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Diesel Tax Change | Illinois Increases State Tax to Improve Infrastructure

Brett Wetzel


Brett Wetzel
June 6, 2019


State infrastructure bills have gained much attention in recent months due to ever-worsening infrastructure throughout the US.  Typically, the most efficient way to fund these projects is to raise flat per-gallon state fuel taxes. In that same vein, some states have implemented more dynamic and variable tax mechanisms, such as inflation-adjusted taxes and weight-per-mile taxes. These mechanisms leave gasoline and diesel subject to cost premiums as vehicles continue to become more fuel efficient.

The most recent state to pass legislation to fund infrastructure improvements with tax increases is Illinois, effectively doubling the per gallon tax on diesel.

At the beginning of June 2019, Illinois elected to approve an infrastructure spending bill, leveraging gasoline and diesel tax revenue and vehicle registration fees to fund an array of projects. The state’s gasoline and diesel excise tax, in turn, will double rising from 19 cents per gallon to 38 cents per gallon effective July 1, 2019. The state historically applies an additional 22.5 cents per gallon in other fuel related taxes along with 2.5 cents per gallon as a premium for diesel fuel. This diesel fuel premium will also double to 5 cents per gallon in excess of the base tax rate (see chart at left).

Illinois joins three other states who have passed legislation to increase diesel taxes in 2019 (shown in the table below).  The most significant change among these other states is Ohio, which is increasing its diesel tax by 19 cents per gallon on July 1 of this year.  Alabama and Arkansas also elected to increase taxes by 10 and 6 cents per gallon, respectively.  Read more about proposed diesel tax increases on our blog. The tax rate is also set to adjust annually – up to 1 cent per gallon – based on the Consumer Price Index, which will be determined by the Bureau of Labor Statistics.  This adjustment will be assessed and determined by June 1 of each year and implemented on July 1.  Additionally, five separate counties near Chicago – including DuPage, Kane, Lake, McHenry, and Will – have the option to incrementally increase taxes an additional 4 to 8 cents per gallon.  DuPage, Kane, and McHenry counties all had 4 cents in place prior to the bill.

The tax hike will have significant impacts on Breakthrough shippers—and the transportation and shipping industry at large—as Illinois represents the third largest state for diesel fuel consumption, falling behind only Texas and California.  Illinois is also a major transportation hub connecting major markets, which will be financially impacted by this legislation.

Breakthrough’s core values are removing distortion, achieving transparency, and establishing fairness – all pillars of which fuel taxes direct attention to. Our market-based fuel reimbursement program accounts for all fuel tax changes in your transportation supply chain, as we continue monitoring these changes to ensure carrier counterparts are adequately reimbursed for the energy used to move goods to market.

For more information about the newly imposed tax updates, market updates, or Fuel Recovery, contact us or reach out to the Applied Knowledge team directly.

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