Varying motor fuel taxes are just another example of Illinois’ tax mess

A man fuels his truck on Thursday, June 2, 2022, at the Thorntons gas station at the intersection of Chapel Hill Road and Route 120 in McHenry. Fuel prices reached a new high this week.

Prospect Heights created its own motor fuel tax, adding 2 cents to the cost of each gallon of gas in town. City leaders said they needed to generate income to make up for the loss of some state income tax revenue that’s sent to municipalities. The city council approved the tax despite a plea from one gas station owner who worried the tax will prompt customers to seek out cheaper gas out of town.

He may be right – but who can tell? The reality is the gas tax situation in Illinois is a mess within a larger mess of taxes that just keep getting shifted around.

That diminished state income tax revenue stream comes from what’s called the local government distributive fund. It was established in 1969 to send some of the newly enacted state income taxes to counties and municipalities – 10% of them. In 2011, that share dropped to 6%. It’s never gotten close to 10% again. Many municipal leaders have contended they are not getting what they used to, so they’ve called for that local share to rise – most recently, this year, to 8%. Legislation to that effect stalled. Today the rate stands at about 6%.

Meanwhile, the state for three decades has had the motor fuel tax, aimed primarily at funding road and infrastructure costs. That tax doubled in 2019 as part of the state’s Rebuild Illinois program, and that came with automatic increases every July 1. The tax is now about 39 cents a gallon, with this year’s 2.4-cent hike suspended until Dec. 31 as part of a much-touted inflation relief plan.

Also in 2019, the state let counties impose their own gas taxes. Lake, Kane, McHenry and Will counties’ are now about 4 cents, Cook’s is 6 cents and DuPage’s is about 8 cents.

Many home-rule communities also have imposed their own gas taxes. Warrenville, as it considered increasing its motor fuel tax to 6 cents from 4 this year, reviewed more than a dozen other suburbs’ gas taxes; they ranged from a cent and a half to 4 cents. (Warrenville did raise its tax.) Kane County, as it has continued weighing (and rejecting) a gas tax increase, this year noted the Tri-Cities’ own gas taxes, such as Batavia’s at 5 cents.

Beginning in July 2020, the state next created the “Municipal Motor Fuel Tax” that non-home-rule communities could impose without a referendum – but only in Cook County. Prospect Heights is taking advantage.

Is gas cheaper nearby? Mount Prospect has its own 4-cent gas tax; Des Plaines has a 7-cent tax. Arlington Heights, Buffalo Grove and Wheeling don’t have their own.

That’s just a sampling of the rates. The other reality of all this is the difficulty in determining what gas taxes are being charged where. This even as the state this summer required gas stations to post signage with the line, “The price on this pump should reflect the suspension of the (state) tax increase.” There’s no signage that itemizes the price at the pump, nor are all the taxes listed on the receipt. So how would you know?

What it all starts to look like is a never-ending tax shuffle, and it ought to be simplified and more transparent.

The Daily Herald