Effects of dropping tax subsidy still unclear at gas pump

  • Gas prices will go up as a result of the state dropping a gas tax subsidy, experts say.

    Gas prices will go up as a result of the state dropping a gas tax subsidy, experts say. Daily Herald file photo

Updated 7/28/2017 4:46 PM

Drop a sales tax subsidy on gas, and you know the pain will be passed down at the pump. But it's not clear whether the effects of recent state actions are trickling down to consumers yet.

After months of gridlock, lawmakers passed a controversial budget in June that eliminated an exemption on the sales tax imposed on gasohol.


Gasohol refers to the gas purchased by the majority of consumers at stations, which contains a mixture of gasoline and about 10 percent ethanol.

Dropping the subsidy could result in an increase of 4 to 10 cents a gallon or so, AAA estimates.

Tax increases were necessary to stem huge debts and avoid financial disaster in Illinois, legislators said. But groups like the Illinois Petroleum Marketers Association said small businesses and consumers would suffer.

"We fought against it and they won," IPMA Executive Vice President Bill Fleischli said.

The tax incentive scheduled to end Dec. 31, 2018, was halted July 1.

AAA spokeswoman Beth Mosher said the resulting increase is yet to be seen. Prices "haven't increased so substantially you can point to something and say, 'that's it,'" Mosher said.

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In the metro region, a gallon was $2.50 Friday and $2.39 a month ago, AAA reported.

That shift, however, is reflected nationwide, Mosher said. "The bulk of the country is seeing higher gas prices so what's happening in Illinois is not atypical. Demand is up, gas stocks are dipping down, which can drive prices at the pump up."

Mosher also noted that "it's not a gas tax but a sales tax, so the monies also will be going to the general fund instead of the road fund."

Meanwhile, lawmakers spared users of alternative fuels a hit. The budget extended tax exemptions for biodiesel and majority-ethanol fuels through 2023.

But Fleischli has doubts the status quo will hold. "We're very concerned they'll renege on that," he said.

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