Insights on Fuel Tax Impact in Illinois: July 1 Update

Impact of Fuel Tax Increase on Drivers in Illinois

The fuel tax drivers pay at the gas pump is set to increase in Illinois, effective July 1. The state tax on gas will rise from 45.4 cents per gallon to 47 cents per gallon, making it the second-highest in the country. This increase may result in higher prices at the pump for Illinois drivers, just in time for the busy Fourth of July travel weekend. The motor fuel tax is a tax imposed on those who distribute or supply fuel in the state.

Reasons Behind the Fuel Tax Increase

The fuel tax increase is part of Governor JB Pritzker's Rebuild Illinois capital plan. The plan aims to invest $45 billion in rebuilding the state's roads and bridges. The legislation to increase the motor fuel tax was signed into law shortly after Pritzker took office in 2019. The tax was initially raised by 19 cents a gallon and is now indexed with the federal Consumer Price Index. The revenues generated from the tax are utilized to fund infrastructure projects in the state.

The revenues raised through the motor fuel tax are split between the state and local municipalities to support road construction projects. The Transportation Renewal Fund was created to manage the tax revenues and distribute them accordingly. Approximately 80% of the total increase in taxes each year is allocated to road construction projects, with a 60-40 split between the state and local governments. Local municipalities receive 49% of the funds, while counties and other road districts receive the remaining 51%.

The increase in the motor fuel tax may not immediately impact gas prices but can be felt after a few days. Data from GasBuddy shows that gas prices in Illinois increased following previous tax hikes. For example, prices rose from $3.14 a gallon to $3.65 a gallon after the tax increase in January 2023. It is essential for Illinois drivers to be aware of the potential impact of the fuel tax increase on gas prices as they plan their summer travel.

In conclusion, the fuel tax increase in Illinois is part of a broader effort to improve the state's infrastructure. While it may lead to higher gas prices for drivers, the tax revenues generated will be instrumental in funding crucial road construction projects. It is crucial for drivers to stay informed about changes in fuel taxes and how they may affect the cost of fuel in the state.