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PRITZKER
CAPITAL PLAN WOULD DOUBLE ILLINOIS GAS TAX, HIKE VEHICLE REGISTRATION
FEES, CREATE NEW TAXES ON UBER AND NETFLIX
Illinois Policy Institute/
Austin Berg
Gov. J.B. Pritzker’s office is using a
major capital bill as a vehicle to grease lawmakers for a progressive
income tax amendment. But the tax hikes to pay for it would make
Illinoisans’ gas tax burden the second highest in the nation.
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 The wheels are in motion on Gov. J.B. Pritzker’s capital bill.
But preliminary details shared with Springfield political blog CapitolFax show
Illinoisans should brace for a wide range of heavy tax and fee hikes to fund it.
Pritzker is proposing a $41.5 billion capital plan over six years, funded by
$2.4 billion in new tax and fee revenue. The proposed tax and fee hikes include
the following, among other changes:
Gas tax hike ($1.2 billion)
The preliminary capital plan relies on doubling Illinois’ motor fuel tax to 38
cents from 19 cents per gallon, effective July 1. This would make Illinois’
total gas tax burden the second highest in the nation.
Under the proposed gas tax hike, drivers filling up in Chicago would pay 96
cents in taxes and fees on a $2.46 gallon of gasoline – an effective tax burden
of 39%.
A draft of Pritzker’s capital plan states, “Illinois currently has one of the
lowest motor fuel taxes in the nation.” This is misleading.
When adding up all the layers of taxes and fees Illinoisans pay on gasoline,
they currently pay the 10th highest average total state and local gas tax burden
in the nation, according to the Tax Foundation. The Prairie State is one of just
seven states where drivers pay general state and local sales taxes on gas
purchases. Drivers also pay underground storage and environmental fees of 1.1
cents per gallon, along with various local charges.
Vehicle
registration fee hike ($490 million)
The preliminary capital plan would also hike vehicle registration fees, imposing
a new cost structure based on the age of the car. The current annual fee of $101
would jump to $199 for vehicles 3 years old or newer, $169 for vehicles 4-6
years old, $139 for vehicles 7-11 years old, and $109 for vehicles 12 years and
older.
The $199 registration fee for newer vehicles would be higher than any
neighboring state and third-highest in the nation, according to Ballotpedia
research. Illinois’ vehicle registration fee was just $79 as recently as 2009.
New $1 per ride tax on ridesharing ($214 million)
The plan would enact a statewide $1 per ride tax on ridesharing services such as
Uber and Lyft. Chicago already levies a 72-cent per ride fee on ridesharing
services.
New 7% tax on cable, satellite and streaming services ($150 million)
Chicago’s “Netflix tax” would expand statewide, with the state charging a 7% tax
on users of streaming services, as well as cable and satellite customers. None
of these services are currently taxed at the state level. Chicago currently
stretches the definition of its 9 percent citywide “amusement tax” to include
online streaming services such as Netflix and Spotify, as well as Playstation
rentals.
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Tax hikes on beer, wine and liquor ($120 million)
Taxes on booze would rise by up to 50%. The per-gallon tax on beer
and cider would rise to 27.7 cents from 23.1 cents; the per-gallon
tax on wine would rise to $2.05 from $1.39, and the per-gallon tax
on distilled liquor would rise to $12.60 from $8.55.
Illinois’ alcohol excise taxes already stick out among Midwestern
states, leaving border-state businesses at a disadvantage. Bob
Myers, president of the Associated Beer Distributors of Illinois,
estimated Illinois loses out on up to $30 million per year to
cross-border alcohol purchases. New statewide
parking garage tax ($60 million)
Daily and hourly garage parking would be hit with a 6% tax while
monthly and annual garage parking would come with a 9% tax.
Chicagoans already pay among the highest parking rates in the
country. The state does not currently tax garage parking.
Doubling the real estate transfer tax ($34 million)
The proposaldoubles the real estate transfer tax on non-residential
real estate to $1 from 50 cents per $500 in value.
Hiking registration fees for electric vehicles ($4 million)
The registration fee for electric vehicles would rise to $250 per
year from $34 every other year.
Pork for progressive tax
Pritzker also released a list of new capital projects that would be
funded with this new revenue. But the state’s most pressing
infrastructure needs may not be top of mind.
According to Politico Illinois, “Democratic leaders are subtly
offering a piece of the capital bill to get votes for the
progressive income tax. Lawmakers get a sense that they could be
treated well in the capital bill if they vote in favor of a
graduated income tax, which Pritzker calls ‘the fair tax.’”
Using a capital bill as a political tool to pass the progressive
income tax amendment – which is unpopular in Illinois House
districts held by Democrats – is a recipe for poor spending choices.
Fortunately, the Illinois Policy Institute on May 16 published a
smarter roadmap for lawmakers: an evidence-based, $10 billion
capital plan without any tax or fee hikes.
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