Illinois Motorists Could See 2 Tax Increases on Fuel in 2023

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As part of the state of Illinois’ 2023 fiscal-year budget, an inflation-related gas tax increase was suspended for six months, but that suspension is about to come to an end when the calendar flips to January, and it may not be the only time motorists see an uptick in fuel taxes.

Under the state’s budget, a 2.2 cent-per-gallon tax increase that was scheduled to take effect on July 1, 2022, was suspended as part of a larger effort to provide relief to taxpayers impacted by wildly-escalating inflation rates.

The move was expected to save Illinois taxpayers approximately $70 million.

Unlike the grocery tax suspension, which was put into effect for an entire year, the gas tax suspension was only slated to last six months, meaning that on Jan. 1, motorists will see their tax bills go up.

The increase is tied to the percentage by which the Department of Labor’s Consumer Price Index for All Urban Consumers (CPI) increased over a 12-month period ending on Sept. 1, according to terms of the state’s budget. That number turned out to be 8.2%, according to the Bureau of Labor Statistics.

As a result, Illinois motorists will see a fuel tax increase of roughly 3.2 cents per gallon for gasoline in the new year, bringing the state’s total fuel tax on gasoline to 42.4 cents per gallon.

That may not be the only tax increase motorists see in the coming year, however. According to the legislation, another inflation-based tax increase could also occur on July 1, though it would be anticipated that the increase would be smaller given that it would occur over a shorter time frame, and that inflation at the national level is finally showing signs of slowing.

As of Dec. 15, AAA reports that the average price of a gallon of fuel in Illinois is $3.388. In Cook County, gas costs $3.627 per gallon, while in Kane, DuPage and Lake counties, fuel costs less than the statewide average.

Prior to 2019’s Rebuild Illinois infrastructure plan, the state’s gas tax had been locked in at 19 cents per gallon since 2000.

Following passage of that law, the state’s gas tax doubled to 38 cents, and was indexed to inflation every year on July 1.

Under a state law passed in 2016, those taxes are collected and can only be used on transportation infrastructure and operations.

In addition to the state’s fuel tax, the federal government also imposes a federal excise tax of 18.4 cents per gallon on gasoline. Motorists also have to pay state sales taxes on gasoline, with a base rate of 6.25%.

According to the Illinois CPA Society, Illinois residents spend 78 cents per gallon on taxes, the second-highest rate in the country.

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