Reducing Illinois Sales Tax on Gasoline Proposed

Calling it a 'tax on a tax,' Republican Gubenatorial candidate wants it reduced.
CHICAGO -- Republican candidate for Governor Kirk Dillard is proposing Illinois cut its sales tax on gasoline while also borrowing more using bonds to repair failing roads and bridges.  The proposal would reduce the 5 percent state sales tax on gas, while leaving the local government portion undisturbed.   Dillard estimates his proposal would provide approximately $450 million of taxpayer relief at the pump.   “Families need a break, especially when the economy is this tough. This is money they can use for school supplies, new clothes for kids, and books,” Dillard said.

Dillard would also take $100 million of sales tax revenue per year that would be bonded, the proceeds of which would be dedicated to failing roads and bridges.  He says the revenue stream could support up to $1 billion of infrastructure improvements.

Dillard noted that Illinois is one of just seven states that charge sales tax at the pump.  Most states levy an 'excise' tax on Illinois.  It is a set amount per gallon no matter what the price of that gallon of gas.  Illinois actually has a relatively low excise tax on gasoline of 18 cents per gallon, but collects a little more than that in sales taxes (a percentage of the amount paid per gallon) and other fees.  That leaves the state with the 5th highest gas taxes in the nation according to the Tax Foundation at nearly 40 cents per gallon.  By contrast, Iowa charges approxiamately 22 cents per gallon while drivers in Wisconsin pay around 33 cents per gallon.

On a typical gallon of unleaded regular gasoline sold in Chicago, motorists are charged a federal motor fuel tax of 18.4 cents, a state motor fuel tax of 19 cents, Cook County and City motor fuel taxes of 11 cents and Illinois environmental taxes of 1.1 cents all before any sales taxes are assessed. This makes gas prices in Chicago among the highest in the nation, which is why Dillard chose Chicago for his press conference.

Gas taxes are problematic in many ways.  For one, they are considered 'regressive,' based on the assumption that rich people and poor people still generally drive in about equal amounts and therefore are taxed equally.  Another issue is that because higher gas taxes discourage consumption, they are a poor way to fund road maintenance and improvements.  As Americans purchase more fuel efficient vehicles and drive less, money for highways has gone down.
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