Pain at the Pump: How Illinois Taxes Drive Up the Cost of Gas

Most consumers understand that the forces of supply and demand are largely responsible for setting gas prices, but many are shocked to find that Illinois has the fifth-highest gas taxes nationwide. Not surprisingly, government has exacerbated the problem: The state reaps “windfall profits” when gas prices rise since it applies a 6.25 percent sales tax on gasoline, in addition to a flat-rate excise tax. So when gas prices go up, so does the state’s “take” from sales taxes. Illinois should eliminate the five percent state share of the sales tax on gasoline (the rest goes to localities), thereby taking the tax from 6.25 percent to 1.25 percent. Under this scenario, the average motorist would save $2.83 each time he filled up his tank at the current prices. Such a reform would undoubtedly be welcome relief to the Illinois taxpayers, especially in this economic climate.

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