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Illinois’ gasoline tax will rise to 47 cents per gallon on July 1, 2024

With the start of the new fiscal year next week, drivers in Illinois may have to expect slightly higher gasoline prices as the fuel tax is being raised slightly.

According to the Illinois Department of Revenue, the tax on motor fuels in the state of Illinois will rise to 47 cents per gallon, a 3.5% increase, beginning in the 2023-24 fiscal year. The increase may mean customers face higher prices at the pump, which is unfortunate since it is just days before the busy Fourth of July travel weekend.

Here’s what you need to know about the gas tax and how it affects you:

What is the fuel tax in Illinois?

According to IDOR, the fuel tax is a tax levied on a person’s ability to operate a motor vehicle or recreational watercraft in the state of Illinois.

The tax was introduced in 1977 and is paid by those who distribute or deliver fuel to customers – think of those who supply your petrol station with fuel that you then pump into your tank.

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Why raise the gas tax in Illinois now?

Shortly after his election to office in 2019, Governor JB Pritzker signed legislation that raised the fuel tax by 19 cents per gallon and then increased it further by indexing it to the federal Consumer Price Index, the leading indicator of inflation in the United States.

The legislation was part of the governor’s “Rebuild Illinois” capital plan, which allocated $45 billion to rebuild the state’s roads and bridges. Pritzker said at the time that the plan would create hundreds of thousands of new jobs across the state by investing in the state’s infrastructure.

“The Rebuild Illinois plan changes the way our state approaches transportation infrastructure, finally treating our roads, bridges and railroads as 21st century investments rather than relics of the past,” Pritzker said. “This is more than an infrastructure plan. This is a job creation plan unlike anything our state has ever seen.”

After a pause in 2022 put in place to combat skyrocketing gasoline prices, the gasoline tax was raised to 42 cents per gallon on January 1, 2023, up from 39 cents the previous year. This represents an increase of nearly 8%, similar to the increase in the Consumer Price Index throughout 2022.

In July of this year, the tax rose to the current 45 cents per gallon, about 7 percent more than before. The 3.5 percent increase largely corresponds to the increase in the consumer price index last year.

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Where does the revenue from fuel tax go?

The state and many municipalities use the fuel tax to fund infrastructure projects. Much of the Rebuild Illinois plan was funded by fuel tax increases not only on gasoline, but also on specialty fuels (diesel, natural gas, and propane). In addition, the state created the Transportation Renewal Fund to provide a mechanism to collect these taxes and distribute them where they are needed.

According to the Illinois Municipal League, tax revenues are split between those earmarked for the TRF and those not. Of the revenues not coming from the TRF, 45% goes to the state, and the other half is sent to the Illinois Department of Transportation, which distributes it to municipalities.

As for the funds transferred to the TRF, about 80% of the annual tax increases are split between states and local governments to fund road projects. The split between states and local governments is 60:40. From local governments, 49% goes to the local governments themselves, and the remaining 51% goes to counties and other road districts.

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What impact will the increase in fuel tax have on the price of petrol?

Although a change in fuel tax does not immediately lead to higher petrol prices, the effects are usually only noticeable after a few days.

According to data from GasBuddy, a national website that provides a list of prices at gas stations across the U.S., Illinois gasoline prices rose in January 2023, during the period when the gas tax was first increased. On Christmas Eve 2022, prices across Illinois were at $3.14 per gallon. By the end of the next month, prices had risen by over 50 cents, to $3.65 per gallon.

In addition, prices were about 15 cents higher than the national average; the price of a gallon of unleaded gasoline was about $3.50 per gallon nationwide.

Gasoline prices did not rise during the summer, but there was a price difference between Illinois prices and the national average. At the end of July, prices were $3.97 per gallon, 25 cents more than the national average.

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