Research & Commentary: Don’t Burden Illinois Drivers with Nation-High Gas Tax

Published May 3, 2016

Illinois legislators are now considering a bill that would hike the state’s gasoline excise tax by 30 cents per gallon. This increase would bring Illinois gas taxes to a whopping 60 cents per gallon, which would be the highest rate of any state, according to the Tax Foundation.

High gas prices hit Illinoisans harder than citizens in almost any other state, warns the Illinois Policy Institute (IPI): “When prices rise, the Illinois gas-tax structure hits drivers harder than gas taxes in almost any other state. In 2014, for instance, Illinoisans were paying the eighth-highest gas taxes in the nation.”

In addition to the gas tax hike, the proposed bill would also raise vehicle registration fees by 50 percent. These fees already cost a driver in Illinois $101 for a car or truck.

The current proposal ignores the growing evidence that gasoline taxes are an ineffective, regressive tax which has increasingly left transportation systems shortchanged. In recent years, the rise of fuel-efficient cars has decreased motor-fuel tax coffers and disproportionately shifted the burden to low-income drivers, a group that typically owns older, less fuel-efficient vehicles.

Kyle Pomerleau of the Tax Foundation argues this trend is likely to continue. “Consumers now purchase less fuel to drive more miles, which increases the wear on roads while decreasing tax receipts,” said Pomerleau.

In 2015, Daniel Vock, writing for Governing magazine, analyzed state gas tax data reported to the U.S. Census Bureau and found two-thirds of state fuel taxes have failed to keep up with inflation and fuel-tax-related revenue has dramatically dropped. “In some states, the drop-off is significant,” wrote Vock. “In New Mexico and Illinois, fuel taxes brought in a quarter less in 2014 than when Congress raised the federal gas tax two decades ago.”

The fact gas taxes have not increased over time does not mean they need to be increased now. Gas taxes are a regressive tax hike which Wendell Cox and Ronald Utt argue has a stronger effect on lower- and middle-income families than it does on the wealthy. The tax could also cause low-income families to drive less, which could reduce employment options. Americans for Prosperity estimates lower gas prices amount to approximately $100 in additional spendable income per month for an average family, which means the recent nationwide drop in gas prices could potentially lead to an additional $100 billion of economic growth.

Another big problem with transportation funding lies not with revenue but with spending. Far too many dollars are spent on projects unrelated to roads, such as bike paths and museums. If gas taxes are intended as a user fee, gas-tax dollars should be spent on roads alone. In The Wealth of Nations, Adam Smith argues when infrastructure is constructed and maintained using user fees and decentralized, new construction occurs only when market demand justifies it.

IPI argues legislators should take a look at the inflated cost of public construction projects in Illinois before they allow any tax or fee hikes. Austin Berg, a writer for IPI, points to Illinois’ high workers’ compensation costs – Illinois has the highest workers’ compensation costs in the Midwest – and prevailing-wage requirements as key cost drivers for Illinois transportation projects. As an example, Berg compared Illinois to Indiana and found Indiana’s average workers’ compensation insurance premium costs made up only 4 percent of an average payroll, compared to 22 percent in Illinois.

As the rise in fuel efficiency continues, motor-fuel tax revenues will continue to decline. Illinois will have to explore more modern and efficient ways to fund road construction and traffic infrastructure. These include privatizing roads and establishing toll systems. In several cities, transportation agencies are using congestion pricing—varying toll prices based on congestion—to manage demand and limit traffic problems.

The following documents provide additional information about how motor-fuel taxes are applied and their effect on the economy.

New Bill Would Make Illinois Gas Taxes Highest in the Nation
Austin Berg of the Illinois Policy Institute examines a new plan from the Metropolitan Planning Council that calls for a massive 10-year, $43 billion plan to fund state and local roads, public transportation, railways, and large public projects. This plan would be funded by a huge 30-cents-per-gallon hike of the state’s motor-fuel taxes.  

Hosed at the Pump: Illinois Gas Taxes
The Illinois Policy Institute discusses the state gasoline sales tax, how it harms Illinois drivers, and why this high tax is inefficient and unnecessary. Illinois is one of only seven states charging a sales tax at the gas pump. “Illinois should follow the lead of the 43 states that don’t charge a sales tax on gasoline and end this practice, saving taxpayers millions of dollars.”

Alternatives to the Motor Fuel Tax 
This report, prepared by the Center for Urban Studies at Portland State University and submitted to the Oregon Department of Transportation, evaluates potential alternatives to motor-fuel taxes. The report also identifies the economic and technological problems that must be addressed when designing alternative revenue sources. 

Designing Alternatives to State Motor Fuel Taxes 
Writing in Transportation Quarterly, Anthony M. Rufolo and Robert L. Bertini consider the future of motor-fuel taxes as more fuel-efficient vehicles become available. They also report on the economic effects of road pricing as a substitute for fuel taxes. 

Paying at the Pump: Gasoline Taxes in America 
Jonathan Williams argues gas taxes can be an effective means of funding transportation improvements. In many cases, however, governments exploit the taxes for political reasons, spending them on projects unrelated to roads and other transportation improvements. 

Gasoline Fuel Tax Rates as of January 2016
The American Road & Transportation Builders Association provides a map documenting state gasoline tax rates, using data from state Departments of Revenue.

State Motor Fuel Taxes: January 2016
The American Petroleum Institute documents each state’s current motor-fuel taxes (both gasoline and diesel).  

Reconsider the Gas Tax: Paying for What You Get 
Jeffrey Brown of the University of California–Los Angeles notes the gasoline tax was created as a user fee to raise money for roads, but many politicians and the general public seem to have lost sight of this purpose and lump it together with other unpopular taxes. The challenge for policymakers, Brown argues, is to restore the connection in the public’s mind between the tax and the roads it should provide.

Research & Commentary: Congestion Traffic Pricing 
Congestion pricing, an alternative to gasoline taxes, uses market principles to address traffic congestion. Under congestion pricing, operators of a road charge a variable price based on congestion, allowing the operator to manage demand and limit congestion. Heartland Senior Policy Analyst Matthew Glans examines several proposals for implementing pricing systems to alleviate traffic congestion.  

Fuel Taxes, Tolls Pay for Only One-Third of Road Spending 
Joseph Henchman of the Tax Foundation finds highway user taxes and fees made up just 32 percent of state and local spending on roads. Financing for the rest of the projects came out of general revenues, including federal aid. 

Raising Gas Taxes Won’t Fix Our Bridges
In the aftermath of the I-35 bridge collapse in Minneapolis, Minnesota, Adrian Moore of the Reason Foundation argues increasing fuel taxes should not be the only response to state transportation funding problems. Moore wrote, “First we must examine how we spend transportation dollars now. Then we maximize the value out of those dollars. Finally, the last step is to address the need for additional revenue.”

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Environment & Climate News website at, The Heartland Institute’s website at, and PolicyBot, Heartland’s free online research database, at

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