highway system there and said the revenue Tazewell gets from the motor fuel tax to maintain the highways hasn’t changed since 2000.

Meanwhile, “our costs have more than tripled,” he said. That means he can’t fill potholes or resurface the same miles of road he would have 20 years ago, so the system is deteriorating .

He said indexing the gas tax rate could avoid the huge increase lawmakers are looking at right now.

“By not having it indexed, we’ve created a huge shortfall,” he said.

But Andrew Nelms, Illinois state director for the group Americans For Prosperity, said tying the gas tax to inflation results in an automatic tax hike every year that legislators don’t have to take a tough vote on and own up to come election day.

“We see tax increases crop up with some regularity here in Illinois,” he said. “If more dollars are needed, then it seems that folks would be able to make a credible case of that and pass that tax hike rather than people incurring an automatic, annual tax hike.”

He also pointed out that proposals to raise the state’s gas tax come as federal lawmakers are again considering raising the federal gas tax by 25 cents.

Other Ideas

Meanwhile, the Illinois Chamber of Commerce offered its own proposal for a statewide infrastructure plan and how to pay for it last month. The proposal included a gradual gas tax increase of 25 cents, while phasing out the sales tax on gas.

The state collects the 6.25% sales tax on motor fuel. By ITEP’s standards, Illinois has a variable gas tax rate because of this sales tax. But the money goes to the state’s general fund and not to pay for infrastructure repairs.

Todd Maisch, president of the Illinois Chamber of Commerce, said getting rid of the sales tax on gas would ease the burden of the per-gallon hike on taxpayers. He said their proposal did not include the variable rate, but that they wouldn’t rule it out.

Still, he sees two challenges with it. First, he said having consumers pay more at the pump then support increases in perpetuity is a big ask. And second, with more electric and fuel efficient vehicles, the gas tax alone won’t be a sustainable revenue source in the long run.

“The reality is that the gas tax revenues are going to continue to decline even if you index,” he said. “We've got to have a more diverse mix of funding sources for transportation.”

Lawmakers left Springfield Friday for a two-week recess before the end-of-session push in May, when they’ll continue negotiations on how to pay for a capital plan.

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