Car fee, tax would wipe out graduated tax plan's savings for many in Illinois
The savings lower- and middle-income taxpayers would see under a graduated income tax plan that still needs voter approval would be erased by tax and fee hikes on their cars.
That's because legislators voted earlier this week to double the state's motor fuel tax and increase vehicle registration fees. Gov. J.B. Pritzker is expected to sign the bills into law.
The average Illinois car owner would pay an extra $50 a year to register it and about $95 more annually to gas it up. The motor fuel tax hike would go into effect July 1, but the registration fee increase wouldn't happen until the first of the year. Money generated by the increases would pay for road construction and other public works projects throughout the state, which Pritzker and other backers say are long overdue and will create jobs.
The fees also include a 6% daily and 9% monthly tax on parking in garages and lots, a $1 increase in the per-pack cigarette tax to $2.98 and changes in the tax structure for online purchases.
"I think it's fair to say that the communication we've been getting from the state has been inconsistent," said Bill Bergman, director of research at Chicago-based Truth in Accounting. "They pretend they're working for the little guy, but our government is not Robin Hood."
For months, the Pritzker administration has focused on a change to the state constitution to create a graduated income tax in which higher earners pay higher rates. The plan, if approved by more than 60% of the voters in the November 2020 election, is expected to generate more than $3.4 billion in revenue while providing modest cuts to most taxpayers.
A married couple making a combined $250,000 a year, with kids and paying $8,000 in property taxes annually would stand to see their income taxes reduced by as much $145, according to Pritzker's online "Fair Tax" calculator. That's the added cost on one car with new fee and tax hikes.
Officials in Pritzker's administration defended the hikes.
"When it comes to fixing roads and bridges that are in dire shape, Democrats and Republicans came together to pass an infrastructure plan that will create 500,000 jobs across the state," said Jordan Abudayyeh, Pritzker's press secretary. "People throughout the state are already paying the price for our crumbling infrastructure when they sit in gridlock or have to replace their tires routinely because of potholes."
The increase to the motor fuel tax is estimated to generate $1.2 billion a year, experts said. It will double the current rate of 19 cents on gasoline and increase the rate on diesel from 21.5 cents to 45.5 cents. Some of the new revenue will go to local governments. Beginning in 2021, the tax will increase by as much as another penny each year, according to the legislation.
Cook County municipalities would be able to impose motor fuel taxes of up to 3 cents more and communities in collar counties to add a motor fuel tax of as much as 8 cents more, according to the legislation.
According to AAA, the average American car drives 15,000 miles a year and gets about 30 miles to the gallon. That adds up to an additional $95 a year for the average Illinois driver under the new motor fuel tax rate. Over the past year, the average price of a gallon of gas in the Chicago area is $2.87, according to the U.S. Energy Information Administration.
The car registration fee hike is expected to generate an additional $383 million a year, according to recent registration figures that had more than 7.6 million passenger vehicles in Illinois. The registration rate will jump from $101 to $151 for traditional vehicles. But for the 8,000-plus electric vehicles registered in Illinois, owners will now have to pay $251 a year instead of $25 every two years.