Illinois should eliminate the ve percent stateshare of the sales tax on gasoline (the rest goesto localities), thereby taking the tax from 6.25percent to 1.25 percent. Under this scenario, theaverage motorist would save $2.83 each time helled up his tank at the current prices.
Over thecourse 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. Using Illinoistaxable gasoline gallonage from 2010, Graphic4 provides estimates of the potential savings toIllinois motorists from a reduction of the gaso-line sales tax to 1.25 percent over the course of three, six and 12 months.
Multiple bills introduced in the spring 2011 ses-sion by Illinois legislators would have offered al-ternative avenues for addressing Illinois’s doubletaxation on gasoline. Two sought to reduce oreliminate the state sales tax and partially replaceit with a higher at excise tax, all while offering a net tax reduction with gas prices above $4 agallon. Another proposed a six month gasolinesales tax holiday, and one bill eliminated the stateportion of the gasoline sales tax completely.
HB 2057 (Rep. Mike Fortner) would abol-ish the state share of the sales tax (5 per-cent) on motor fuel. Part of the funds would be recouped by increasing the statemotor fuel by 15 cents per gallon, and re-sulting revenues would be restricted tocapital spending. Because the excise taxamount is xed, as opposed to the vari-able sales tax, tax cost would not go up asprices rise.
HB 3485 (Rep. David Harris) would abol-ish the state and local share (5 percent and1.25 percent, respectively) of the sales taxon motor fuel. Part of the revenues wouldbe recouped by increasing the state motorfuel tax by 19 cents per gallon, with 4 centsset aside for localities.
HB 3769 (Rep. Wayne Rosenthal) wouldcreate a six month gasoline sales tax holi-day in which the state share of the sales tax(5 percent) on motor fuel would be elimi-nated from July 1, 2011 through Decem-ber 31, 2011.
SB 2078 (Sen. Kirk Dillard) would abolishthe state share of the sales tax (5 percent)on motor fuel indenitely starting July 1,2011.
Why This Works
Fluctuations in motor fuel prices can cause sig-nicant strain on the pocketbooks of businessesand families in Illinois. The sales tax portion of the motor fuel tax adds an unnecessary burdenon the Illinois economy during a time of in-creasing commodity prices and a falling dollar.It’s time for this burden to go, especially as therelated revenues don’t always go to maintain ourstate’s transportation system. While $180 in tax savings may not seem like alarge sum to everyone, it represents a materialamount to those most hurt by rising gasolineand food prices: the working class and poor.High fuel costs have a disproportionate effecton household income, particularly in the lowerbrackets. For the afuent, $180 may be incon-sequential; for those struggling to make endsmeet, it makes a real difference. Even if just half of the savings is passed on to consumers, many families will be happy to redirect those dollars tothe grocery bills or college savings.
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Multiple bills introduced in the spring 2011 session by Illinois legislators would have offered alterative avenues for addressing Illinois’s double taxation on gasoline.
Graphic 4. Estimates forPotential Savings fromMotor Fuel Tax Moratorium
Length of MoratoriumTotalSavingsforMotoristsSavingsPerHousehold
Three Months$247,420,662$52.10Six Months$494,841,324$104.19One Year$989,682,647$208.38
Sources: Illinois Department of Revenue
, U.S. CensusBureau
and Illinois Policy Institute calculations. Thesegures were estimated by multiplying the Department of Revenue’s 2010 taxable gallonage by the suggested decrease in sales tax rate (approximately 20.2 cents using $4.29 as the average price for gasoline in Illinois and estimating the average local gasoline excise tax at 5 centsper gallon
). Latest Illinois household numbers from theU.S. Census Bureau were used to determine the savings per household.