How to Tackle Gas Prices in Illinois
Gas prices around Illinois have skyrocketed, reaching nearly $5 per gallon for regular unleaded in Chicagoland. But providing relief isn’t as easy as you may think.
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High gas prices hurt every consumer in Illinois, but providing relief may be a more difficult task than it seems.
In Chicago and the suburbs, prices have been as high as $4.79 for regular unleaded over the past couple of weeks, and while the price of a barrel is starting to fall a little, it may take some time for people to get some relief.
The Illinoize spoke with Jim Watson, the former State Representative from Jacksonville who is now the Executive Director of the American Petroleum Institute-Illinois.
Clearly, he says, the market has caused the spike, driven by the Russian war in Ukraine and an increase in demand after consumers spent two years, for the most part, staying at home. But Illinois does have something working against it: taxes.
“What’s happening here, relatively speaking, is not all that different than what’s going on in Missouri,” Watson said. “Illinois has higher gas prices than Missouri because we have higher motor fuel taxes and we charge a sales tax on top of that.”
Every gallon sold in Illinois is charged 18.4 cents in a federal motor fuel tax, and 39.2 cents in state motor fuel tax. Some places, like Chicago, Cook County, and other larger counties also have their own gas taxes. Additionally, the state charges a 6.25% sales tax on each gallon. That drives the price higher faster when you’re talking about $4.50 instead of $2.50.
All of the Motor Fuel Tax revenue goes into roads and infrastructure. Only 1% of the sales tax goes to roads and 5.25% goes to the state’s general revenue fund. So cutting either, either partially or completely, risks blowing a budget in an already potentially stagnant FY23 budget.
“Both of them have a challenge for elected officials,” Watson said. “If you decide to cut, reduce, end the sales tax that we put on gasoline, that’s going to cut resources for and funding for local governments. Or, you can reduce the Motor Fuel Tax, but that funding goes to expenditures on capital projects like redoing our highways and building our bridges.”
Watson says the state should ease rules on fracking to get more production in southern Illinois. He says if the industry were “unleashed,” it could help in the long term, but wells aren’t built overnight.
Either way, a cut to motor fuel taxes will have an impact on the state budget. So, how do lawmakers approach it?
Governor JB Pritzker has proposed eliminating the automatic increase in the MFT due to inflation, but that would only be about two cents per gallon.
Some lawmakers want more action.
“Prices are surging higher on everything from gasoline to groceries, and as elected officials, our top priority should be to look out for taxpayers,” said Rep. Tom Demmer (R-Dixon), the top budget negotiator for House Republicans. “In this year’s budget, we should prioritize real relief for Illinois families by limiting gasoline sales taxes and providing a tax credit for families who need it the most.”
Demmer and the House GOP wanted to put an inflation tax credit into tax returns next month, but the measure wasn’t taken up.
And it’s not like Democrats are just looking at a big pot of gold, either. Rep. Mike Zalewski (D-Riverside), the chair of the powerful House Revenue & Finance Committee says it’s going to be a balancing act to provide relief without blowing a hole in the budget.
“Tax relief during this time of economic uncertainty remains a high priority as we enter the final weeks of session,” he told me yesterday.
Nobody seems to have a great answer yet, meanwhile consumers are hurting, voters are noticing, and the clock is ticking to the scheduled April 8 adjournment.